Form 10-Q 2012.09.30 10Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
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x | Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended SEPTEMBER 30, 2012 or |
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o | Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from ______ to ______. |
Commission file number: 001-32991
WASHINGTON TRUST BANCORP, INC.
(Exact name of registrant as specified in its charter)
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RHODE ISLAND | | 05-0404671 |
(State or other jurisdiction of incorporation or organization) | | (I.R.S. Employer Identification No.) |
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23 BROAD STREET | | |
WESTERLY, RHODE ISLAND | | 02891 |
(Address of principal executive offices) | | (Zip Code) |
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(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 o No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). x Yes o No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Mark one)
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Large accelerated filer o | | Accelerated filer x |
Non-accelerated filer o | | Smaller reporting company o |
(Do not check if a smaller reporting company) | | |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). o Yes x No
The number of shares of common stock of the registrant outstanding as of November 2, 2012 was 16,371,272.
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FORM 10-Q |
WASHINGTON TRUST BANCORP, INC. AND SUBSIDIARIES |
For the Quarter Ended September 30, 2012 |
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TABLE OF CONTENTS |
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
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WASHINGTON TRUST BANCORP, INC. AND SUBSIDIARIES | (Dollars in thousands, |
CONSOLIDATED BALANCE SHEETS (unaudited) | except par value) |
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| | | | | | | | |
| | September 30, 2012 | | December 31, 2011 |
Assets: | | | | |
Cash and due from banks | |
| $49,935 |
| |
| $82,238 |
|
Short-term investments | | 3,599 |
| | 4,782 |
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Mortgage loans held for sale, at fair value; amortized cost $33,737 in 2012 and $19,624 in 2011 | | 35,409 |
| | 20,340 |
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Securities: | | | | |
Available for sale, at fair value; amortized cost $424,194 in 2012 and $524,036 in 2011 | 440,289 |
| | 541,253 |
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Held to maturity, at cost; fair value $45,031 in 2012 and $52,499 in 2011 | | 43,569 |
| | 52,139 |
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Total securities | | 483,858 |
| | 593,392 |
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Federal Home Loan Bank stock, at cost | | 40,418 |
| | 42,008 |
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Loans: | | | | |
Commercial | | 1,219,327 |
| | 1,124,628 |
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Residential real estate | | 715,412 |
| | 700,414 |
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Consumer | | 321,958 |
| | 322,117 |
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Total loans | | 2,256,697 |
| | 2,147,159 |
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Less allowance for loan losses | | 30,752 |
| | 29,802 |
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Net loans | | 2,225,945 |
| | 2,117,357 |
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Premises and equipment, net | | 27,482 |
| | 26,028 |
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Investment in bank-owned life insurance | | 54,344 |
| | 53,783 |
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Goodwill | | 58,114 |
| | 58,114 |
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Identifiable intangible assets, net | | 6,346 |
| | 6,901 |
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Other assets | | 63,418 |
| | 59,155 |
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Total assets | |
| $3,048,868 |
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| $3,064,098 |
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Liabilities: | | | | |
Deposits: | | | | |
Demand deposits | |
| $352,330 |
| |
| $339,809 |
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NOW accounts | | 267,495 |
| | 257,031 |
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Money market accounts | | 459,671 |
| | 406,777 |
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Savings accounts | | 268,191 |
| | 243,904 |
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Time deposits | | 886,972 |
| | 878,794 |
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Total deposits | | 2,234,659 |
| | 2,126,315 |
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Federal Home Loan Bank advances | | 417,675 |
| | 540,450 |
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Junior subordinated debentures | | 32,991 |
| | 32,991 |
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Other borrowings | | 229 |
| | 19,758 |
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Other liabilities | | 64,920 |
| | 63,233 |
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Total liabilities | | 2,750,474 |
| | 2,782,747 |
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Commitments and contingencies | |
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Shareholders’ Equity: | | | | |
Common stock of $.0625 par value; authorized 30,000,000 shares; issued and outstanding 16,371,272 shares in 2012 and 16,292,471 shares in 2011 | | 1,023 |
| | 1,018 |
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Paid-in capital | | 90,829 |
| | 88,030 |
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Retained earnings | | 208,639 |
| | 194,198 |
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Accumulated other comprehensive loss | | (2,097 | ) | | (1,895 | ) |
Total shareholders’ equity | | 298,394 |
| | 281,351 |
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Total liabilities and shareholders’ equity | |
| $3,048,868 |
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| $3,064,098 |
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The accompanying notes are an integral part of these unaudited consolidated financial statements.
3
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WASHINGTON TRUST BANCORP, INC. AND SUBSIDIARIES | (Dollars and shares in thousands, |
CONSOLIDATED STATEMENTS OF INCOME (unaudited) | except per share amounts) |
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| | | | | | | | | | | | | | | | |
| | Three Months | | Nine Months |
Periods ended September 30, | 2012 | | 2011 | | 2012 | | 2011 |
Interest income: | | | | | | | |
Interest and fees on loans |
| $25,840 |
| |
| $25,069 |
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| $76,547 |
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| $74,035 |
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Interest on securities: | Taxable | 3,672 |
| | 4,640 |
| | 12,118 |
| | 14,282 |
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| Nontaxable | 660 |
| | 746 |
| | 2,035 |
| | 2,273 |
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Dividends on corporate stock and Federal Home Loan Bank stock | 52 |
| | 64 |
| | 207 |
| | 197 |
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Other interest income | 27 |
| | 15 |
| | 64 |
| | 52 |
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Total interest income | 30,251 |
| | 30,534 |
| | 90,971 |
| | 90,839 |
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Interest expense: | |
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Deposits | 3,391 |
| | 3,808 |
| | 10,210 |
| | 12,040 |
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Federal Home Loan Bank advances | 3,726 |
| | 4,539 |
| | 11,809 |
| | 13,956 |
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Junior subordinated debentures | 393 |
| | 393 |
| | 1,176 |
| | 1,175 |
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Other interest expense | 5 |
| | 245 |
| | 244 |
| | 728 |
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Total interest expense | 7,515 |
| | 8,985 |
| | 23,439 |
| | 27,899 |
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Net interest income | 22,736 |
| | 21,549 |
| | 67,532 |
| | 62,940 |
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Provision for loan losses | 600 |
| | 1,000 |
| | 2,100 |
| | 3,700 |
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Net interest income after provision for loan losses | 22,136 |
| | 20,549 |
| | 65,432 |
| | 59,240 |
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Noninterest income: | |
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Wealth management services: | |
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Trust and investment advisory fees | 5,877 |
| | 5,547 |
| | 17,474 |
| | 17,045 |
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Mutual fund fees | 1,024 |
| | 1,035 |
| | 3,051 |
| | 3,293 |
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Financial planning, commissions and other service fees | 292 |
| | 209 |
| | 1,326 |
| | 1,043 |
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Wealth management services | 7,193 |
| | 6,791 |
| | 21,851 |
| | 21,381 |
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Service charges on deposit accounts | 833 |
| | 821 |
| | 2,356 |
