Documents
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-Q
(Mark
One)
xQuarterly
Report
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for
the
quarterly period ended MARCH 31,
2007
or
oTransition
Report
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for
the
transition period from ______ to ______.
Commission
file number: 000-13091
WASHINGTON TRUST BANCORP, INC.
(Exact
name of registrant as specified in its charter)
RHODE
ISLAND
|
|
05-0404671
|
(State
or other jurisdiction of
|
|
(I.R.S.
Employer
|
incorporation
or organization)
|
|
Identification
No.)
|
23
BROAD STREET
|
|
|
WESTERLY,
RHODE ISLAND
|
|
02891
|
(Address
of principal executive offices)
|
|
(Zip
Code)
|
(401)
348-1200
|
(Registrant’s
telephone number, including area
code)
|
Indicate
by check mark whether the registrant (1) has filed all reports required to
be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements
for
the past 90 days.
xYes oNo
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of “accelerated
filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check
one):
Large
accelerated filer o Accelerated
filer x Non-accelerated
filer o
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).
oYes
xNo
The
number of shares of common stock of the registrant outstanding as of May 3,
2007 was 13,356,244.
|
|
|
|
WASHINGTON
TRUST BANCORP, INC. AND SUBSIDIARIES
|
(Dollars
in thousands)
|
|
|
Unaudited
|
|
|
|
March 31,
|
|
December 31,
|
|
|
|
2007
|
|
2006
|
|
Assets:
|
|
|
|
|
|
|
|
Cash
and due from banks
|
|
$
|
30,058
|
|
$
|
54,337
|
|
Federal
funds sold
|
|
|
29,625
|
|
|
16,425
|
|
Other
short term investments
|
|
|
683
|
|
|
1,147
|
|
Mortgage
loans held for sale
|
|
|
2,122
|
|
|
2,148
|
|
Securities:
|
|
|
|
|
|
|
|
Available
for sale, at fair value; amortized cost $540,650 in 2007 and $525,966
in
2006
|
|
|
541,942
|
|
|
526,396
|
|
Held
to maturity, at cost; fair value $162,974 in 2007 and $175,369 in
2006
|
|
|
164,464
|
|
|
177,455
|
|
Total
securities
|
|
|
706,406
|
|
|
703,851
|
|
Federal
Home Loan Bank stock, at cost
|
|
|
28,727
|
|
|
28,727
|
|
Loans:
|
|
|
|
|
|
|
|
Commercial
and other
|
|
|
599,170
|
|
|
587,397
|
|
Residential
real estate
|
|
|
589,565
|
|
|
588,671
|
|
Consumer
|
|
|
281,465
|
|
|
283,918
|
|
Total
loans
|
|
|
1,470,200
|
|
|
1,459,986
|
|
Less
allowance for loan losses
|
|
|
19,360
|
|
|
18,894
|
|
Net
loans
|
|
|
1,450,840
|
|
|
1,441,092
|
|
Premises
and equipment, net
|
|
|
24,603
|
|
|
24,307
|
|
Accrued
interest receivable
|
|
|
11,572
|
|
|
11,268
|
|
Investment
in bank-owned life insurance
|
|
|
40,161
|
|
|
39,770
|
|
Goodwill
|
|
|
44,558
|
|
|
44,558
|
|
Identifiable
intangible assets, net
|
|
|
12,448
|
|
|
12,816
|
|
Other
assets
|
|
|
18,159
|
|
|
18,719
|
|
Total
assets
|
|
$
|
2,399,962
|
|
$
|
2,399,165
|
|
Liabilities:
|
|
|
|
|
|
|
|
Deposits:
|
|
|
|
|
|
|
|
Demand
deposits
|
|
$
|
175,010
|
|
$
|
186,533
|
|
NOW
accounts
|
|
|
176,006
|
|
|
175,479
|
|
Money
market accounts
|
|
|
290,273
|
|
|
286,998
|
|
Savings
accounts
|
|
|
204,465
|
|
|
205,998
|
|
Time
deposits
|
|
|
837,838
|
|
|
822,989
|
|
Total
deposits
|
|
|
1,683,592
|
|
|
1,677,997
|
|
Dividends
payable
|
|
|
2,682
|
|
|
2,556
|
|
Federal
Home Loan Bank advances
|
|
|
457,145
|
|
|
474,561
|
|
Junior
subordinated debentures
|
|
|
22,681
|
|
|
22,681
|
|
Other
borrowings
|
|
|
25,792
|
|
|
14,684
|
|
Accrued
expenses and other liabilities
|
|
|
32,543
|
|
|
33,630
|
|
Total
liabilities
|
|
|
2,224,435
|
|
|
2,226,109
|
|
Shareholders’
Equity:
|
|
|
|
|
|
|
|
Common
stock of $.0625 par value; authorized 30,000,000 shares;
|
|
|
|
|
|
|
|
issued
13,492,110 in 2007 and 2006
|
|
|
843
|
|
|
843
|
|
Paid-in
capital
|
|
|
35,697
|
|
|
35,893
|
|
Retained
earnings
|
|
|
144,841
|
|
|
141,548
|
|
Accumulated
other comprehensive loss
|
|
|
(2,876
|
)
|
|
(3,515
|
)
|
Treasury
stock, at cost; 109,575 shares in 2007 and 62,432 shares in
2006
|
|
|
(2,978
|
)
|
|
(1,713
|
)
|
Total
shareholders’ equity
|
|
|
175,527
|
|
|
173,056
|
|
Total
liabilities and shareholders’ equity
|
|
$
|
2,399,962
|
|
$
|
2,399,165
|
|
|
|
|
|
|
|
|
|
The
accompanying notes are an integral part of these consolidated financial
statements.
|
|
|
|
|
|
|
|
WASHINGTON
TRUST BANCORP, INC. AND SUBSIDIARIES
|
|
(Dollars
and shares in thousands,
|
|
|
|
except
per share amounts)
|
|
|
|
|
|
|
|
Unaudited
|
|
Three
months ended March 31,
|
|
2007
|
|
2006
|
|
Interest
income:
|
|
|
|
|
|
|
|
Interest
and fees on loans
|
|
$
|
23,934
|
|
$
|
21,897
|
|
Interest
on securities:
|
|
|
|
|
|
|
|
Taxable
|
|
|
7,792
|
|
|
8,412
|
|
Nontaxable
|
|
|
668
|
|
|
328
|
|
Dividends
on corporate stock and Federal Home Loan Bank stock
|
|
|
718
|
|
|
677
|
|
Interest
on federal funds sold and other short-term investments
|
|
|
191
|
|
|
115
|
|
Total
interest income
|
|
|
33,303
|
|
|
31,429
|
|
Interest
expense:
|
|
|
|
|
|
|
|
Deposits
|
|
|
12,977
|
|
|
10,238
|
|
Federal
Home Loan Bank advances
|
|
|
4,968
|
|
|
5,359
|
|
Junior
subordinated debentures
|
|
|
338
|
|
|
338
|
|
Other
|
|
|
150
|
|
|
79
|
|
Total
interest expense
|
|
|
18,433
|
|
|
16,014
|
|
Net
interest income
|
|
|
14,870
|
|
|
15,415
|
|
Provision
for loan losses
|
|
|
300
|
|
|
300
|
|
Net
interest income after provision for loan losses
|
|
|
14,570
|
|
|
15,115
|
|
Noninterest
income:
|
|
|
|
|
|
|
|
Wealth
management services
|
|
|
|
|
|
|
|
Trust
and investment advisory fees
|
|
|
5,038
|
|
|
4,627
|
|
Mutual
fund fees
|
|
|
1,262
|
|
|
1,130
|
|
Financial
planning, commissions and other service fees
|
|
|
570
|
|
|
683
|
|
Wealth
management services
|
|
|
6,870
|
|
|
6,440
|
|
Service
charges on deposit accounts
|
|
|
1,125
|
|
|
1,119
|
|
Merchant
processing fees
|
|
|
1,204
|
|
|
1,047
|
|
Income
from bank-owned life insurance
|
|
|
391
|
|
|
279
|
|
Net
gains on loan sales and commissions on loans originated for
others
|
|
|
264
|
|
|
276
|
|
Net
realized gains on sales of securities
|
|
|
1,036
|
|
|
59
|
|
Other
income
|
|
|
358
|
|
|
300
|
|
Total
noninterest income
|
|
|
11,248
|
|
|
9,520
|
|
Noninterest
expense:
|
|
|
|
|
|
|
|
Salaries
and employee benefits
|
|
|
9,812
|
|
|
9,619
|
|
Net
occupancy
|
|
|
1,017
|
|
|
954
|
|
Equipment
|
|
|
832
|
|
|
799
|
|
Merchant
processing costs
|
|
|
1,019
|
|
|
887
|
|
Outsourced
services
|
|
|
519
|
|
|
518
|
|
Advertising
and promotion
|
|
|
429
|
|
|
437
|
|
Legal,
audit and professional fees
|
|
|
450
|
|
|
376
|
|
Amortization
of intangibles
|
|
|
368
|
|
|
405
|
|
Debt
prepayment penalties
|
|
|
1,067
|
|
|
-
|
|
Other
|
|
|
1,596
|
|
|
1,709
|
|
Total
noninterest expense
|
|
|
17,109
|
|
|
15,704
|
|
Income
before income taxes
|
|
|
8,709
|
|
|
8,931
|
|
Income
tax expense
|
|
|
2,734
|
|
|
2,858
|
|
Net
income
|
|
$
|
5,975
|
|
$
|
6,073
|
|
|
|
|
|
|
|
|
|
Weighted
average shares outstanding - basic
|
|
|
13,412.1
|
|
|
13,386.8
|
|
Weighted
average shares outstanding - diluted
|
|
|
13,723.0
|
|
|
13,698.6
|
|
Per
share information: Basic earnings per share
|
|
$
|
0.45
|
|
$
|
0.45
|
|
Diluted
earnings per share
|
|
$
|
0.44
|
|
$
|
0.44
|
|
Cash
dividends declared per share
|
|
$
|
0.20
|
|
$
|
0.19
|
|
|
|
|
|
|
|
|
|
The
accompanying notes are an integral part of these consolidated financial
statements.
|
WASHINGTON
TRUST BANCORP, INC. AND SUBSIDIARIES
|
|
(Dollars
in thousands)
|
|
|
|
|
|
|
|
(Unaudited)
|
|
Three
months ended March 31,
|
|
2007
|
|
2006
|
|
Cash
flows from operating activities:
|
|
|
|
|
|
|
|
Net
income
|
|
$
|
5,975
|
|
$
|
6,073
|
|
Adjustments
to reconcile net income to net cash provided by operating
activities:
|
|
|
|
|
|
|
|
Provision
for loan losses
|
|
|
300
|
|
|
300
|
|
Depreciation
of premises and equipment
|
|
|
728
|
|
|
729
|
|
Loss
on disposal of premises and equipment
|
|
|
21
|
|
|
-
|
|
Net
amortization of premium and discount
|
|
|
204
|
|
|
416
|
|
Net
amortization of intangibles
|
|
|
368
|
|
|
405
|
|
Share-based
compensation
|
|
|
171
|
|
|
181
|
|
Earnings
from bank-owned life insurance
|
|
|
(391
|
)
|
|
(279
|
)
|
Net
gains on loan sales
|
|
|
(264
|
)
|
|
(276
|
)
|
Net
realized gains on sales of securities
|
|
|
(1,036
|
)
|
|
(59
|
)
|
Proceeds
from sales of loans
|
|
|
11,364
|
|
|
6,819
|
|
Loans
originated for sale
|
|
|
(11,201
|
)
|
|
(8,364
|
)
|
Increase
in accrued interest receivable, excluding purchased
interest
|
|
|
(295
|
)
|
|
(567
|
)
|
Decrease
(increase) in other assets
|
|
|
266
|
|
|
(681
|
)
|
(Decrease)
increase in accrued expenses and other liabilities
|
|
|
(1,018
|
)
|
|
761
|
|
Other,
net
|
|
|
-
|
|
|
6
|
|
Net
cash provided by operating activities
|
|
|
5,192
|
|
|
5,464
|
|
Cash
flows from investing activities:
|
|
|
|
|
|
|
|
Purchases
of: Other
investment securities available for sale
|
|
|
(17,065
|
)
|
|
(12,851
|
)
|
Other
investment securities available for sale
|
|
|
(15,873
|
)
|
|
(18,608
|
)
|
Other
investment securities held to maturity
|
|
|
(10,302
|
)
|
|
(6,141
|
)
|
Proceeds
from sale of: Other
investment securities available for sale
|
|
|
2,001
|
|
|
193
|
|
Maturities
and principal payments of: Mortgage-backed
securities available for sale
|
|
|
14,177
|
|
|
23,787
|
|
Other
investment
securities available for sale
|
|
|
2,982
|
|
|
-
|
|
Mortgage-backed
securities
held to maturity
|
|
|
2,980
|
|
|
4,291
|
|
Other
investment securities held to maturity
|
|
|
20,265
|
|
|
1,335
|
|
Net
increase in loans
|
|
|
(8,339
|
)
|
|
(349
|
)
|
Purchases
of loans, including purchased interest
|
|
|
(1,630
|
)
|
|
(16,616
|
)
|
Purchases
of premises and equipment
|
|
|
(1,045
|
)
|
|
(1,098
|
)
|
Net
cash used in investing activities
|
|
|
(11,849
|
)
|
|
(26,057
|
)
|
Cash
flows from financing activities:
|
|
|
|
|
|
|
|
Net
increase in deposits
|
|
|
5,595
|
|
|
21,363
|
|
Net
increase (decrease) in other borrowings
|
|
|
11,108
|
|
|
(3,666
|
)
|
Proceeds
from Federal Home Loan Bank advances
|
|
|
170,400
|
|
|
160,204
|
|
Repayment
of Federal Home Loan Bank advances
|
|
|
(187,805
|
)
|
|
(149,463
|
)
|
Purchases
of treasury stock, including deferred compensation plan
activity
|
|
|
(1,930
|
)
|
|
(69
|
)
|
Proceeds
from the issuance of common stock under dividend reinvestment
plan
|
|
|
-
|
|
|
313
|
|
Proceeds
from the exercise of share options
|
|
|
113
|
|
|
530
|
|
Tax
benefit from share option exercises
|
|
|
189
|
|
|
201
|
|
Cash
dividends paid
|
|
|
(2,556
|
)
|
|
(2,408
|
)
|
Net
cash (used in) provided by financing activities
|
|
|
(4,886
|
)
|
|
27,005
|
|
Net
(decrease) increase in cash and cash equivalents
|
|
|
(11,543
|
)
|
|
6,412
|
|
Cash
and cash equivalents at beginning of year
|
|
|
71,909
|
|
|
66,163
|
|
Cash
and cash equivalents at end of period
|
|
$
|
60,366
|
|
$
|
72,575
|
|
|
|
|
|
|
|
|
|
Noncash
Investing and Financing Activities: Loans
charged off
|
|
$
|
25
|
|
$
|
38
|
|
Supplemental
Disclosures: Interest
payments
|
|
|
18,393
|
|
|
14,727
|
|
Income
tax
payments
|
|
|
125
|
|
|
240
|
|
|
|
|
|
|
|
|
|
The
accompanying notes are an integral part of these consolidated financial
statements.
|
|
|
|
|
|
|
|
WASHINGTON
TRUST BANCORP INC. AND SUBSIDIARIES
|
|
|
|
General
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 to individuals and
businesses including commercial, residential and consumer lending, retail and
commercial deposit products, and wealth management services through its branch
offices in Rhode Island, Massachusetts and southeastern Connecticut, ATMs,
and
its Internet web site (www.washtrust.com).
(1)
Basis of Presentation
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 U.S. generally
accepted accounting principles (“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 and other intangible assets
for impairment.
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 March 31, 2007 and December 31, 2006, 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 Washington Trust’s Annual Report on
Form 10-K for the year ended December 31, 2006.
(2)
New Accounting Pronouncements
In
February 2006, the Financial Accounting Standards Board (“FASB”) issued SFAS
No. 155, “Accounting for Certain Hybrid Financial Instruments - an
amendment of FASB Statements No. 133 and 140.” This Statement eliminates
the exemption from applying SFAS No. 133 to interests in securitized
financial assets so that similar instruments are accounted for similarly
regardless of the form of the instruments. This Statement also allows a preparer
to elect fair value measurement at acquisition, at issuance, or when a
previously recognized financial instrument is subject to a remeasurement event,
on an instrument-by-instrument basis, in cases in which a derivative would
otherwise have to be bifurcated. SFAS No. 155 is effective for all
financial instruments acquired or issued after the beginning of an entity’s
first fiscal year that begins after September 15, 2006. Provisions of this
Statement may be applied to instruments that an entity holds at the date of
adoption on an instrument-by-instrument basis. Prior periods should not be
restated. The adoption of SFAS No. 155 did not have a material impact on
the Corporation’s financial position or results of operations.
In
March
2006, the FASB issued SFAS No. 156, “Accounting for Servicing of Financial
Assets - an amendment of FASB Statement No. 140.” This Statement requires
that all separately recognized servicing assets and servicing liabilities be
initially measured at fair value. SFAS No. 156 permits, but does not
require, the subsequent measurement of servicing assets and servicing
liabilities at fair value. An entity that used derivative instruments to
mitigate the risks inherent in servicing assets and servicing liabilities is
required to account for those derivative instruments at fair value. SFAS
No. 156 is effective as of the beginning of the first fiscal year that
begins after September 15, 2006. The adoption of SFAS No. 156 did not
have a material impact on the Corporation’s financial position or results of
operations.
WASHINGTON
TRUST BANCORP INC. AND SUBSIDIARIES
|
(Continued)
|
CONDENSED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
|
Effective
January 1, 2007, the Corporation adopted the provisions of FASB
Interpretation No. 48, "Accounting for Uncertainty in Income Taxes - An
Interpretation of FASB Statement No. 109" ("FIN 48"). FIN 48 clarifies the
accounting for uncertainty in income taxes recognized in an enterprise's
financial statements in accordance with FASB Statement No. 109, "Accounting
for
Income Taxes." FIN 48 also prescribes a recognition threshold and
measurement attribute for the financial statement recognition and measurement
of
a tax position taken or expected to be taken in a tax return. In addition,
FIN 48 provides guidance on derecognition, classification, interest and
penalties, accounting in interim periods, disclosure and transition. The
adoption of FIN 48
did
not have a material impact on the Corporation’s financial position or results of
operations.
In
September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements”.
This Statement defines fair value, establishes a framework for measuring fair
value and expands disclosures of fair value measurements. SFAS No. 157
applies to the accounting principles that currently use fair value measurement,
and does not require any new fair value measurements. The expanded disclosures
focus on the inputs used to measure fair value as well as the effect of the
fair
value measurements on earnings. This Statement is effective as of the beginning
of the first fiscal year beginning after November 15, 2007 and interim
periods within that fiscal year. The Corporation believes the adoption of SFAS
No. 157 will not have a material impact on the Corporation’s financial
position or results of operations.
In
September 2006, the FASB issued SFAS No. 158, “Employers’ Accounting for
Defined Benefit Pension and Other Post Retirement Plans (an amendment of FASB
Statements No. 87, 88, 106 and 132R)”. The recognition and disclosure
provisions of SFAS No. 158 were adopted by the Corporation for the year ended
December 31, 2006. Upon adoption, the funded status of an employer’s
postretirement benefit plan was recognized in the statement of financial
position and the changes in funded status of the defined benefit plan, including
actuarial gains and losses and prior service costs and credits were recognized
in comprehensive income. The requirement to measure the plan’ assets and
obligations as of the employers fiscal year end is effective for fiscal years
ending after December 15, 2008. The Corporation is currently evaluating the
impact the measurement date provisions of SFAS No. 158 will have on its
consolidated financial statements.
In
February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
Financial Assets and Liabilities - Including an amendment to FASB No. 115”. This
Statement permits entities to choose to measure eligible items at fair value
at
specified election dates. Unrealized gains and losses on items for which the
fair value option has been elected are reported in earnings at each subsequent
reporting date. The fair value option (i) may be applied
instrument-by-instrument with certain exceptions, (ii) is irrevocable (unless
a
new election date occurs) and (iii) is applied only to entire instruments and
not to portions of instruments. This Statement is effective as of the beginning
of the first fiscal year that begins after November 15, 2007. Early
adoption is permitted as of the beginning of a fiscal year that begins on or
before November 15, 2007, provided the entity also elects to apply the
provisions of SFAS No. 157, “Fair Value Instruments.” Retrospective
application is allowed for early adopters, prohibited for others. The choice
to
adopt early must be made within 120 days of the beginning of the fiscal year
of
adoption, provided the entity has not yet issued financial statements. This
Statement permits application to eligible items existing at the effective date
(or early adoption date). The Corporation is currently evaluating the impact
that SFAS No. 159 will have on its consolidated financial
statements.