| | 2,662 |
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Merchant processing fees | 3,207 |
| | 3,223 |
| | 7,927 |
| | 7,849 |
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Card interchange fees | 675 |
| | 597 |
| | 1,844 |
| | 1,665 |
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Income from bank-owned life insurance | 1,006 |
| | 488 |
| | 1,969 |
| | 1,446 |
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Net gains on loan sales and commissions on loans originated for others | 3,504 |
| | 1,077 |
| | 9,616 |
| | 2,139 |
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Net realized gains on securities | — |
| | — |
| | 299 |
| | 197 |
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Net gains (losses) on interest rate swap contracts | 63 |
| | (47 | ) | | 87 |
| | (6 | ) |
Equity in earnings (losses) of unconsolidated subsidiaries | 27 |
| | (144 | ) | | 114 |
| | (433 | ) |
Other income | 413 |
| | 308 |
| | 1,473 |
| | 1,229 |
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Noninterest income, excluding other-than-temporary impairment losses | 16,921 |
| | 13,114 |
| | 47,536 |
| | 38,129 |
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Total other-than-temporary impairment losses on securities | — |
| | — |
| | (85 | ) | | (54 | ) |
Portion of loss recognized in other comprehensive income (before tax) | — |
| | (158 | ) | | (124 | ) | | (137 | ) |
Net impairment losses recognized in earnings | — |
| | (158 | ) | | (209 | ) | | (191 | ) |
Total noninterest income | 16,921 |
| | 12,956 |
| | 47,327 |
| | 37,938 |
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Noninterest expense: | |
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Salaries and employee benefits | 15,214 |
| | 12,912 |
| | 44,125 |
| | 37,138 |
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Net occupancy | 1,468 |
| | 1,362 |
| | 4,521 |
| | 3,919 |
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Equipment | 1,168 |
| | 1,092 |
| | 3,418 |
| | 3,211 |
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Merchant processing costs | 2,707 |
| | 2,781 |
| | 6,690 |
| | 6,795 |
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Outsourced services | 845 |
| | 863 |
| | 2,660 |
| | 2,610 |
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FDIC deposit insurance costs | 427 |
| | 427 |
| | 1,311 |
| | 1,614 |
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Legal, audit and professional fees | 598 |
| | 430 |
| | 1,599 |
| | 1,389 |
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Advertising and promotion | 445 |
| | 561 |
| | 1,295 |
| | 1,341 |
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Amortization of intangibles | 182 |
| | 230 |
| | 555 |
| | 705 |
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Foreclosed property costs | 136 |
| | 45 |
| | 604 |
| | 549 |
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Debt prepayment penalties | 1,173 |
| | — |
| | 2,134 |
| | 221 |
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Other expenses | 1,927 |
| | 1,892 |
| | 6,005 |
| | 6,107 |
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Total noninterest expense | 26,290 |
| | 22,595 |
| | 74,917 |
| | 65,599 |
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Income before income taxes | 12,767 |
| | 10,910 |
| | 37,842 |
| | 31,579 |
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Income tax expense | 3,867 |
| | 3,328 |
| | 11,791 |
| | 9,632 |
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Net income |
| $8,900 |
| |
| $7,582 |
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| $26,051 |
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| $21,947 |
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Weighted average common shares outstanding - basic | 16,366 |
| | 16,278 |
| | 16,351 |
| | 16,242 |
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Weighted average common shares outstanding - diluted | 16,414 |
| | 16,294 |
| | 16,392 |
| | 16,269 |
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Per share information: | Basic earnings per common share |
| $0.54 |
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| $0.46 |
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| $1.59 |
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| $1.35 |
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| Diluted earnings per common share |
| $0.54 |
| |
| $0.46 |
| |
| $1.58 |
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| $1.34 |
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| Cash dividends declared per share |
| $0.24 |
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| $0.22 |
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| $0.70 |
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| $0.66 |
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The accompanying notes are an integral part of these unaudited consolidated financial statements.
4
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WASHINGTON TRUST BANCORP, INC. AND SUBSIDIARIES | (Dollars in thousands) |
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (unaudited) | |
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| | Three Months | | Nine Months |
Periods ended September 30, | | 2012 | | 2011 | | 2012 | | 2011 |
Net income | |
| $8,900 |
| |
| $7,582 |
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| $26,051 |
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| $21,947 |
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Other comprehensive income, net of tax: | | | | | | | | |
Securities available for sale: | | | | | | | | |
Unrealized (losses) gains on securities arising during the period | | (218 | ) | | (310 | ) | | (676 | ) | | 3,315 |
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Less: reclassification adjustment for net gains on securities realized in net income | | — |
| | — |
| | 138 |
| | 92 |
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Net unrealized (losses) gains on securities available for sale | | (218 | ) | | (310 | ) | | (814 | ) | | 3,223 |
|
Reclassification adjustment for change in non-credit portion of OTTI realized losses transferred to net income | | — |
| | 101 |
| | 80 |
| | 88 |
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Cash flow hedges: | | | | | | | | |
Unrealized losses on cash flow hedges arising during the period | | (127 | ) | | (498 | ) | | (331 | ) | | (917 | ) |
Less: reclassification adjustment for amount of gains on cash flow hedges realized in net income | | 113 |
| | 123 |
| | 336 |
| | 368 |
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Net unrealized (losses) gains on cash flow hedges | | (14 | ) | | (375 | ) | | 5 |
| | (549 | ) |
Defined benefit plan obligation adjustment | | 171 |
| | 60 |
| | 527 |
| | 181 |
|
Total other comprehensive (loss) income, net of tax | | (61 | ) | | (524 | ) | | (202 | ) | | 2,943 |
|
Total comprehensive income | |
| $8,839 |
| |
| $7,058 |
| |
| $25,849 |
| |
| $24,890 |
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The accompanying notes are an integral part of these unaudited consolidated financial statements.
5
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WASHINGTON TRUST BANCORP, INC. AND SUBSIDIARIES | (Dollars and shares in thousands) |
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (unaudited) |
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| Common Shares Outstanding | | Common Stock | | Paid-in Capital | | Retained Earnings | | Accumulated Other Comprehensive Income | | Total |
Balance at January 1, 2011 | 16,172 |
| |
| $1,011 |
| |
| $84,889 |
| |
| $178,939 |
| |
| $4,025 |
| |
| $268,864 |
|
Net income | | | | | | | 21,947 |
| | | | 21,947 |
|
Total other comprehensive income, net of tax | | | | | | | | | 2,943 |
| | 2,943 |
|
Cash dividends declared | | | | | | | (10,844 | ) | | | | (10,844 | ) |
Share-based compensation | | | | | 1,037 |
| | | | | | 1,037 |
|
Exercise of stock options, issuance of other compensation-related equity instruments and related tax benefit | 74 |
| | 4 |
| | 789 |
| | | | | | 793 |
|
Shares issued – dividend reinvestment plan | 33 |
| | 2 |
| | 752 |
| | | | | | 754 |
|
Balance at September 30, 2011 | 16,279 |
| |
| $1,017 |
| |
| $87,467 |
| |
| $190,042 |
| |
| $6,968 |
| |
| $285,494 |
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| | | | | | | | | | | | | | | | | | | | | | |
| Common Shares Outstanding | | Common Stock | | Paid-in Capital | | Retained Earnings | | Accumulated Other Comprehensive (Loss) | | Total |
Balance at January 1, 2012 | 16,292 |
| |
| $1,018 |
| |
| $88,030 |
| |
| $194,198 |
| |
| ($1,895 | ) | |
| $281,351 |
|
Net income | | | | | | | 26,051 |
| | | | 26,051 |
|
Total other comprehensive loss, net of tax | | | | | | | | | (202 | ) | | (202 | ) |
Cash dividends declared | | | | | | | (11,610 | ) | | | | (11,610 | ) |
Share-based compensation | | | | | 1,404 |
| | | | | | 1,404 |
|
Deferred compensation plan | 10 |
| | 1 |
| | 145 |
| | | | | | 146 |
|
Exercise of stock options, issuance of other compensation-related equity instruments and related tax benefit | 69 |
| | 4 |
| | 1,250 |
| | | | | | 1,254 |
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Balance at September 30, 2012 | 16,371 |
| |
| $1,023 |
| |
| $90,829 |
| |
| $208,639 |
| |
| ($2,097 | ) | |
| $298,394 |
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The accompanying notes are an integral part of these unaudited consolidated financial statements.