WASHINGTON
TRUST BANCORP INC. AND SUBSIDIARIES
|
(Continued)
|
CONDENSED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
|
(3)
Securities
Securities
available for sale are summarized as follows:
(Dollars
in thousands)
|
|
Amortized
|
|
Unrealized
|
|
Unrealized
|
|
Fair
|
|
|
|
Cost
|
|
Gains
|
|
Losses
|
|
Value
|
|
March
31, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
Treasury obligations and obligations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
of
U.S. government-sponsored agencies
|
|
$
|
164,394
|
|
$
|
846
|
|
$
|
(551
|
)
|
$
|
164,689
|
|
Mortgage-backed
securities
|
|
|
300,793
|
|
|
1,085
|
|
|
(4,189
|
)
|
|
297,689
|
|
Trust
preferred securities
|
|
|
36,161
|
|
|
281
|
|
|
(151
|
)
|
|
36,291
|
|
Corporate
bonds
|
|
|
24,983
|
|
|
81
|
|
|
(20
|
)
|
|
25,044
|
|
Corporate
stocks
|
|
|
14,319
|
|
|
4,071
|
|
|
(161
|
)
|
|
18,229
|
|
Total
|
|
|
540,650
|
|
|
6,364
|
|
|
(5,072
|
)
|
|
541,942
|
|
December
31, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
Treasury obligations and obligations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
of
U.S. government-sponsored agencies
|
|
|
157,383
|
|
|
778
|
|
|
(876
|
)
|
|
157,285
|
|
Mortgage-backed
securities
|
|
|
298,038
|
|
|
923
|
|
|
(5,174
|
)
|
|
293,787
|
|
Trust
preferred securities
|
|
|
30,571
|
|
|
208
|
|
|
(205
|
)
|
|
30,574
|
|
Corporate
bonds
|
|
|
24,998
|
|
|
83
|
|
|
(47
|
)
|
|
25,034
|
|
Corporate
stocks
|
|
|
14,976
|
|
|
4,915
|
|
|
(175
|
)
|
|
19,716
|
|
Total
|
|
$
|
525,966
|
|
$
|
6,907
|
|
$
|
(6,477
|
)
|
$
|
526,396
|
|
Securities
held to maturity are summarized as follows:
(Dollars
in thousands)
|
|
Amortized
|
|
Unrealized
|
|
Unrealized
|
|
Fair
|
|
|
|
Cost
|
|
Gains
|
|
Losses
|
|
Value
|
|
March
31, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
Treasury obligations and obligations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
of
U.S. government-sponsored agencies
|
|
$
|
22,000
|
|
$
|
-
|
|
$
|
(246
|
)
|
$
|
21,754
|
|
Mortgage-backed
securities
|
|
|
66,319
|
|
|
496
|
|
|
(1,351
|
)
|
|
65,464
|
|
States
and political subdivisions
|
|
|
76,145
|
|
|
108
|
|
|
(497
|
)
|
|
75,756
|
|
Total
|
|
|
164,464
|
|
|
604
|
|
|
(2,094
|
)
|
|
162,974
|
|
December
31, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
Treasury obligations and obligations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
of
U.S. government-sponsored agencies
|
|
|
42,000
|
|
|
-
|
|
|
(422
|
)
|
|
41,578
|
|
Mortgage-backed
securities
|
|
|
69,340
|
|
|
440
|
|
|
(1,604
|
)
|
|
68,176
|
|
States
and political subdivisions
|
|
|
66,115
|
|
|
88
|
|
|
(588
|
)
|
|
65,615
|
|
Total
|
|
$
|
177,455
|
|
$
|
528
|
|
$
|
(2,614
|
)
|
$
|
175,369
|
|
Securities
available for sale and held to maturity with a fair value of $555.2 million
and $557.4 million were pledged in compliance with state regulations
concerning trust powers and to secure Treasury Tax and Loan deposits,
borrowings, and certain public deposits at March 31, 2007 and
December 31, 2006, respectively. In addition, securities available for sale
and held to maturity with a fair value of $9.3 million and
$9.6 million were collateralized for the discount window at the Federal
Reserve Bank at March 31, 2007 and December 31, 2006, respectively.
There were no borrowings with the Federal Reserve Bank at either date.
Securities available for sale with a fair value of $2.1 million were
designated in a rabbi trust for a nonqualified retirement plan at March 31,
2007 and December 31, 2006. As of March 31, 2007, securities available
for sale with a fair value of $20.4 million were pledged as collateral to
secure securities sold under agreements to repurchase.
At
March 31, 2007 and December 31, 2006, the available for sale and held
to maturity securities portfolio included $200 thousand and
$1.7 million of net pretax unrealized losses, respectively. Included in
these net amounts were gross unrealized losses amounting to $7.2 million
and $9.1 million at March 31, 2007 and December 31, 2006,
respectively.
WASHINGTON
TRUST BANCORP INC. AND SUBSIDIARIES
|
(Continued)
|
CONDENSED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
|
The
following tables summarize, for all securities in an unrealized loss position
at
March 31, 2007 and December 31, 2006, respectively, the aggregate fair
value and gross unrealized loss by length of time those securities have been
continuously in an unrealized loss position.
(Dollars
in thousands)
|
|
Less
than 12 Months
|
|
12
Months or Longer
|
|
Total
|
|
|
|
|
|
Fair
|
|
Unrealized
|
|
|
|
Fair
|
|
Unrealized
|
|
|
|
Fair
|
|
Unrealized
|
|
At
March 31, 2007
|
|
#
|
|
Value
|
|
Losses
|
|
#
|
|
Value
|
|
Losses
|
|
#
|
|
Value
|
|
Losses
|
|
U.S.
Treasury obligations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
and
obligations of U.S. government-sponsored agencies
|
|
|
6
|
|
$
|
35,884
|
|
$
|
82
|
|
|
13
|
|
$
|
82,765
|
|
$
|
715
|
|
|
19
|
|
$
|
118,649
|
|
$
|
797
|
|
Mortgage-backed
securities
|
|
|
10
|
|
|
27,705
|
|
|
74
|
|
|
69
|
|
|
230,984
|
|
|
5,466
|
|
|
79
|
|
|
258,689
|
|
|
5,540
|
|
States
and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
political
subdivisions
|
|
|
62
|
|
|
49,347
|
|
|
343
|
|
|
12
|
|
|
6,758
|
|
|
154
|
|
|
74
|
|
|
56,105
|
|
|
497
|
|
Trust
preferred securities
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
6
|
|
|
13,896
|
|
|
151
|
|
|
6
|
|
|
13,896
|
|
|
151
|
|
Corporate
bonds
|
|
|
3
|
|
|
11,148
|
|
|
8
|
|
|
1
|
|
|
3,002
|
|
|
12
|
|
|
4
|
|
|
14,150
|
|
|
20
|
|
Subtotal,
debt securities
|
|
|
81
|
|
|
124,084
|
|
|
507
|
|
|
101
|
|
|
337,405
|
|
|
6,498
|
|
|
182
|
|
|
461,489
|
|
|
7,005
|
|
Corporate
stocks
|
|
|
5
|
|
|
5,834
|
|
|
107
|
|
|
4
|
|
|
1,505
|
|
|
54
|
|
|
9
|
|
|
7,339
|
|
|
161
|
|
Total
temporarily
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
impaired
securities
|
|
|
86
|
|
$
|
129,918
|
|
$
|
614
|
|
|
105
|
|
$
|
338,910
|
|
$
|
6,552
|
|
|
191
|
|
$
|
468,828
|
|
$
|
7,166
|
|
(Dollars
in thousands)
|
|
Less
than 12 Months
|
|
12
Months or Longer
|
|
Total
|
|
|
|
|
|
Fair
|
|
Unrealized
|
|
|
|
Fair
|
|
Unrealized
|
|
|
|
Fair
|
|
Unrealized
|
|
At
December 31, 2006
|
|
#
|
|
Value
|
|
Losses
|
|
#
|
|
Value
|
|
Losses
|
|
#
|
|
Value
|
|
Losses
|
|
U.S.
Treasury obligations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
and
obligations of U.S. government-sponsored agencies
|
|
|
8
|
|
$
|
52,751
|
|
$
|
211
|
|
|
14
|
|
$
|
94,393
|
|
$
|
1,087
|
|
|
22
|
|
$
|
147,144
|
|
$
|
1,298
|
|
Mortgage-backed
securities
|
|
|
7
|
|
|
20,620
|
|
|
122
|
|
|
69
|
|
|
240,457
|
|
|
6,656
|
|
|
76
|
|
|
261,077
|
|
|
6,778
|
|
States
and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
political
subdivisions
|
|
|
61
|
|
|
45,948
|
|
|
419
|
|
|
12
|
|
|
6,747
|
|
|
169
|
|
|
73
|
|
|
52,695
|
|
|
588
|
|
Trust
preferred securities
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
7
|
|
|
14,840
|
|
|
205
|
|
|
7
|
|
|
14,840
|
|
|
205
|
|
Corporate
bonds
|
|
|
2
|
|
|
6,130
|
|
|
34
|
|
|
1
|
|
|
3,006
|
|
|
13
|
|
|
3
|
|
|
9,136
|
|
|
47
|
|
Subtotal,
debt securities
|
|
|
78
|
|
|
125,449
|
|
|
786
|
|
|
103
|
|
|
359,443
|
|
|
8,130
|
|
|
181
|
|
|
484,892
|
|
|
8,916
|
|
Corporate
stocks
|
|
|
5
|
|
|
5,823
|
|
|
110
|
|
|
4
|
|
|
1,494
|
|
|
65
|
|
|
9
|
|
|
7,317
|
|
|
175
|
|
Total
temporarily
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
impaired
securities
|
|
|
83
|
|
$
|
131,272
|
|
$
|
896
|
|
|
107
|
|
$
|
360,937
|
|
$
|
8,195
|
|
|
190
|
|
$
|
492,209
|
|
$
|
9,091
|
|
For
those
debt securities whose amortized cost exceeds fair value, the primary cause
is
related to interest rates. The majority of debt securities reported in an
unrealized loss position at March 31, 2007 were purchased during 2005, 2004
and 2003, during which time interest rates were at or near historical lows.
The
Corporation believes that the nature and duration of impairment on its debt
security holdings are primarily a function of interest rate movements and
changes in investment spreads, and does not consider full repayment of principal
on the reported debt obligations to be at risk. The Corporation has the ability
and intent to hold these investments to full recovery of the cost basis. The
debt securities in an unrealized loss position at March 31, 2007 consisted
of 182 debt security holdings. The largest loss percentage of any single holding
was 4.50% of its amortized cost.
Causes
of
conditions whereby the fair value of corporate stock equity securities is less
than cost include the timing of purchases and changes in valuation specific
to
individual industries or issuers. The relationship between the level of market
interest rates and the dividend rates paid on individual equity securities
may
also be a contributing factor. The Corporation believes that the nature and
duration of impairment on its equity securities holdings are considered to
be a
function of general financial market movements and industry conditions. The
equity securities in an unrealized loss position at March 31, 2007
consisted of 9 holdings of financial and commercial entities.
WASHINGTON
TRUST BANCORP INC. AND SUBSIDIARIES
|
(Continued)
|
CONDENSED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
|
(4) Loan Portfolio
The
following is a summary of loans:
(Dollars
in thousands)
|
|
March
31, 2007
|
|
December
31, 2006
|
|
|
|
Amount
|
|
%
|
|
Amount
|
|
%
|
|
Commercial:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgages
(1)
|
|
$
|
271,817
|
|
|
18
|
%
|
$
|
282,019
|
|
|
19
|
%
|
Construction
and development (2)
|
|
|
33,092
|
|
|
2
|
%
|
|
32,233
|
|
|
2
|
%
|
Other
(3)
|
|
|
294,261
|
|
|
21
|
%
|
|
273,145
|
|
|
19
|
%
|
Total
commercial
|
|
|
599,170
|
|
|
41
|
%
|
|
587,397
|
|
|
40
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgages
(4)
|
|
|
577,823
|
|
|
39
|
%
|
|
577,522
|
|
|
40
|
%
|
Homeowner
construction
|
|
|
11,742
|
|
|
1
|
%
|
|
11,149
|
|
|
-
|
%
|
Total
residential real estate
|
|
|
589,565
|
|
|
40
|
%
|
|
588,671
|
|
|
40
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home
equity lines
|
|
|
142,548
|
|
|
10
|
%
|
|
145,676
|
|
|
10
|
%
|
Home
equity loans
|
|
|
94,521
|
|
|
6
|
%
|
|
93,947
|
|
|
6
|
%
|
Other
|
|
|
44,396
|
|
|
3
|
%
|
|
44,295
|
|
|
4
|
%
|
Total
consumer
|
|
|
281,465
|
|
|
19
|
%
|
|
283,918
|
|
|
20
|
%
|
Total
loans (5)
|
|
$
|
1,470,200
|
|
|
100
|
%
|
$
|
1,459,986
|
|
|
100
|
%
|
(1)
Amortizing mortgages, primarily secured by income producing
property.
(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.
(4)
A
substantial portion of these loans is used as qualified collateral for FHLB
borrowings (See Note 8 for additional discussion of FHLB
borrowings).
(5)
Net of
unamortized loan origination fees, net of costs, totaling $80 thousand and
$277 thousand at March 31, 2007 and December 31, 2006,
respectively. Also includes $300 thousand and $342 thousand of
premium, net of discount, on purchased loans at March 31, 2007 and
December 31, 2006, respectively.
(5)
Allowance for Loan Losses
The
following is an analysis of the allowance for loan losses:
(Dollars
in thousands)
|
|
|
|
|
|
|
|
Three
months ended March 31,
|
|
2007
|
|
2006
|
|
Balance
at beginning of period
|
|
$
|
18,894
|
|
$
|
17,918
|
|
Provision
charged to expense
|
|
|
300
|
|
|
300
|
|
Recoveries
of loans previously charged off
|
|
|
191
|
|
|
67
|
|
Loans
charged off
|
|
|
(25
|
)
|
|
(38
|
)
|
Balance
at end of period
|
|
$
|
19,360
|
|
$
|
18,427
|
|
WASHINGTON
TRUST BANCORP INC. AND SUBSIDIARIES
|
(Continued)
|
CONDENSED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
|
(6)
Goodwill and Other
Intangibles
The
changes in the carrying value of goodwill and other intangible assets for the
nine months ended March 31, 2007 are as follows:
Goodwill
|
|
|
|
Wealth
|
|
|
|
(Dollars
in thousands)
|
|
Commercial
|
|
Management
|
|
|
|
|
|
Banking
|
|
Service
|
|
|
|
|
|
Segment
|
|
Segment
|
|
Total
|
|
Balance
at December 31, 2006
|
|
$
|
22,591
|
|
$
|
21,967
|
|
$
|
44,558
|
|
Additions
to goodwill during the period
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Impairment
recognized
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Balance
at March 31, 2007
|
|
$
|
22,591
|
|
$
|
21,967
|
|
$
|
44,558
|
|
Other
Intangible Assets
|
|
Core
Deposit
|
|
Advisory
|
|
Non-compete
|
|
|
|
|
|
Intangible
|
|
Contracts
|
|
Agreements
|
|
Total
|
|
Balance
at December 31, 2006
|
|
$
|
650
|
|
$
|
11,937
|
|
$
|
229
|
|
$
|
12,816
|
|
Amortization
|
|
|
50
|
|
|
306
|
|
|
12
|
|
|
368
|
|
Balance
at March 31, 2007
|
|
$
|
600
|
|
$
|
11,631
|
|
$
|
217
|
|
$
|
12,448
|
|
Amortization
of intangible assets for the three months ended March 31, 2007 totaled
$368 thousand. Estimated annual amortization expense of current intangible
assets with finite useful lives, absent any impairment or change in estimated
useful lives, is summarized below.
(Dollars
in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
Core
|
|
Advisory
|
|
Non-compete
|
|
|
|
Estimated
amortization expense:
|
|
Deposits
|
|
Contracts
|
|
Agreements
|
|
Total
|
|
2007
(full year)
|
|
$
|
140
|
|
$
|
1,194
|
|
$
|
49
|
|
$
|
1,383
|
|
2008
|
|
|
120
|
|
|
1,111
|
|
|
49
|
|
|
1,280
|
|
2009
|
|
|
120
|
|
|
1,040
|
|
|
49
|
|
|
1,209
|
|
2010
|
|
|
120
|
|
|
922
|
|
|
49
|
|
|
1,091
|
|
2011
|
|
|
120
|
|
|
768
|
|
|
33
|
|
|
921
|
|
The
components of intangible assets at March 31, 2007 are as
follows:
(Dollars
in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
Core
|
|
Advisory
|
|
Non-compete
|
|
|
|
|
|
Deposits
|
|
Contracts
|
|
Agreements
|
|
Total
|
|
Gross
carrying amount
|
|
$
|
2,997
|
|
$
|
13,657
|
|
$
|
1,147
|
|
$
|
17,801
|
|
Accumulated
amortization
|
|
|
2,397
|
|
|
2,026
|
|
|
930
|
|
|
5,353
|
|
Net
amount
|
|
$
|
600
|
|
$
|
11,631
|
|
$
|
217
|
|
$
|
12,448
|
|
(7)
Income Taxes
Effective
January 1, 2007, the Corporation adopted FASB Interpretation No. 48,
Accounting for Uncertainty in Income Taxes (FIN 48). The adoption of
FIN 48 did not result in any adjustment to retained earnings as of
January 1, 2007.
As
of the
adoption date, the Corporation had gross tax affected unrecognized tax benefits
of $1.2 million. If recognized this amount would be recorded as a component
of income tax expense. There have been no significant changes to these amounts
during the quarter ended March 31, 2007.
The
Corporation recognizes potential accrued interest related to unrecognized tax
benefits in income tax expense in the Consolidated Statements of Income. As
of
the adoption date of January 1, 2007, accrued interest amounted to
WASHINGTON
TRUST BANCORP INC. AND SUBSIDIARIES
|
(Continued)
|
CONDENSED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
|
$70 thousand.
To the extent interest is not assessed with respect to uncertain tax positions,
amounts accrued will be reduced and reflected as a reduction of the overall
income tax provision. Penalties, if incurred, would be recognized as a component
of income tax expense.
The
Corporation files income tax returns in the U.S. federal jurisdiction and
various state jurisdictions. The Corporation is no longer subject to U.S.
federal income tax examinations by tax authorities for years before 2003. With
a
few exceptions, the Corporation is no longer subject to state income tax
examinations by tax authorities for years before 2000.
(8)
Borrowings
Federal
Home Loan Bank Advances
Advances
payable to the Federal Home Loan Bank (“FHLB”) are summarized as
follows:
(Dollars
in thousands)
|
|
March 31,
|
|
December 31,
|
|
|
|
2007
|
|
2006
|
|
FHLB
advances
|
|
$
|
457,145
|
|
$
|
474,561
|
|
During
the first quarter of 2007, the Corporation prepaid $26.5 million in
advances payable to the FHLB resulting in a debt prepayment penalty charge,
recorded in noninterest expense, of $1.1 million. See additional discussion
in Item 2, “Management’s Discussion and Analysis of Financial Condition and
Results of Operations, under the caption “Noninterest Expense.”
In
addition to outstanding advances, the Corporation also has access to an unused
line of credit amounting to $8.0 million at March 31, 2007. Under an
agreement with the FHLB, the Corporation is required to maintain qualified
collateral, free and clear of liens, pledges, or encumbrances that, based on
certain percentages of book and market values, has a value equal to the
aggregate amount of the line of credit and outstanding advances (“FHLB
borrowings”). The FHLB maintains a security interest in various assets of the
Corporation including, but not limited to, residential mortgages loans, U.S.
government or agency securities, U.S. government-sponsored agency securities,
and amounts maintained on deposit at the FHLB. The Corporation maintained
qualified collateral in excess of the amount required to collateralize the
line
of credit and outstanding advances at March 31, 2007. Included in the
collateral were securities available for sale and held to maturity with a fair
value of $432.1 million and $451.5 million that were specifically
pledged to secure FHLB borrowings at March 31, 2007 and December 31,
2006, respectively. Unless there is an event of default under the agreement
with
the FHLB, the Corporation may use, encumber or dispose of any portion of the
collateral in excess of the amount required to secure FHLB borrowings, except
for that collateral that has been specifically pledged.
Other
Borrowings
The
following is a summary of other borrowings:
(Dollars
in thousands)
|
|
March 31,
|
|
December
31,
|
|
|
|
2007
|
|
2006
|
|
Treasury,
Tax and Loan demand note balance
|
|
$
|
2,121
|
|
$
|
3,863
|
|
Deferred
acquisition obligations
|
|
|
3,769
|
|
|
10,372
|
|
Securities
sold under repurchase agreements
|
|
|
19,500
|
|
|
-
|
|
Other
|
|
|
402
|
|
|
449
|
|
Other
borrowings
|
|
$
|
25,792
|
|
$
|
14,684
|
|
In
the
first quarter of 2007, securities sold under repurchase agreements of
$19.5 million were executed. The securities sold under agreements to
repurchase are callable at the issuer’s option, at one time only, in one year
and mature in five years. The securities underlying the agreements are held
in
safekeeping by the counterparty in the name of the Corporation and are
repurchased when the agreement matures. Accordingly, these underlying securities
are included in securities available for sale and the obligations to repurchase
such securities are reflected as a liability.
WASHINGTON
TRUST BANCORP INC. AND SUBSIDIARIES
|
(Continued)
|
CONDENSED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
|
The
Stock
Purchase Agreement for the August 2005 acquisition of Weston Financial provides
for the payment of contingent purchase price amounts based on operating results
in each of the years in the three-year earn-out period ending December 31,
2008. Contingent payments are added to goodwill and recorded as deferred
acquisition liabilities at the time the payments are determinable beyond a
reasonable doubt. Deferred acquisition obligations amounted to $3.8 million
at March 31, 2007 compared to $10.4 million at December 31, 2006.
In the first quarter of 2007 the Corporation paid approximately $6.7.million
in
earn-out payments.