6
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WASHINGTON TRUST BANCORP, INC. AND SUBSIDIARIES | (Dollars in thousands) |
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) | |
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| | | | | | | | |
Nine months ended September 30, | 2012 |
| | 2011 |
|
Cash flows from operating activities: | | | |
Net income |
| $26,051 |
| |
| $21,947 |
|
Adjustments to reconcile net income to net cash provided by operating activities: | | | |
Provision for loan losses | 2,100 |
| | 3,700 |
|
Depreciation of premises and equipment | 2,370 |
| | 2,325 |
|
Foreclosed and repossessed property valuation adjustments | 298 |
| | 392 |
|
Net gain on sale of bank property | (358 | ) | | (208 | ) |
Net amortization of premium and discount | 1,679 |
| | 1,149 |
|
Net amortization of intangibles | 555 |
| | 705 |
|
Share-based compensation | 1,404 |
| | 1,037 |
|
Income from bank-owned life insurance | (1,969 | ) | | (1,446 | ) |
Net gains on loan sales and commissions on loans originated for others | (9,616 | ) | | (2,139 | ) |
Net realized gains on securities | (299 | ) | | (197 | ) |
Net impairment losses recognized in earnings | 209 |
| | 191 |
|
Net (gains) losses on interest rate swap contracts | (87 | ) | | 6 |
|
Equity in (earnings) losses of unconsolidated subsidiaries | (114 | ) | | 433 |
|
Proceeds from sales of loans | 336,919 |
| | 94,803 |
|
Loans originated for sale | (344,532 | ) | | (101,795 | ) |
(Increase) decrease in other assets | (7,567 | ) | | 877 |
|
Increase (decrease) in other liabilities | 1,711 |
| | (3,328 | ) |
Net cash provided by operating activities | 8,754 |
| | 18,452 |
|
Cash flows from investing activities: | |
| | |
|
Purchases of: | Mortgage-backed securities available for sale | — |
| | (94,352 | ) |
| Other investment securities available for sale | — |
| | (5,000 | ) |
| Mortgage-backed securities held to maturity | — |
| | (11,954 | ) |
Proceeds from sale of: | Mortgage-backed securities available for sale | 6,247 |
| | 42,783 |
|
| Other investment securities available for sale | 6,338 |
| | 2,940 |
|
Maturities and principal payments of: | Mortgage-backed securities available for sale | 85,059 |
| | 81,613 |
|
| Other investment securities available for sale | 911 |
| | 355 |
|
| Mortgage-backed securities held to maturity | 8,138 |
| | 106 |
|
Remittance of Federal Home Loan Bank stock | 1,590 |
| | — |
|
Net increase in loans | (103,402 | ) | | (90,613 | ) |
Purchases of loans, including purchased interest | (5,007 | ) | | (3,745 | ) |
Proceeds from the sale of property acquired through foreclosure or repossession | 3,146 |
| | 2,133 |
|
Purchases of premises and equipment | (4,513 | ) | | (2,237 | ) |
Net proceeds from the sale of bank property | 1,571 |
| | 1,279 |
|
Proceeds from bank-owned life insurance | 1,419 |
| | — |
|
Equity investments in real estate limited partnerships | — |
| | (449 | ) |
Net cash provided by (used in) investing activities | 1,497 |
| | (77,141 | ) |
Cash flows from financing activities: | |
| | |
|
Net increase in deposits | 108,344 |
| | 49,820 |
|
Net decrease in other borrowings | (19,529 | ) | | (2,401 | ) |
Proceeds from Federal Home Loan Bank advances | 472,930 |
| | 333,975 |
|
Repayment of Federal Home Loan Bank advances | (595,705 | ) | | (338,599 | ) |
Proceeds from the issuance of common stock under dividend reinvestment plan | — |
| | 754 |
|
Proceeds from the exercise of stock options and issuance of other compensation-related equity instruments | 1,251 |
| | 725 |
|
Tax benefit from stock option exercises and issuance of other compensation-related equity instruments | 149 |
| | 68 |
|
Cash dividends paid | (11,177 | ) | | (10,603 | ) |
Net cash (used in) provided by financing activities | (43,737 | ) | | 33,739 |
|
Net decrease in cash and cash equivalents | (33,486 | ) | | (24,950 | ) |
Cash and cash equivalents at beginning of period | 87,020 |
| | 92,736 |
|
Cash and cash equivalents at end of period |
| $53,534 |
| |
| $67,786 |
|
| | | | |
Noncash Investing and Financing Activities: | | | |
Loans charged off |
| $1,801 |
| |
| $2,914 |
|
Loans transferred to property acquired through foreclosure or repossession | 3,255 |
| | 1,251 |
|
Supplemental Disclosures: | | | | |
Interest payments |
| $22,869 |
| |
| $26,941 |
|
Income tax payments | 12,729 |
| | 9,799 |
|
The accompanying notes are an integral part of these unaudited consolidated financial statements.
7
WASHINGTON TRUST BANCORP, INC. AND SUBSIDIARIES
CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Washington Trust Bancorp, Inc. (the “Bancorp”) is a publicly-owned registered bank holding company and financial holding company. The Bancorp owns all of the outstanding common stock of The Washington Trust Company (the “Bank”), a Rhode Island chartered commercial bank founded in 1800. Through its subsidiaries, the Bancorp offers a complete product line of financial services including commercial, residential and consumer lending, retail and commercial deposit products, and wealth management services through its offices in Rhode Island, eastern Massachusetts and Connecticut.
The consolidated financial statements include the accounts of the Bancorp and its subsidiaries (collectively, the “Corporation” or “Washington Trust”). All significant intercompany transactions have been eliminated. Certain prior year amounts have been reclassified to conform to the current year classification. Such reclassifications have no effect on previously reported net income or shareholders’ equity.
The accounting and reporting policies of the Corporation conform to accounting principles generally accepted in the United States of America (“GAAP”) and to general practices of the banking industry. In preparing the financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the balance sheet and revenues and expenses for the period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to change are the determination of the allowance for loan losses and the review of goodwill, other intangible assets and investments for impairment. The current economic environment has increased the degree of uncertainty inherent in such estimates and assumptions.