(9)
Shareholders’ Equity
Stock
Repurchase Plan:
Under
the
Corporation’s 2006 stock repurchase plan, 61,100 shares of stock were
repurchased at a total cost of $1.7 million during the three months ended
March 31, 2007. In addition, 11,180 shares were acquired pursuant to the
Nonqualified Deferred Compensation Plan.
Regulatory
Capital Requirements:
The
following table presents the Corporation’s and the Bank’s actual capital amounts
and ratios at March 31, 2007 and December 31, 2006, as well as the
corresponding minimum regulatory amounts and ratios:
(Dollars
in thousands)
|
|
Actual
|
|
For
Capital Adequacy Purposes
|
|
To
Be Well Capitalized Under Prompt Corrective Action
Provisions
|
|
|
|
Amount
|
|
Ratio
|
|
Amount
|
|
Ratio
|
|
Amount
|
|
Ratio
|
|
As
of March 31, 2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Capital (to Risk-Weighted Assets):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporation
|
|
$
|
163,382
|
|
|
10.84
|
%
|
$
|
120,581
|
|
|
8.00
|
%
|
$
|
150,727
|
|
|
10.00
|
%
|
Bank
|
|
$
|
164,163
|
|
|
10.90
|
%
|
$
|
120,508
|
|
|
8.00
|
%
|
$
|
150,635
|
|
|
10.00
|
%
|
Tier
1 Capital (to Risk-Weighted Assets):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporation
|
|
$
|
142,772
|
|
|
9.47
|
%
|
$
|
60,291
|
|
|
4.00
|
%
|
$
|
90,436
|
|
|
6.00
|
%
|
Bank
|
|
$
|
143,564
|
|
|
9.53
|
%
|
$
|
60,254
|
|
|
4.00
|
%
|
$
|
90,381
|
|
|
6.00
|
%
|
Tier
1 Capital (to Average Assets): (1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporation
|
|
$
|
142,772
|
|
|
6.14
|
%
|
$
|
92,944
|
|
|
4.00
|
%
|
$
|
116,180
|
|
|
5.00
|
%
|
Bank
|
|
$
|
143,564
|
|
|
6.18
|
%
|
$
|
92,900
|
|
|
4.00
|
%
|
$
|
116,125
|
|
|
5.00
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As
of December 31, 2006:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Capital (to Risk-Weighted Assets):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporation
|
|
$
|
161,076
|
|
|
10.96
|
%
|
$
|
117,538
|
|
|
8.00
|
%
|
$
|
146,922
|
|
|
10.00
|
%
|
Bank
|
|
$
|
168,235
|
|
|
11.46
|
%
|
$
|
117,465
|
|
|
8.00
|
%
|
$
|
146,832
|
|
|
10.00
|
%
|
Tier
1 Capital (to Risk-Weighted Assets):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporation
|
|
$
|
140,568
|
|
|
9.57
|
%
|
$
|
58,769
|
|
|
4.00
|
%
|
$
|
88,153
|
|
|
6.00
|
%
|
Bank
|
|
$
|
147,738
|
|
|
10.06
|
%
|
$
|
58,733
|
|
|
4.00
|
%
|
$
|
88,099
|
|
|
6.00
|
%
|
Tier
1 Capital (to Average Assets): (1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporation
|
|
$
|
140,568
|
|
|
6.01
|
%
|
$
|
93,487
|
|
|
4.00
|
%
|
$
|
116,858
|
|
|
5.00
|
%
|
Bank
|
|
$
|
147,738
|
|
|
6.32
|
%
|
$
|
93,437
|
|
|
4.00
|
%
|
$
|
116,797
|
|
|
5.00
|
%
|
The
Corporation’s capital ratios at March 31,
2007
place the Corporation in the “well-capitalized” category according to regulatory
standards.
(10)
Financial Instruments with Off-Balance Sheet Risk and Derivative Financial
Instruments
The
Corporation is a party to financial instruments with off-balance sheet risk
in
the normal course of business to meet the financing needs of its customers
and
to manage the Corporation’s exposure to fluctuations in interest rates. These
financial instruments include commitments to extend credit, standby letters
of
credit, financial guarantees, and commitments to originate and commitments
to
sell fixed rate mortgage loans. These instruments involve, to varying degrees,
elements of credit risk in excess of the amount recognized in the Corporation’s
Consolidated Balance Sheets. The contract or notional amounts of these
instruments reflect the extent of involvement the Corporation has in particular
classes of financial instruments. The Corporation uses the same credit policies
in making commitments and
WASHINGTON
TRUST BANCORP INC. AND SUBSIDIARIES
|
(Continued)
|
CONDENSED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
|
conditional
obligations as it does for on-balance sheet instruments. The contractual and
notional amounts of financial instruments with off-balance sheet risk are as
follows:
(Dollars
in thousands)
|
|
March 31,
2007
|
|
December 31,
2006
|
|
Financial
instruments whose contract amounts represent credit risk:
|
|
|
|
|
|
|
|
Commitments
to extend credit:
|
|
|
|
|
|
|
|
Commercial
loans
|
|
$
|
156,944
|
|
$
|
122,376
|
|
Home
equity lines
|
|
|
182,290
|
|
|
185,483
|
|
Other
loans
|
|
|
11,906
|
|
|
10,671
|
|
Standby
letters of credit
|
|
|
8,898
|
|
|
9,401
|
|
Financial
instruments whose notional amounts exceed the amount of credit
risk:
|
|
|
|
|
|
|
|
Forward
loan commitments:
|
|
|
|
|
|
|
|
Commitments
to originate fixed rate mortgage loans to be sold
|
|
|
4,868
|
|
|
2,924
|
|
Commitments
to sell fixed rate mortgage loans
|
|
|
6,988
|
|
|
5,066
|
|
Commitments
to Extend Credit
Commitments
to extend credit are agreements to lend to a customer as long as there are
no
violations of any conditions established in the contract. Commitments generally
have fixed expiration dates or other termination clauses and may require payment
of a fee. Since some of the commitments are expected to expire without being
drawn upon, the total commitment amounts do not necessarily represent future
cash requirements. Each borrower’s creditworthiness is evaluated on a
case-by-case basis. The amount of collateral obtained is based on management’s
credit evaluation of the borrower.
Standby
Letters of Credit
Standby
letters of credit are conditional commitments issued to guarantee the
performance of a customer to a third party. The credit risk involved in issuing
letters of credit is essentially the same as that involved in extending loan
facilities to customers. Under the standby letters of credit, the Corporation
is
required to make payments to the beneficiary of the letters of credit upon
request by the beneficiary contingent upon the customer’s failure to perform
under the terms of the underlying contract with the beneficiary. Standby letters
of credit extend up to five years. At March 31, 2007 and December 31,
2006, the maximum potential amount of undiscounted future payments, not reduced
by amounts that may be recovered, totaled $8.9 million and
$9.4 million, respectively. At March 31, 2007 and December 31,
2006, there was no liability to beneficiaries resulting from standby letters
of
credit. Fee income on standby letters of credit for the three months ended
March 31, 2007 and 2006 was insignificant.
At
March 31, 2007, a substantial portion of the standby letters of credit were
supported by pledged collateral. The collateral obtained is determined based
on
management’s credit evaluation of the customer. Should the Corporation be
required to make payments to the beneficiary, repayment from the customer to
the
Corporation is required.
Forward
Loan Commitments
Commitments
to originate and commitments to sell fixed rate mortgage loans are derivative
financial instruments. Accordingly, the fair value of these commitments is
recognized in other assets on the balance sheet and changes in fair value of
such commitments are recorded in current earnings in the income statement.
The
carrying value of such commitments as of March 31, 2007 and
December 31, 2006 and the respective changes in fair values for the three
months ended March 31, 2007 and 2006 were insignificant.
WASHINGTON
TRUST BANCORP INC. AND SUBSIDIARIES
|
(Continued)
|
CONDENSED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
|
(11)
Defined Benefit Pension Plans
Components
of Net Periodic Benefit Costs:
(Dollars
in thousands)
|
|
Qualified
|
|
Non-Qualified
|
|
|
|
Pension
Plan
|
|
Retirement
Plans
|
|
Three
months ended March 31,
|
|
2007
|
|
2006
|
|
2007
|
|
2006
|
|
Service
cost
|
|
$
|
503
|
|
$
|
517
|
|
$
|
86
|
|
$
|
88
|
|
Interest
cost
|
|
|
462
|
|
|
413
|
|
|
130
|
|
|
116
|
|
Expected
return on plan assets
|
|
|
(496
|
)
|
|
(450
|
)
|
|
-
|
|
|
-
|
|
Amortization
of transition asset
|
|
|
(1
|
)
|
|
(1
|
)
|
|
-
|
|
|
-
|
|
Amortization
of prior service cost
|
|
|
(9
|
)
|
|
(8
|
)
|
|
16
|
|
|
16
|
|
Recognized
net actuarial loss
|
|
|
47
|
|
|
79
|
|
|
54
|
|
|
54
|
|
Net
periodic benefit cost
|
|
$
|
506
|
|
$
|
550
|
|
$
|
286
|
|
$
|
274
|
|
Assumptions:
The
measurement date and weighted-average assumptions used to determine net periodic
benefit cost for the three months ended March 31, 2007 and 2006 were as
follows:
|
|
Qualified
|
|
Non-Qualified
|
|
|
|
Pension
Plan
|
|
Retirement
Plans
|
|
|
|
2006
|
|
2005
|
|
2006
|
|
2005
|
|
Measurement
date
|
|
|
Sept.
30, 2006
|
|
|
Sept.
30, 2005
|
|
|
Sept.
30, 2006
|
|
|
Sept.
30, 2005
|
|
Discount
rate
|
|
|
5.90
|
%
|
|
5.50
|
%
|
|
5.90
|
%
|
|
5.50
|
%
|
Expected
long-term return on plan assets
|
|
|
8.25
|
%
|
|
8.25
|
%
|
|
-
|
|
|
-
|
|
Rate
of compensation increase
|
|
|
4.25
|
%
|
|
4.25
|
%
|
|
4.25
|
%
|
|
4.25
|
%
|
As
discussed in Note 2, the SFAS No. 158 requirement to measure the
plan’s assets and obligations as of the employer’s fiscal year end is effective
December 31, 2008.
Employer
Contributions:
The
Corporation previously disclosed in its financial statements for the year ended
December 31, 2006 that it expected to contribute $1.3 million to its
qualified pension plan and $369 thousand in benefit payments to its
non-qualified retirement plans in 2007. As of March 31, 2007, approximately
$1.9 million of contributions have been made to the qualified pension plan
and $84 thousand in benefit payments have been made to the non-qualified
retirement plans. The Corporation presently anticipates contributing an
additional $251 thousand in benefit payments to the non-qualified
retirement plans in 2007.
WASHINGTON
TRUST BANCORP INC. AND SUBSIDIARIES
|
(Continued)
|
CONDENSED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
|
(12)
Business Segments
Washington
Trust segregates financial information in assessing its results among two
operating segments: Commercial Banking and Wealth Management Services. The
amounts in the Corporate column include activity not related to the segments,
such as the investment securities portfolio, wholesale funding activities and
administrative units. The Corporate column is not considered to be an operating
segment. The methodologies and organizational hierarchies that define the
business segments are periodically reviewed and revised. Results may be
restated, when necessary, to reflect changes in organizational structure or
allocation methodology. The following table presents the statement of operations
and total assets for Washington Trust’s reportable segments.
(Dollars
in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
Banking
|
|
Wealth
Management Services
|
|
Corporate
|
|
Consolidated
Total
|
|
Three
months ended March 31,
|
|
2007
|
|
2006
|
|
2007
|
|
2006
|
|
2007
|
|
2006
|
|
2007
|
|
2006
|
|
Net
interest income (expense)
|
|
$
|
13,201
|
|
$
|
13,396
|
|
$
|
(8
|
)
|
$
|
(24
|
)
|
$
|
1,677
|
|
$
|
2,043
|
|
$
|
14,870
|
|
$
|
15,415
|
|
Noninterest
income
|
|
|
2,889
|
|
|
2,749
|
|
|
6,894
|
|
|
6,440
|
|
|
1,465
|
|
|
331
|
|
|
11,248
|
|
|
9,520
|
|
Total
income
|
|
|
16,090
|
|
|
16,145
|
|
|
6,886
|
|
|
6,416
|
|
|
3,142
|
|
|
2,374
|
|
|
26,118
|
|
|
24,935
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision
for loan losses
|
|
|
300
|
|
|
300
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
300
|
|
|
300
|
|
Depreciation
and
amortization expense
|
|
|
616
|
|
|
558
|
|
|
436
|
|
|
419
|
|
|
44
|
|
|
157
|
|
|
1,096
|
|
|
1,134
|
|
Other
noninterest expenses
|
|
|
8,643
|
|
|
8,315
|
|
|
4,298
|
|
|
4,342
|
|
|
3,072
|
|
|
1,913
|
|
|
16,013
|
|
|
14,570
|
|
Total
noninterest expenses
|
|
|
9,559
|
|
|
9,173
|
|
|
4,734
|
|
|
4,761
|
|
|
3,116
|
|
|
2,070
|
|
|
17,409
|
|
|
16,004
|
|
Income
before income taxes
|
|
|
6,531
|
|
|
6,972
|
|
|
2,152
|
|
|
1,655
|
|
|
26
|
|
|
304
|
|
|
8,709
|
|
|
8,931
|
|
Income
tax expense (benefit)
|
|
|
2,301
|
|
|
2,425
|
|
|
834
|
|
|
658
|
|
|
(401
|
)
|
|
(225
|
)
|
|
2,734
|
|
|
2,858
|
|
Net
income
|
|
$
|
4,230
|
|
$
|
4,547
|
|
$
|
1,318
|
|
$
|
997
|
|
$
|
427
|
|
$
|
529
|
|
$
|
5,975
|
|
$
|
6,073
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
assets at period end
|
|
|
1,540,794
|
|
|
1,499,729
|
|
|
36,726
|
|
|
33,145
|
|
|
822,442
|
|
|
899,891
|
|
|
2,399,962
|
|
|
2,432,765
|
|
Expenditures
for
long-lived assets
|
|
$
|
886
|
|
|
788
|
|
|
69
|
|
|
254
|
|
|
90
|
|
|
56
|
|
|
1,045
|
|
|
1,098
|
|
Management
uses certain methodologies to allocate income and expenses to the business
lines. A funds transfer pricing methodology is used to assign interest income
and interest expense to each interest-earning asset and interest-bearing
liability on a matched maturity funding basis. Certain indirect expenses are
allocated to segments. These include support
unit expenses such as technology and processing operations and other support
functions. Taxes are allocated to each segment based on the effective rate
for
the period shown.
Commercial
Banking
The
Commercial Banking segment includes commercial, commercial real estate,
residential and consumer lending activities; mortgage banking, secondary market
and loan servicing activities; deposit generation; merchant credit card
services; cash management activities; and direct banking activities, which
include the operation of ATMs, telephone and internet banking services and
customer support and sales.
Wealth
Management Services
Wealth
Management Services includes asset management services provided for individuals
and institutions; personal trust services, including services as executor,
trustee, administrator, custodian and guardian; corporate trust services,
including services as trustee for pension and profit sharing plans; and other
financial planning and advisory services.
Corporate
Corporate
includes the Treasury Unit, which is responsible for managing the wholesale
investment portfolio and wholesale funding needs. It also includes income from
bank-owned life insurance as well as administrative and executive expenses
not
allocated to the business lines and the residual impact of methodology
allocations such as funds transfer pricing offsets.
WASHINGTON
TRUST BANCORP INC. AND SUBSIDIARIES
|
(Continued)
|
CONDENSED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
|
(13)
Comprehensive Income
(Dollars
in thousands)
|
|
|
|
|
|
|
|
Three
months ended March 31,
|
|
2007
|
|
2006
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
$
|
5,975
|
|
$
|
6,073
|
|
|
|
|
|
|
|
|
|
Unrealized
holding gains (losses) on securities available for sale, net of $664
income
|
|
|
|
|
|
|
|
tax
expense in 2007 and $1,754 income tax benefit in 2006
|
|
|
1,234
|
|
|
(3,211
|
)
|
Reclassification
adjustments for gains arising during the period, net of $371 income
tax
|
|
|
|
|
|
|
|
expense
in 2007 and $20 income tax expense in 2006
|
|
|
(665
|
)
|
|
(39
|
)
|
Change
in funded status of defined benefit plans related to the amortization
of
net
|
|
|
|
|
|
|
|
actuarial
losses, net prior service credit and net transition asset, net of
$37
income
|
|
|
|
|
|
|
|
tax
expense in 2007
|
|
|
70
|
|
|
-
|
|
Total
comprehensive income
|
|
$
|
6,614
|
|
$
|
2,823
|
|
(14)
Earnings Per Share
Basic
earnings per share (“EPS”) is calculated by dividing net income by the weighted
average common stock outstanding, excluding options and other equity
instruments. The dilutive effect of options, nonvested share units, non vested
share awards and other items is calculated using the treasury stock method
for
purposes of weighted average dilutive shares. Diluted EPS is computed by
dividing net income by the average number of common stock and common stock
equivalents outstanding.
(Dollars
and shares in thousands, except per share amounts)
|
|
|
|
|
|
Three
months ended March 31,
|
|
2007
|
|
2006
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
$
|
5,975
|
|
$
|
6,073
|
|
|
|
|
|
|
|
|
|
Weighted
average basic shares
|
|
|
13,412.1
|
|
|
13,386.8
|
|
Dilutive
effect of:
|
|
|
|
|
|
|
|
Options
|
|
|
244.6
|
|
|
276.2
|
|
Other
|
|
|
66.3
|
|
|
35.6
|
|
Weighted
average diluted shares
|
|
|
13,723.0
|
|
|
13,698.6
|
|
|
|
|
|
|
|
|
|
Earnings
per share:
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.45
|
|
$
|
0.45
|
|
Diluted
|
|
$
|
0.44
|
|
$
|
0.44
|
|
(15)
Litigation
The
Corporation is involved in various claims and legal proceedings arising out
of
the ordinary course of business. Management is of the opinion, based on its
review with counsel of the development of such matters to date, that the
ultimate disposition of such matters will not materially affect the consolidated
financial position or results of operations of the Corporation.
With
respect to the unaudited consolidated financial statements of Washington Trust
Bancorp, Inc. and Subsidiaries at March 31, 2007 and for the three months
ended March 31, 2007 and 2006, KPMG LLP has made a review (based on the
standards of the Public Company Accounting Oversight Board (United States))
and
not an audit, set forth in their separate report dated May 7, 2007
appearing below. That report does not express an opinion on the interim
unaudited consolidated financial information. KPMG LLP has not carried out
any
significant or additional audit tests beyond those which would have been
necessary if their report had not been included. Accordingly, such report is
not
a “report” or “part of the Registration Statement” within the meaning of
Sections 7 and 11 of the Securities Act of 1933, as amended, and the liability
provisions of Section 11 of the Securities Act do not apply.
The
Board
of Directors and Shareholders
Washington
Trust Bancorp, Inc.:
We
have
reviewed the accompanying consolidated balance sheet of Washington Trust
Bancorp, Inc. and Subsidiaries (the “Corporation”) as of March 31, 2007,
and the related consolidated statements of income and cash flows for the three
months period ended March 31, 2007 and 2006. These consolidated financial
statements are the responsibility of the Corporation’s management.
We
conducted our review in accordance with the standards of the Public Company
Accounting Oversight Board (United States). A review of interim financial
information consists principally of applying analytical procedures and making
inquiries of persons responsible for financial and accounting matters. It is
substantially less in scope than an audit conducted in accordance with the
standards of the Public Company Accounting Oversight Board (United States),
the
objective of which is the expression of an opinion regarding the consolidated
financial statements taken as a whole. Accordingly, we do not express such
an
opinion.
Based
on
our review, we are not aware of any material modifications that should be made
to the consolidated financial statements referred to above for them to be in
conformity with U.S. generally accepted accounting principles.
We
have
previously audited, in accordance with standards established by the Public
Company Accounting Oversight Board (United States), the consolidated balance
sheet of Washington Trust Bancorp, Inc. and Subsidiaries as of December 31,
2006, and the related consolidated statements of income, changes in
shareholders’ equity and cash flows for the year then ended (not presented
herein); and in our report dated March 12, 2007, we expressed an
unqualified opinion on those consolidated financial statements. In our opinion,
the information set forth in the consolidated balance sheet as of
December 31, 2006, is fairly stated, in all material respects, in relation
to the consolidated balance sheet from which it has been derived.
/s/
KPMG LLP
Providence,
Rhode Island
May 7,
2007
Forward-Looking
Statements
This
report contains certain statements that may be considered “forward-looking
statements” within the meaning of Section 27A of the Securities Act of
1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as
amended. The actual results, performance or achievements of the Corporation
(as
defined below) could differ materially from those projected in the
forward-looking statements as a result of, among other factors, changes in
general national or regional economic conditions, changes in interest rates,
reductions in the market value of wealth management assets under administration,
reductions in loan demand, reductions in deposit levels necessitating increased
borrowing to fund loans and investments, changes in loan default and charge-off
rates, changes in the size and nature of the Corporation’s competition, changes
in legislation or regulation and accounting principles, policies and guidelines,
and changes in the assumptions used in making such forward-looking statements.
The Corporation assumes no obligation to update forward-looking statements
or
update the reasons actual results, performance or achievements could differ
materially from those provided in the forward-looking statements, except as
required by law.