In the opinion of management, the accompanying consolidated financial statements reflect all adjustments (consisting of normal recurring adjustments) and disclosures necessary to present fairly the Corporation’s financial position as of September 30, 2012 and December 31, 2011, respectively, and the results of operations and cash flows for the interim periods presented. Interim results are not necessarily reflective of the results of the entire year. The unaudited consolidated financial statements of the Corporation presented herein have been prepared pursuant to the rules of the Securities and Exchange Commission (“SEC”) for quarterly reports on Form 10-Q and do not include all of the information and note disclosures required by GAAP. The accompanying consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Annual Report on Form 10-K for the year ended December 31, 2011.
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(2) | Recently Issued Accounting Pronouncements |
Fair Value Measurement – Topic 820
Accounting Standards Update No. 2011-04, “Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and International Financial Reporting Standards (“ASU 2011-04”), was issued in May 2011. The amendments in ASU 2011-04 added language to clarify many of the requirements in GAAP for measuring fair value and for disclosing information about fair value measurements, as well as prescribed additional disclosures for Level 3 fair value measurements and financial instruments not carried at fair value. For many of the requirements, the Financial Accounting Standards Board (“FASB”) did not intend for ASU 2011-04 to result in a change in the application of the requirements in GAAP. The amendments required by ASU 2011-04 were to be applied prospectively and were effective for fiscal years and interim periods within those years, beginning after December 15, 2011. The Corporation adopted ASU 2011-04 in the first quarter of 2012, provided the additional disclosures required and made the election to use the exception permitted with respect to measuring counterparty credit risk on our interest rate derivative contracts. See Note 10 to the Unaudited Consolidated Financial Statements for additional information. The adoption of ASU 2011-04 did not have a material impact on the Corporation’s consolidated financial position, results of operations or cash flows.
Comprehensive Income – Topic 220
Accounting Standards Update No. 2011-05, “Presentation of Comprehensive Income” (“ASU 2011-05”), was issued in June 2011. The FASB issued ASU 2011-05 to improve the comparability and transparency of financial reporting and to increase the prominence of items reported in other comprehensive income. ASU 2011-05 eliminates the option to present components of other comprehensive income as part of the statement of changes in stockholders’ equity. ASU 2011-05 requires that all non-owner changes in stockholders’ equity be presented either in a single continuous statement of comprehensive income or in two separate but consecutive statements. Accounting Standards Update No. 2011-12, “Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05” (“ASU 2011-12”), was issued in December 2011. ASU 2011-12 deferred the effective date of the requirement to present separate line items on the income statement for reclassification adjustments of items out of accumulated
WASHINGTON TRUST BANCORP, INC. AND SUBSIDIARIES
CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
other comprehensive income into net income. No other requirements in ASU 2011-05 were affected by this amendment. The provisions of ASU 2011-05, exclusive of the provisions pertaining to the reclassification adjustments deferred by ASU 2011-12, were to be applied retrospectively and were effective for fiscal years and interim periods within those years, beginning after December 15, 2011. The Corporation adopted these provisions of ASU 2011-05 in the first quarter of 2012 and elected to present comprehensive income in a separate financial statement, the Consolidated Statements of Comprehensive Income. The adoption of these provisions of ASU 2011-05 did not have a material impact on the Corporation’s consolidated financial position, results of operations or cash flows.
Intangibles-Goodwill and Other – Topic 350
Accounting Standards Update No. 2012-02, “Testing Indefinite-Lived Assets for Impairment” (“ASU 2012-02”), was issued in July 2012. The objective of ASU 2012-02 is to reduce the cost and complexity of performing an impairment test for indefinite-lived asset categories by simplifying how an entity performs the testing of those assets. Similar to the amendments to goodwill impairment testing issued in September 2011, an entity has the option first to assess qualitative factors to determine whether the existence of events and circumstances indicates that it is more likely than not that the indefinite-lived intangible asset is impaired. If an entity concludes that it is not more likely than not that the indefinite-lived intangible asset is impaired, then the entity is not required to take further action. If an entity concludes otherwise, then it is required to determine the fair value of the indefinite-lived intangible asset and perform the quantitative impairment test. The provisions of ASU 2012-02 are effective for annual and interim goodwill impairment tests performed for fiscal years beginning after September 15, 2012, with early adoption permitted. The adoption of ASU 2012-02 is not expected to have a material impact on the Corporation’s consolidated financial position, results of operations or cash flows.
Accounting Standards Update No. 2011-08, “Testing for Goodwill Impairment” (“ASU 2011-08”), was issued in September 2011. The objective of ASU 2011-08 was to simplify the testing of goodwill for impairment by allowing entities to first assess qualitative factors to determine whether it is necessary to perform the two-step quantitative test. There will no longer be a requirement to calculate the fair value of a reporting unit unless it is determined, based on a qualitative assessment, that it is more-likely-than-not that its fair value is less than its carrying amount. The more-likely-than-not threshold was defined as having a likelihood of more than 50 percent. The provisions of ASU 2011-08 are effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. The adoption of ASU 2011-08 did not have a material impact on the Corporation’s consolidated financial position, results of operations or cash flows.
Balance Sheet - Topic 210
Accounting Standards Update No. 2011-11, “Disclosures about Offsetting Assets and Liabilities” (“ASU 2011-11”), was issued in December 2011 and was intended to enhance current disclosure requirements on offsetting financial assets and liabilities. The requirements in ASU 2011-11 enables users to compare balance sheets prepared under U.S. GAAP and International Financial Reporting Standards (“IFRS”), which are subject to different offsetting models. The requirements affect all entities that have financial instruments that are either offset in the balance sheet or subject to an enforceable master netting arrangement or similar agreement. ASU 2011-11 will be effective for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods. The required disclosures shall be provided retrospectively for all comparative periods presented. The adoption of ASU 2011-11 is not expected to have a material impact on the Corporation’s consolidated financial position, results of operations or cash flows.
| |
(3) | Cash and Due from Banks |
The Bank maintains certain average reserve balances to meet the requirements of the Board of Governors of the Federal Reserve System (“FRB”). Some or all of this reserve requirement may be satisfied with vault cash. Reserve balances amounted to $4.4 million at September 30, 2012 and $5.1 million at December 31, 2011 and are included in cash and due from banks in the Consolidated Statements of Condition.
As of September 30, 2012 and December 31, 2011, cash and due from banks included interest-bearing deposits in other banks of $12.8 million and $41.6 million, respectively.