Critical
Accounting Policies
Accounting
policies involving significant judgments and assumptions by management that
have, or could have, a material impact on the carrying value of certain assets
and impact income are considered critical accounting policies. The Corporation’s
accounting and reporting policies comply with U.S. generally accepted accounting
principles and conform to general practices within the banking industry. The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions. The financial position and results of operations can be
affected by these estimates and assumptions, which are important in
understanding the reported results. Management has discussed the development
and
the selection of critical accounting policies with the Audit Committee of our
board of directors. As discussed in our 2006 Annual Report on Form 10-K, we
have
identified the allowance for loan losses, accounting for acquisitions and review
of goodwill and intangible assets for impairment, other-than-temporary
impairment of investment securities, defined benefit pension obligations,
interest income recognition, and tax estimates as critical accounting policies.
There have been no significant changes in the methods or assumptions used in
the
accounting policies that require material estimates and
assumptions.
Results
of Operations
Overview
Net
income for the first quarter of 2007 was $6.0 million, a decrease of 1.6%
from the $6.1 million reported for the first quarter of 2006. On a per
diluted share basis, the Corporation earned $0.44 for the first quarter of
2007
and 2006.
The
rates
of return on average equity and average assets for the three months ended
March 31, 2007 were 13.66% and 1.00%, compared to 15.09% and 1.01%,
respectively, for the same period in 2006.
Selected
financial highlights are presented in the table below.
(Dollars
in thousands, except per share amounts)
|
|
|
|
|
|
|
|
Three
months ended March 31,
|
|
2007
|
|
2006
|
|
|
|
|
|
|
|
|
|
Earnings:
|
|
|
|
|
|
|
|
Net
income
|
|
$
|
5,975
|
|
$
|
6,073
|
|
Diluted
earnings per share
|
|
|
0.44
|
|
|
0.44
|
|
Dividends
declared per common share
|
|
|
0.20
|
|
|
0.19
|
|
Weighted
average shares- Basic
|
|
|
13,412.1
|
|
|
13,386.8
|
|
Weighted
average shares- Diluted
|
|
|
13,723.0
|
|
|
13,698.6
|
|
|
|
|
|
|
|
|
|
Select
Ratios:
|
|
|
|
|
|
|
|
Return
on average assets
|
|
|
1.00
|
%
|
|
1.01
|
%
|
Return
on average shareholders equity
|
|
|
13.66
|
%
|
|
15.09
|
%
|
Interest
rate spread (taxable equivalent basis)
|
|
|
2.46
|
%
|
|
2.53
|
%
|
Net
interest margin (taxable equivalent basis)
|
|
|
2.81
|
%
|
|
2.84
|
%
|
Net
Interest Income
Net
interest income is the difference between interest earned on loans and
securities and interest paid on deposits and other borrowings, and continues
to
be the primary source of Washington Trust’s operating income. Included in
interest income are loan prepayment fees and certain other fees, such as late
charges. Net interest income is affected by the level of interest rates, changes
in interest rates and changes in the amount and composition of interest-earnings
assets and interest-bearing liabilities.
Net
interest income totaled $14.9 million for the three months ended
March 31, 2007, down $545 thousand, or 3.5%, from the corresponding
period in 2006. Included in net interest income for the quarter ended
March 31, 2007 was interest recovery of $322 thousand received on a
previously charged off loan. Also, included in net interest income for the
three
months ended March 31, 2007 and 2006 were $103 thousand and
$135 thousand, respectively, of loan prepayment and other
fees.
The
following discussion presents net interest income on a fully taxable equivalent
(“FTE”) basis by adjusting income and yields on tax-exempt loans and securities
to be comparable to taxable loans and securities. For more information see
the
section entitled “Average Balances / Net Interest Margin - Fully Taxable
Equivalent (FTE) Basis” below.
FTE
net
interest income for the three months ended March 31, 2007 amounted to
$15.3 million, down $427 thousand, or 2.7%, from the same period a
year ago. Net interest margin (FTE net interest income as a percentage of
average interest-earning assets) amounted to 2.81% for the first quarter of
2007, down 3 basis points from the first quarter last year and up
7 basis points from the fourth quarter of 2006. Excluding the 6 basis
points attributable to the first quarter 2007 interest recovery, the net
interest margin was down 9 basis points from the first quarter of 2006 and
up by 1 basis point from the fourth quarter of 2006. The inverted yield
curve has increased rates paid on deposits and caused a higher rate of growth
in
higher cost deposit categories, while earning asset yields have risen more
slowly.
Average
interest-earning assets for the three months ended March 31, 2007 decreased
$34.9 million over the amounts reported for the same period last year. This
decrease was mainly due to reductions in the securities portfolio, offset in
part by growth in the loan portfolio. The yield on total loans for the three
months ended March 31, 2007 increased 36 basis points from the
comparable 2006 period. The contribution of the first quarter 2007 interest
recovery on total loans was 9 basis points for the three months ended
March 31, 2007. Total average securities for the three months ended
March 31, 2007 decreased $82.7 million. The inversion of the yield
curve made reinvestment of maturing balances unattractive relative to funding
costs during these periods. The FTE rate of return on securities for the three
months ended March 31, 2007 increased 51 basis points from the
comparable 2006 period. The increase in the total yield on securities reflects
a
combination of higher yields on variable rate securities tied to short-term
interest rates, sale or runoff of lower yielding securities and higher marginal
rates on reinvestment of cash flows relative to the prior year. The Corporation
continues to consider appropriate strategies to manage rising funding costs
and
more slowly increasing investment yields given the inverted yield
curve.
For
the
three months ended March 31, 2007, average interest-bearing liabilities
declined $27.2 million over the amount reported for the comparable period
last year. The Corporation experienced growth in money market and savings
accounts and other borrowed funds, and declines in NOW accounts, time deposits
and savings accounts as well as FHLB advances. Included in time deposits were
brokered certificates of deposit, which are utilized by the Corporation as
part
of its overall funding program along with FHLB advances and other sources.
Average brokered certificates of deposit for the first quarter of 2007 decreased
$43.0 million while the average rate paid increased 6 basis points,
from the comparable period last year. The balance of average FHLB advances
for
the three months ended March 31, 2007 decreased $79.9 million while
the average rate paid on FHLB advances increased 34 basis points, from the
same period a year ago.
Average
Balances / Net Interest Margin - Fully Taxable Equivalent (FTE)
Basis
The
following tables present average balance and interest rate information.
Tax-exempt income is converted to a fully taxable equivalent (“FTE”) basis using
the statutory federal income tax rate. For dividends on corporate stocks, the
70% federal dividends received deduction is also used in the calculation of
tax
equivalency. Unrealized gains (losses) on available for sale securities are
excluded from the average balance and yield calculations. Nonaccrual and
renegotiated loans, as well as interest earned on these loans (to the extent
recognized in the Consolidated Statements of Income) are included in amounts
presented for loans.
Three
months ended March 31,
|
|
2007
|
|
2006
|
|
|
|
Average
|
|
|
|
Yield/
|
|
Average
|
|
|
|
Yield/
|
|
(Dollars
in thousands)
|
|
Balance
|
|
Interest
|
|
Rate
|
|
Balance
|
|
Interest
|
|
Rate
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
real estate loans
|
|
$
|
592,059
|
|
$
|
7,773
|
|
|
5.32
|
%
|
$
|
589,837
|
|
$
|
7,404
|
|
|
5.09
|
%
|
Commercial
and other loans
|
|
|
587,088
|
|
|
11,372
|
|
|
7.86
|
%
|
|
556,013
|
|
|
10,254
|
|
|
7.48
|
%
|
Consumer
loans
|
|
|
281,572
|
|
|
4,825
|
|
|
6.95
|
%
|
|
267,068
|
|
|
4,289
|
|
|
6.51
|
%
|
Total
loans
|
|
|
1,460,719
|
|
|
23,970
|
|
|
6.66
|
%
|
|
1,412,918
|
|
|
21,947
|
|
|
6.30
|
%
|
Federal
funds sold and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
other
short-term investments
|
|
|
13,494
|
|
|
191
|
|
|
5.75
|
%
|
|
10,178
|
|
|
116
|
|
|
4.62
|
%
|
Taxable
debt securities
|
|
|
622,981
|
|
|
7,792
|
|
|
5.07
|
%
|
|
737,563
|
|
|
8,412
|
|
|
4.63
|
%
|
Nontaxable
debt securities
|
|
|
69,648
|
|
|
978
|
|
|
5.69
|
%
|
|
35,177
|
|
|
504
|
|
|
5.81
|
%
|
Corporate
stocks and FHLB stock
|
|
|
43,468
|
|
|
800
|
|
|
7.46
|
%
|
|
49,344
|
|
|
761
|
|
|
6.26
|
%
|
Total
securities
|
|
|
749,591
|
|
|
9,761
|
|
|
5.28
|
%
|
|
832,262
|
|
|
9,793
|
|
|
4.77
|
%
|
Total
interest-earning assets
|
|
|
2,210,310
|
|
|
33,731
|
|
|
6.19
|
%
|
|
2,245,180
|
|
|
31,740
|
|
|
5.73
|
%
|
Non
interest-earning assets
|
|
|
171,033
|
|
|
|
|
|
|
|
|
149,361
|
|
|
|
|
|
|
|
Total
assets
|
|
$
|
2,381,343
|
|
|
|
|
|
|
|
$
|
2,394,451
|
|
|
|
|
|
|
|
Liabilities
and Shareholders’ Equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOW
accounts
|
|
$
|
169,675
|
|
$
|
68
|
|
|
0.16
|
%
|
$
|
170,421
|
|
$
|
67
|
|
|
0.16
|
%
|
Money
market accounts
|
|
|
293,985
|
|
|
2,811
|
|
|
3.88
|
%
|
|
228,305
|
|
|
1,607
|
|
|
2.85
|
%
|
Savings
deposits
|
|
|
205,572
|
|
|
710
|
|
|
1.40
|
%
|
|
204,768
|
|
|
287
|
|
|
0.57
|
%
|
Time
deposits
|
|
|
832,492
|
|
|
9,388
|
|
|
4.57
|
%
|
|
851,298
|
|
|
8,277
|
|
|
3.94
|
%
|
FHLB
advances
|
|
|
467,448
|
|
|
4,968
|
|
|
4.31
|
%
|
|
547,391
|
|
|
5,359
|
|
|
3.97
|
%
|
Junior
subordinated debentures
|
|
|
22,681
|
|
|
338
|
|
|
6.04
|
%
|
|
22,681
|
|
|
338
|
|
|
6.04
|
%
|
Other
borrowed funds
|
|
|
12,797
|
|
|
150
|
|
|
4.73
|
%
|
|
7,017
|
|
|
80
|
|
|
4.64
|
%
|
Total
interest-bearing liabilities
|
|
|
2,004,650
|
|
|
18,433
|
|
|
3.73
|
%
|
|
2,031,881
|
|
|
16,015
|
|
|
3.20
|
%
|
Demand
deposits
|
|
|
170,977
|
|
|
|
|
|
|
|
|
179,954
|
|
|
|
|
|
|
|
Other
liabilities
|
|
|
30,719
|
|
|
|
|
|
|
|
|
21,759
|
|
|
|
|
|
|
|
Shareholders’
equity
|
|
|
174,997
|
|
|
|
|
|
|
|
|
160,947
|
|
|
|
|
|
|
|
Total
liabilities and shareholders’ equity
|
|
$
|
2,381,343
|
|
|
|
|
|
|
|
$
|
2,394,541
|
|
|
|
|
|
|
|
Net
interest income (FTE)
|
|
|
|
|
$
|
15,298
|
|
|
|
|
|
|
|
$
|
15,725
|
|
|
|
|
Interest
rate spread
|
|
|
|
|
|
|
|
|
2.46
|
%
|
|
|
|
|
|
|
|
2.53
|
%
|
Net
interest margin
|
|
|
|
|
|
|
|
|
2.81
|
%
|
|
|
|
|
|
|
|
2.84
|
%
|
Interest
income amounts presented in the preceding table include the following
adjustments for taxable equivalency:
(Dollars
in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
Three
months ended March 31,
|
|
2007
|
|
2006
|
|
Commercial
and other loans
|
|
$
|
36
|
|
$
|
50
|
|
Nontaxable
debt securities
|
|
|
310
|
|
|
176
|
|
Corporate
stocks
|
|
|
82
|
|
|
84
|
|
The
following table presents certain information on a FTE basis regarding changes
in
our interest income and interest expense for the periods indicated. The net
change attributable to both volume and rate has been allocated
proportionately.