WASHINGTON TRUST BANCORP, INC. AND SUBSIDIARIES
CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The following tables present the amortized cost, gross unrealized holding gains, gross unrealized holding losses and fair value of securities by major security type and class of security at September 30, 2012 and December 31, 2011.
|
| | | | | | | | | | | | | | | |
(Dollars in thousands) | | | | | | | |
September 30, 2012 | Amortized Cost (1) | | Unrealized Gains | | Unrealized Losses | | Fair Value |
Securities Available for Sale: | | | | | | | |
Obligations of U.S. government-sponsored enterprises |
| $29,451 |
| |
| $2,584 |
| |
| $— |
| |
| $32,035 |
|
Mortgage-backed securities issued by U.S. government agencies and U.S. government-sponsored enterprises | 277,432 |
| | 18,394 |
| | — |
| | 295,826 |
|
States and political subdivisions | 68,700 |
| | 4,913 |
| | — |
| | 73,613 |
|
Trust preferred securities: | | | | | | | |
Individual name issuers | 30,667 |
| | — |
| | (7,231 | ) | | 23,436 |
|
Collateralized debt obligations | 4,047 |
| | — |
| | (3,117 | ) | | 930 |
|
Corporate bonds | 13,897 |
| | 585 |
| | (33 | ) | | 14,449 |
|
Total securities available for sale |
| $424,194 |
| |
| $26,476 |
| |
| ($10,381 | ) | |
| $440,289 |
|
Held to Maturity: | | | | | | | |
Mortgage-backed securities issued by U.S. government agencies and U.S. government-sponsored enterprises |
| $43,569 |
| |
| $1,462 |
| |
| $— |
| |
| $45,031 |
|
Total securities held to maturity |
| $43,569 |
| |
| $1,462 |
| |
| $— |
| |
| $45,031 |
|
Total securities |
| $467,763 |
| |
| $27,938 |
| |
| ($10,381 | ) | |
| $485,320 |
|
|
| | | | | | | | | | | | | | | |
(Dollars in thousands) | | | | | | | |
December 31, 2011 | Amortized Cost (1) | | Unrealized Gains | | Unrealized Losses | | Fair Value |
Securities Available for Sale: | | | | | | | |
Obligations of U.S. government-sponsored enterprises |
| $29,429 |
| |
| $3,404 |
| |
| $— |
| |
| $32,833 |
|
Mortgage-backed securities issued by U.S. government agencies and U.S. government-sponsored enterprises | 369,946 |
| | 19,712 |
| | — |
| | 389,658 |
|
States and political subdivisions | 74,040 |
| | 5,453 |
| | — |
| | 79,493 |
|
Trust preferred securities: | | | | | | | |
Individual name issuers | 30,639 |
| | — |
| | (8,243 | ) | | 22,396 |
|
Collateralized debt obligations | 4,256 |
| | — |
| | (3,369 | ) | | 887 |
|
Corporate bonds | 13,872 |
| | 813 |
| | (403 | ) | | 14,282 |
|
Perpetual preferred stocks (2) | 1,854 |
| | — |
| | (150 | ) | | 1,704 |
|
Total securities available for sale |
| $524,036 |
| |
| $29,382 |
| |
| ($12,165 | ) | |
| $541,253 |
|
Held to Maturity: | | | | | | | |
Mortgage-backed securities issued by U.S. government agencies and U.S. government-sponsored enterprises |
| $52,139 |
| |
| $360 |
| |
| $— |
| |
| $52,499 |
|
Total securities held to maturity |
| $52,139 |
| |
| $360 |
| |
| $— |
| |
| $52,499 |
|
Total securities |
| $576,175 |
| |
| $29,742 |
| |
| ($12,165 | ) | |
| $593,752 |
|
(1) Net of other-than-temporary impairment losses.
(2) Callable at the discretion of the issuer.
WASHINGTON TRUST BANCORP, INC. AND SUBSIDIARIES
CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Securities available for sale (“AFS”) and held to maturity (“HTM”) with a fair value of $449.7 million and $558.2 million, respectively, were pledged to secure borrowings with the Federal Home Loan Bank of Boston ("FHLBB"), potential borrowings with the FRB, certain public deposits and for other purposes at September 30, 2012 and December 31, 2011.
The following table presents a roll forward of the balance of credit-related impairment losses on debt securities, for which a portion of an other-than-temporary impairment was recognized in other comprehensive income:
|
| | | | | | | | | | | | | | | |
(Dollars in thousands) | Three Months | | Nine Months |
Periods ended September 30, | 2012 | | 2011 | | 2012 | | 2011 |
Balance at beginning of period |
| $3,313 |
| |
| $2,946 |
| |
| $3,104 |
| |
| $2,913 |
|
Credit-related impairment loss on debt securities for which an other-than-temporary impairment was not previously recognized | — |
| | — |
| | — |
| | — |
|
Additional increases to the amount of credit-related impairment loss on debt securities for which an other-than-temporary impairment was previously recognized | — |
| | 158 |
| | 209 |
| | 191 |
|
Balance at end of period |
| $3,313 |
| |
| $3,104 |
| |
| $3,313 |
| |
| $3,104 |
|
There were no credit-related impairment losses recognized in earnings on debt securities in the three months ended September 30, 2012, while credit-related impairment losses of $158 thousand were recognized in earnings in the same period of 2011. For the nine months ended September 30, 2012 and 2011, credit-related impairment losses recognized in earnings on debt securities totaled $209 thousand and $191 thousand, respectively. The anticipated cash flows expected to be collected from these pooled trust preferred debt securities were discounted at the rate equal to the yield used to accrete the current and prospective beneficial interest for each security. Significant inputs included estimated cash flows and prospective defaults and recoveries. Estimated cash flows are generated based on the underlying seniority status and subordination structure of the pooled trust preferred debt tranche at the time of measurement. Prospective default and recovery estimates affecting projected cash flows were based on analysis of the underlying financial condition of individual issuers, and took into account capital adequacy, credit quality, lending concentrations, and other factors.
All cash flow estimates were based on the underlying security’s tranche structure and contractual rate and maturity terms. The present value of the expected cash flows was compared to the current outstanding balance of the tranche to determine the ratio of the estimated present value of expected cash flows to the total current balance for the tranche. This ratio was then multiplied by the principal balance of Washington Trust’s holding to determine the credit-related impairment loss. The estimates used in the determination of the present value of the expected cash flows are susceptible to changes in future periods, which could result in additional credit-related impairment losses.
The following table summarizes temporarily impaired securities at September 30, 2012, segregated by length of time the securities have been in a continuous unrealized loss position:
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(Dollars in thousands) | Less than 12 Months | | 12 Months or Longer | | Total |
September 30, 2012 | # |
| | Fair Value | | Unrealized Losses | | # |
| | Fair Value | | Unrealized Losses | | # |
| | Fair Value | | Unrealized Losses |
Trust preferred securities: | | | | | | | | | | | | | | | | | |
Individual name issuers | — |
| |
| $— |
| |
| $— |
| | 11 |
| |
| $23,436 |
| |
| ($7,231 | ) | | 11 |
| |
| $23,436 |
| |
| ($7,231 | ) |
Collateralized debt obligations | — |
| | — |
| | — |
| | 2 |
| | 930 |
| | (3,117 | ) | | 2 |
| | 930 |
| | (3,117 | ) |
Corporate bonds | 2 |
| | 4,966 |
| | (33 | ) | | — |
| | — |
| | — |
| | 2 |
| | 4,966 |
| | (33 | ) |
Subtotal, debt securities | 2 |
| | 4,966 |
| | (33 | ) | | 13 |
| | 24,366 |
| | (10,348 | ) | | 15 |
| | 29,332 |
| | (10,381 | ) |
Total temporarily impaired securities | 2 |
| |
| $4,966 |
| |
| ($33 | ) | | 13 |
| |
| $24,366 |
| |
| ($10,348 | ) | | 15 |
| |
| $29,332 |
| |
| ($10,381 | ) |
WASHINGTON TRUST BANCORP, INC. AND SUBSIDIARIES
CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The following table summarizes temporarily impaired securities at December 31, 2011, segregated by length of time the securities have been in a continuous unrealized loss position:
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(Dollars in thousands) | Less than 12 Months | | 12 Months or Longer | | Total |
December 31, 2011 | # |
| | Fair Value | | Unrealized Losses | | # |
| | Fair Value | | Unrealized Losses | | # |
| | Fair Value | | Unrealized Losses |
Trust preferred securities: | | | | | | | | | | | | | | | | | |
Individual name issuers | — |
| |
| $— |
| |
| $— |
| | 11 |
| |
| $22,396 |
| |
| ($8,243 | ) | | 11 |
| |
| $22,396 |
| |
| ($8,243 | ) |
Collateralized debt obligations | — |
| | — |
| | — |
| | 2 |
| | 887 |
| | (3,369 | ) | | 2 |
| | 887 |
| | (3,369 | ) |
Corporate bonds | 3 |
| | 5,203 |
| | (403 | ) | | — |
| | — |
| | — |
| | 3 |
| | 5,203 |
| | (403 | ) |
Subtotal, debt securities | 3 |
| | 5,203 |
| | (403 | ) | | 13 |
| | 23,283 |
| | (11,612 | ) | | 16 |
| | 28,486 |
| | (12,015 | ) |
Perpetual preferred stocks | 2 |
| | 1,704 |
| | (150 | ) | | — |
| | — |
| | — |
| | 2 |
| | 1,704 |
| | (150 | ) |
Total temporarily impaired securities | 5 |
| |
| $6,907 |
| |
| ($553 | ) | | 13 |
| |
| $23,283 |
| |
| ($11,612 | ) | | 18 |
| |
| $30,190 |
| |
| ($12,165 | ) |
Unrealized losses on debt securities generally occur as a result of increases in interest rates since the time of purchase, a structural change in an investment or deterioration in credit quality of the issuer. Management evaluates impairments in value whether caused by adverse interest rates or credit movements to determine if they are other-than-temporary.
Further deterioration in credit quality of the companies backing the securities, further deterioration in the condition of the financial services industry, a continuation or worsening of the current economic downturn, or additional declines in real estate values, among other things, may further affect the fair value of these securities and increase the potential that certain unrealized losses be designated as other-than-temporary in future periods, and the Corporation may incur additional write-downs.
Trust Preferred Debt Securities of Individual Name Issuers
Included in debt securities in an unrealized loss position at September 30, 2012 were 11 trust preferred security holdings issued by seven individual companies in the financial services/banking industry. The aggregate unrealized losses on these debt securities amounted to $7.2 million at September 30, 2012. Management believes the decline in fair value of these trust preferred securities primarily reflects investor concerns about global economic growth and how it will affect the recent and potential future losses in the financial services industry. These concerns resulted in increased risk premiums for securities in this sector. Based on the information available through the filing date of this report, all individual name trust preferred debt securities held in our portfolio continue to accrue and make payments as expected with no payment deferrals or defaults on the part of the issuers. As of September 30, 2012, trust preferred debt securities with an amortized cost of $11.8 million and unrealized losses of $2.9 million were rated below investment grade by Standard & Poors, Inc. (“S&P”). Management reviewed the collectibility of these securities taking into consideration such factors as the financial condition of the issuers, reported regulatory capital ratios of the issuers, credit ratings including ratings in effect as of the reporting period date as well as credit rating changes between the reporting period date and the filing date of this report and other information. We noted no additional downgrades to below investment grade between the reporting period date and the filing date of this report. Based on these analyses, management concluded that it expects to recover the entire amortized cost basis of these securities. Furthermore, Washington Trust does not intend to sell these securities and it is not more likely than not that Washington Trust will be required to sell these securities before recovery of their cost basis, which may be maturity. Therefore, management does not consider these investments to be other-than-temporarily impaired at September 30, 2012.
Trust Preferred Debt Securities in the Form of Collateralized Debt Obligations
Washington Trust has two pooled trust preferred holdings in the form of collateralized debt obligations with a total amortized cost of $4.0 million and aggregate unrealized losses of $3.1 million at September 30, 2012. These pooled trust preferred holdings consist of trust preferred obligations of banking industry companies and, to a lesser extent, insurance industry companies. For both of these pooled trust preferred securities, Washington Trust’s investment is senior to one or more subordinated tranches which have first loss exposure. Valuations of the pooled trust preferred holdings are dependent in part on cash flows from underlying issuers. Unexpected cash flow disruptions could have an adverse impact on the fair value and performance of pooled trust preferred securities. Management believes the unrealized losses on these pooled trust preferred securities primarily reflect investor concerns about global economic growth and how it will affect the recent and potential future losses in the financial services industry and the possibility of further incremental deferrals of or defaults on interest payments on trust preferred debentures by financial institutions participating in these pools. These concerns have resulted in a substantial decrease in market liquidity and increased risk premiums for securities in this sector. Credit spreads for issuers in this sector have remained wide
WASHINGTON TRUST BANCORP, INC. AND SUBSIDIARIES
CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
during recent months, causing prices for these securities holdings to remain at low levels.
As of September 30, 2012, one of the pooled trust preferred securities had an amortized cost of $2.8 million. This security was placed on nonaccrual status in March 2009. The tranche instrument held by Washington Trust has been deferring a portion of interest payments since April 2010. The September 30, 2012 amortized cost was net of $2.1 million of credit-related impairment losses previously recognized in earnings, reflective of payment deferrals and credit deterioration of the underlying collateral. Included in the $2.1 million were credit-related impairment losses of $209 thousand recorded in the first quarter of 2012. As of September 30, 2012, this security has unrealized losses of $2.2 million and a below investment grade rating of “Ca” by Moody’s Investors Service Inc. (“Moody’s”). Through the filing date of this report, there have been no further rating changes on this security. This credit rating status has been considered by management in its assessment of the impairment status of this security. The analysis of the expected cash flows for this security as of September 30, 2012 did not negatively affect the amount of credit-related impairment losses previously recognized on this security.
As of September 30, 2012, the second pooled trust preferred security held by Washington Trust had an amortized cost of $1.3 million. This security was placed on nonaccrual status in December 2008. The tranche instrument held by Washington Trust has been deferring interest payments since December 2008. The September 30, 2012 amortized cost was net of $1.2 million of credit-related impairment losses previously recognized in earnings reflective of payment deferrals and credit deterioration of the underlying collateral. As of September 30, 2012, this security has unrealized losses of $1.0 million and a below investment grade rating of “C” by Moody’s. Through the filing date of this report, there have been no rating changes on this security. This credit rating status has been considered by management in its assessment of the impairment status of this security. The analysis of the expected cash flows for this security as of September 30, 2012 did not negatively affect the amount of credit-related impairment losses previously recognized on this security.
Based on information available through the filing date of this report, there have been no further adverse changes in the deferral or default status of the underlying issuer institutions within either of these trust preferred collateralized debt obligations. Based on cash flow forecasts for these securities, management expects to recover the remaining amortized cost of these securities. Furthermore, Washington Trust does not intend to sell these securities and it is not more likely than not that Washington Trust will be required to sell these securities before recovery of their cost basis, which may be at maturity. Therefore, management does not consider the unrealized losses on these investments to be other-than-temporary.
Corporate Bonds
At September 30, 2012, Washington Trust had two corporate bond holdings with unrealized losses of $33 thousand. These investment grade corporate bonds, maturing in three years, represent large financial corporations with potential exposure to the European markets. The unrealized losses on these securities are attributable to the increased risk premium required in the current economic environment.
WASHINGTON TRUST BANCORP, INC. AND SUBSIDIARIES
CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
As of September 30, 2012, the amortized cost of debt securities by maturity is presented below. Mortgage-backed securities are included based on weighted average maturities, adjusted for anticipated prepayments. All other securities are included based on contractual maturities. Actual maturities may differ from amounts presented because certain issuers have the right to call or prepay obligations with or without call or prepayment penalties. Yields on tax exempt obligations are not computed on a tax equivalent basis. Included in the securities portfolio at September 30, 2012 were debt securities with an amortized cost balance of $91.9 million and a fair value of $85.5 million that are callable at the discretion of the issuers. Final maturities of the callable securities range from three to twenty-five years, with call features ranging from one month to five years.
|
| | | | | | | | | | | | | | | | | | | |
(Dollars in thousands) | Within 1 Year | | 1-5 Years | | 5-10 Years | | After 10 Years | | Totals |
Securities Available for Sale: | | | | | | | | | |
Obligations of U.S. government-sponsored enterprises: | | | | | | | | | |
Amortized cost |
| $— |
| |
| $29,451 |
| |
| $— |
| |
| $— |
| |
| $29,451 |
|
Weighted average yield | — | % | | 5.40 | % | | — | % | | — | % | | 5.40 | % |
Mortgage-backed securities issued by U.S. government-sponsored enterprises: | | | | | | | | | |
Amortized cost | 92,691 |
| | 145,406 |
| | 33,912 |
| | 5,423 |
| | 277,432 |
|
Weighted average yield | 4.27 | % | | 3.83 | % | | 2.44 | % | | 2.54 | % | | 3.78 | % |
State and political subdivisions: | | | | | | | | | |
Amortized cost | 3,852 |
| | 64,045 |
| | 803 |
| | — |
| | 68,700 |
|
Weighted average yield | 3.62 | % | | 3.91 | % | | 3.81 | % | | — | % | | 3.89 | % |
Trust preferred securities: | | | | | | | | | |
Amortized cost (1) | — |
| | — |
| | — |
| | 34,714 |
| | 34,714 |
|
Weighted average yield | — | % | | — | % | | — | % | | 1.72 | % | | 1.72 | % |
Corporate bonds: | | | | | | | | | |
Amortized cost | 3,199 |
| | 10,698 |
| | — |
| | — |
| | 13,897 |
|
Weighted average yield | 6.31 | % | | 4.68 | % | | — | % | | — | % | | 5.05 | % |
Total debt securities available for sale: | | | | | | | | | |
Amortized cost |
| $99,742 |
| |
| $249,600 |
| |
| $34,715 |
| |
| $40,137 |
| |
| $424,194 |
|
Weighted average yield | 4.31 | % | | 4.07 | % | | 2.48 | % | | 1.83 | % | | 3.78 | % |
Fair value |
| $103,908 |
| |
| $258,863 |
| |
| $37,021 |
| |
| $40,497 |
| |
| $440,289 |
|
Securities Held to Maturity: | | | | | | | | | |
Mortgage-backed securities issued by U.S. government-sponsored enterprises: | | | | | | | | | |
Amortized cost |
| $10,635 |
| |
| $22,407 |
| |
| $8,376 |
| |
| $2,151 |
| |
| $43,569 |
|
Weighted average yield | 2.48 | % | | 2.36 | % | | 2.24 | % | | 1.19 | % | | 2.31 | % |
Fair value |
| $10,992 |
| |
| $23,159 |
| |
| $8,657 |
| |
| $2,223 |
| |
| $45,031 |
|
| |
(1) | Net of other-than-temporary impairment losses. |
WASHINGTON TRUST BANCORP, INC. AND SUBSIDIARIES
CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The following is a summary of loans:
|
| | | | | | | | | | | | | |
(Dollars in thousands) | September 30, 2012 | | December 31, 2011 |
| Amount |
| | % |
| | Amount |
| | % |
|
Commercial: | | | | | | | |
Mortgages (1) |
| $693,221 |
| | 31 | % | |
| $624,813 |
| | 29 | % |
Construction and development (2) | 25,132 |
| | 1 |
| | 10,955 |
| | 1 |
|
Other (3) | 500,974 |
| | 22 |
| | 488,860 |
| | 22 |
|
Total commercial | 1,219,327 |
| | 54 |
| | 1,124,628 |
| | 52 |
|
Residential real estate: | | | | | | | |
Mortgages (4) | 692,659 |
| | 31 |
| | 678,582 |
| | 32 |
|
Homeowner construction | 22,753 |
| | 1 |
| | 21,832 |
| | 1 |
|
Total residential real estate | 715,412 |
| | 32 |
| | 700,414 |
| | 33 |
|
Consumer: | | | | | | | |
Home equity lines (5) | 227,549 |
| | 10 |
| | 223,430 |
| | 10 |
|
Home equity loans (5) | 39,452 |
| | 2 |
| | 43,121 |
| | 2 |
|
Other (6) | 54,957 |
| | 2 |
| | 55,566 |
| | 3 |
|
Total consumer | 321,958 |
| | 14 |
| | 322,117 |
| | 15 |
|
Total loans (7) |
| $2,256,697 |
| | 100 | % | |
| $2,147,159 |
| | 100 | % |
| |
(1) | Amortizing mortgages and lines of credit, primarily secured by income producing property. As of September 30, 2012 and December 31, 2011, $250.1 million and $107.1 million, respectively, of these loans were pledged as collateral for FHLBB borrowings (see Note 8). |
| |
(2) | Loans for construction of residential and commercial properties and for land development. |
| |
(3) | Loans to businesses and individuals, a substantial portion of which are fully or partially collateralized by real estate. As of September 30, 2012, $54.3 million and $32.7 million, respectively, of these loans were pledged as collateral for FHLBB borrowings and were collateralized for the discount window at the Federal Reserve Bank. Comparable amounts for December 31, 2011 were $27.2 million and $42.1 million, respectively (see Note 8). |
| |
(4) | As of September 30, 2012 and December 31, 2011, $599.6 million and $611.8 million, respectively, of these loans were pledged as collateral for FHLBB borrowings (see Note 8). |
| |
(5) | As of September 30, 2012 and December 31, 2011, $191.2 million and $165.4 million, respectively, of these loans were pledged as collateral for FHLBB borrowings (see Note 8). |
| |
(6) | Fixed-rate consumer installment loans. |
| |
(7) | Includes net unamortized loan origination costs of $39 thousand and $31 thousand, respectively, and net unamortized premiums on purchased loans of $76 thousand and $67 thousand, respectively, at September 30, 2012 and December 31, 2011. |
Nonaccrual Loans
Loans, with the exception of certain well-secured residential mortgage loans that are in the process of collection, are placed on nonaccrual status and interest recognition is suspended when such loans are 90 days or more overdue with respect to principal and/or interest or sooner if considered appropriate by management. Well-secured residential mortgage loans are permitted to remain on accrual status provided that full collection of principal and interest is assured and the loan is in the process of collection. Loans are also placed on nonaccrual status when, in the opinion of management, full collection of principal and interest is doubtful. Interest previously accrued but not collected on such loans is reversed against current period income. Subsequent interest payments received on nonaccrual loans are applied to the outstanding principal balance of the loan or recognized as interest income depending on management's assessment of the ultimate collectability of the loan. Loans are removed from nonaccrual status when they have been current as to principal and interest for a period of time, the borrower has demonstrated an ability to comply with repayment terms, and when, in management's opinion, the loans are considered to be fully collectible.
WASHINGTON TRUST BANCORP, INC. AND SUBSIDIARIES
CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The following is a summary of nonaccrual loans, segregated by class of loans, as of the dates indicated:
|
| | | | | | | |
(Dollars in thousands) | Sep 30, 2012 | | Dec 31, 2011 |
Commercial: | | | |
Mortgages |
| $5,956 |
| |
| $5,709 |
|
Construction and development | — |
| | — |
|
Other | 3,201 |
| | 3,708 |
|
Residential real estate: | | | |
Mortgages | 7,127 |
| | 10,614 |
|
Homeowner construction | — |
| | — |
|
Consumer: | | | |
Home equity lines | 1,013 |
| | 718 |
|
Home equity loans | 376 |
| | 335 |
|
Other | 74 |
| | 153 |
|
Total nonaccrual loans |
| $17,747 |
| |
| $21,237 |
|
Accruing loans 90 days or more past due |
| $— |
| |
| $— |
|
As of September 30, 2012 and December 31, 2011, nonaccrual loans of $3.3 million and $3.6 million, respectively, were current as to the payment of principal and interest.
Past Due Loans
Past due status is based on the contractual payment terms of the loan. The following tables present an age analysis of past due loans, segregated by class of loans, as of the dates indicated:
|
| | | | | | | | | | | | | | | | | | | | | | | |
(Dollars in thousands) | Days Past Due | | | | | | |
September 30, 2012 | 30-59 | | 60-89 | | Over 90 | | Total Past Due | | Current | | Total Loans |
Commercial: | | | | | | | | | | | |
Mortgages |
| $3,978 |
| |
| $874 |
| |
| $2,495 |
| |
| $7,347 |
| |
| $685,874 |
| |
| $693,221 |
|
Construction and development | — |
| | — |
| | — |
| | — |
| | 25,132 |
| | 25,132 |
|
Other | 2,719 |
| | 1,169 |
| | 1,366 |
| | 5,254 |
| | 495,720 |
| | 500,974 |
|
Residential real estate: | | | | | | | | | | | |
Mortgages | 2,368 |
| | 821 |
| | 3,924 |
| | 7,113 |
| | 685,546 |
| | 692,659 |
|
Homeowner construction | — |
| | — |
| | — |
| | — |
| | 22,753 |
| | 22,753 |
|
Consumer: | | | | | | | | | | | |
Home equity lines | 1,546 |
| | 914 |
| | 528 |
| | 2,988 |
| | 224,561 |
| | 227,549 |
|
Home equity loans | 296 |
| | 241 |
| | 250 |
| | 787 |
| | 38,665 |
| | 39,452 |
|
Other | 34 |
| | 58 |
| | 33 |
| | 125 |
| | 54,832 |
| | 54,957 |
|
Total loans |
| $10,941 |
| |
| $4,077 |
| |
| $8,596 |
| |
| $23,614 |
| |
| $2,233,083 |
| |
| $2,256,697 |
|
WASHINGTON TRUST BANCORP, INC. AND SUBSIDIARIES
CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
| | | | | | | | | | | | | | | | | | | | | | | |
(Dollars in thousands) | Days Past Due | | | | | | |
December 31, 2011 | 30-59 | | 60-89 | | Over 90 | | Total Past Due | | Current | | Total Loans |
Commercial: | | | | | | | | | | | |
Mortgages |
| $1,621 |
| |
| $315 |
| |
| $4,995 |
| |
| $6,931 |
| |
| $617,882 |
| |
| $624,813 |
|
Construction and development | — |
| | — |
| | — |
| | — |
| | 10,955 |
| | 10,955 |
|
Other | 3,760 |
| | 982 |
| | 633 |
| | 5,375 |
| | 483,485 |
| | 488,860 |
|
Residential real estate: | | | | | | | | | | | |
Mortgages | 3,969 |
| | 1,505 |
| | 6,283 |
| | 11,757 |
| | 666,825 |
| | 678,582 |
|
Homeowner construction | — |
| | — |
| | — |
| | — |
| | 21,832 |
| | 21,832 |
|
Consumer: | | | | | | | | | | | |
Home equity lines | 645 |
| | 210 |
| | 525 |
| | 1,380 |
| | 222,050 |
| | 223,430 |
|
Home equity loans | 362 |
| | 46 |
| | 202 |
| | 610 |
| | 42,511 |
| | 43,121 |
|
Other | 66 |
| | 7 |
| | 147 |
| | 220 |
| | 55,346 |
| | 55,566 |
|
Total loans |
| $10,423 |
| |
| $3,065 |
| |
| $12,785 |
| |
| $26,273 |
| |
| $2,120,886 |
| |
| $2,147,159 |
|
Included in past due loans as of September 30, 2012 and December 31, 2011, were nonaccrual loans of $14.5 million and $17.6 million, respectively.
Impaired Loans
Impaired loans are loans for which it is probable that the Corporation will not be able to collect all amounts due according to the contractual terms of the loan agreements and loans restructured in a troubled debt restructuring. Impaired loans do not include large groups of smaller-balance homogeneous loans that are collectively evaluated for impairment, which consist of most residential mortgage loans and consumer loans.
WASHINGTON TRUST BANCORP, INC. AND SUBSIDIARIES
CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The following is a summary of impaired loans, as of the dates indicated:
|
| | | | | | | | | | | | | | | | | | | | | | | |
(Dollars in thousands) | Recorded Investment (1) | | Unpaid Principal | | Related Allowance |
| Sep 30, 2012 | | Dec 31, 2011 | | Sep 30, 2012 | | Dec 31, 2011 | | Sep 30, 2012 | | Dec 31, 2011 |
No Related Allowance Recorded: | | | | | | | | | | | |
Commercial: | | | | | | | | | | | |
Mortgages |
| $914 |
| |
| $7,093 |
| |
| $915 |
| |
| $7,076 |
| |
| $— |
| |
| $— |
|
Construction and development | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Other | 2,140 |
| | 1,622 |
| | 2,136 |
| | 1,620 |
| | — |
| | — |
|
Residential real estate: | |