|
|
Three
months ended
|
|
|
|
March 31,
2007 vs. 2006
|
|
|
|
Increase
(decrease) due to
|
|
(Dollars
in thousands)
|
|
Volume
|
|
Rate
|
|
Net
Chg
|
|
Interest
on interest-earning assets:
|
|
|
|
|
|
|
|
|
|
|
Residential
real estate loans
|
|
$
|
28
|
|
$
|
341
|
|
$
|
369
|
|
Commercial
and other loans
|
|
|
586
|
|
|
532
|
|
|
1,118
|
|
Consumer
loans
|
|
|
239
|
|
|
297
|
|
|
536
|
|
Federal
funds sold and other short-term investments
|
|
|
43
|
|
|
32
|
|
|
75
|
|
Taxable
debt securities
|
|
|
(1,377
|
)
|
|
757
|
|
|
(620
|
)
|
Nontaxable
debt securities
|
|
|
484
|
|
|
(10
|
)
|
|
474
|
|
Corporate
stocks and FHLB stock
|
|
|
(97
|
)
|
|
136
|
|
|
39
|
|
Total
interest income
|
|
|
(94
|
)
|
|
2,085
|
|
|
1,991
|
|
Interest
on interest-bearing liabilities:
|
|
|
|
|
|
|
|
|
|
|
NOW
accounts
|
|
|
1
|
|
|
-
|
|
|
1
|
|
Money
market accounts
|
|
|
534
|
|
|
670
|
|
|
1,204
|
|
Savings
deposits
|
|
|
1
|
|
|
422
|
|
|
423
|
|
Time
deposits
|
|
|
(186
|
)
|
|
1,297
|
|
|
1,111
|
|
FHLB
advances
|
|
|
(825
|
)
|
|
434
|
|
|
(391
|
)
|
Junior
subordinated debentures
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Other
borrowed funds
|
|
|
67
|
|
|
3
|
|
|
70
|
|
Total
interest expense
|
|
|
(408
|
)
|
|
2,826
|
|
|
2,418
|
|
Net
interest income
|
|
$
|
314
|
|
|
($741
|
)
|
|
($427
|
)
|
Provision
and Allowance for Loan Losses
The
Corporation’s loan loss provision charged to earnings amounted to
$300 thousand for the three months ended March 31, 2007, unchanged
from the amount recorded in 2006. The allowance for loan losses was
$19.4 million, or 1.32% of total loans, at March 31, 2007, compared to
$18.2 million, or 1.29%, at March 31, 2006. See additional discussion
under the caption “Asset Quality” for further information on the Allowance for
Loan Losses.
Noninterest
Income
Noninterest
income is an important source of revenue for Washington Trust.
Noninterest
income as a percent of total revenues (net interest income plus noninterest
income) increased from 38.2% in the first quarter of 2006 to 43.1% in the first
quarter of 2007. Total noninterest income amounted to $11.2 million for the
first quarter of 2007, up $1.7 million from the same quarter a year ago.
Included in noninterest income were net realized gains on sales of securities
of
$1.0 million and $59 thousand for the three months ended
March 31, 2007 and 2006, respectively. Excluding net realized gains on
sales of securities, noninterest income increased $751 thousand, or
8 percent, from the same quarter of 2006. This increase was largely
attributable to higher revenues from wealth management services.
The
following table presents a noninterest income comparison for the three months
ended March 31, 2007 and 2006:
(Dollars
in thousands)
|
|
2007
|
|
2006
|
|
$
Change
|
|
%
Change
|
|
Noninterest
income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wealth
management services:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trust
and investment advisory fees
|
|
$
|
5,038
|
|
$
|
4,627
|
|
$
|
411
|
|
|
8.9
|
%
|
Mutual
fund fees
|
|
|
1,262
|
|
|
1,130
|
|
|
132
|
|
|
11.7
|
|
Financial
planning, commissions and other service fees
|
|
|
570
|
|
|
683
|
|
|
(113
|
)
|
|
(16.5
|
)
|
Wealth
management services
|
|
|
6,870
|
|
|
6,440
|
|
|
430
|
|
|
6.7
|
|
Service
charges on deposit accounts
|
|
|
1,125
|
|
|
1,119
|
|
|
6
|
|
|
0.5
|
|
Merchant
processing fees
|
|
|
1,204
|
|
|
1,047
|
|
|
157
|
|
|
15.0
|
|
Income
from BOLI
|
|
|
391
|
|
|
279
|
|
|
112
|
|
|
40.1
|
|
Net
gains on loan sales and commissions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
on
loans originated for others
|
|
|
264
|
|
|
276
|
|
|
(12
|
)
|
|
(4.3
|
)
|
Other
income
|
|
|
358
|
|
|
300
|
|
|
58
|
|
|
19.3
|
|
Subtotal
|
|
|
10,212
|
|
|
9,461
|
|
|
751
|
|
|
7.9
|
|
Net
realized gains on securities
|
|
|
1,036
|
|
|
59
|
|
|
977
|
|
|
1655.9
|
|
Total
noninterest income
|
|
$
|
11,248
|
|
$
|
9,520
|
|
$
|
1,728
|
|
|
18.2
|
%
|
Wealth
management revenues for the three months ended March 31, 2007 increased by
6.7% over the same period in 2006. Revenue from wealth management services
is
largely dependent on the value of assets under administration and is closely
tied to the performance of the financial markets. Assets under administration
totaled $3.806 billion at March 31, 2007, up $111.5 million, or
3.0%, in the first quarter of 2007 and up $363.3 million, or 10.6%, from
March 31, 2006. This growth was due to business development efforts and
financial market appreciation.
Merchant
processing fees for the three months ended March 31, 2007 increased 15.0%
from the corresponding period a year ago due to increases in the volume of
transactions processed for existing and new customers. Merchant processing
fees
represent charges to merchants for credit card transactions
processed.
Income
from bank-owned life insurance (“BOLI”) increased $112 thousand, or 40.1%,
amounting to $391 thousand for the three months ended March 31, 2007.
The increase is largely attributable to the purchase of an additional
$8 million in BOLI during the second quarter of 2006.
Common
equity securities were sold in the first quarter of 2007, resulting in the
recognition of $1.0 million of net realized gains on sales of securities.
Net realized gains on securities sales during the three month period in 2006
totaled $59 thousand.
Noninterest
Expense
Noninterest
expenses amounted to $17.1 million for the first quarter of 2007, up
$1.4 million, or 8.9%,
from
the same quarter a year ago. During the first quarter of 2007, the Corporation
prepaid $26.5 million in higher cost advances from Federal Home Loan Bank
of Boston (“FHLBB”), resulting in a debt prepayment penalty charge, recorded in
noninterest expense, of $1.1 million. The source of funds for the paydowns
was maturities of investments as well as other borrowings. Excluding debt
prepayment penalty expense, noninterest expenses increased $338 thousand,
or 2.2%, over the same quarter last year.
The
following table presents a noninterest expense comparison for the three months
ended March 31, 2007 and 2006:
(Dollars
in thousands)
|
|
2007
|
|
2006
|
|
$
Change
|
|
%
Change
|
|
Noninterest
expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries
and employee benefits
|
|
$
|
9,812
|
|
$
|
9,619
|
|
$
|
193
|
|
|
2.0
|
%
|
Net
occupancy
|
|
|
1,017
|
|
|
954
|
|
|
63
|
|
|
6.6
|
|
Equipment
|
|
|
832
|
|
|
799
|
|
|
33
|
|
|
4.1
|
|
Merchant
processing costs
|
|
|
1,019
|
|
|
887
|
|
|
132
|
|
|
14.9
|
|
Outsourced
services
|
|
|
519
|
|
|
518
|
|
|
1
|
|
|
0.2
|
|
Advertising
and promotion
|
|
|
429
|
|
|
437
|
|
|
(8
|
)
|
|
(1.8
|
)
|
Legal,
audit and professional fees
|
|
|
450
|
|
|
376
|
|
|
74
|
|
|
19.7
|
|
Amortization
of intangibles
|
|
|
368
|
|
|
405
|
|
|
(37
|
)
|
|
(9.1
|
)
|
Debt
prepayment penalties
|
|
|
1,067
|
|
|
-
|
|
|
1,067
|
|
|
100.0
|
|
Other
|
|
|
1,596
|
|
|
1,709
|
|
|
(113
|
)
|
|
(6.6
|
)
|
Total
noninterest expense
|
|
$
|
17,109
|
|
$
|
15,704
|
|
$
|
1,405
|
|
|
8.9
|
%
|
Salaries
and employee benefit expense, the largest component of noninterest expense,
totaled $9.8 million for the three months ended March 31, 2007, up
$193 thousand, or 2%, from the first quarter of 2006. The increase is
primarily attributable to increases in salaries and wages and performance-based
compensation plans.
Net
occupancy expense for the three months ended March 31, 2007 increased
$63 thousand, or 6.6%, over the same period in 2006. The increase is due to
increased rental expenses and maintenance costs.
Merchant
processing costs for the three months ended March 31, 2007 increased
$132 thousand, or 14.9%, from the comparable period in 2006 due to
increases in the volume of transactions processed for existing and new
customers. Merchant processing costs represent third-party costs incurred that
are directly attributable to handling merchant credit card
transactions.
Legal,
audit and professional fees for the three months ended March 31, 2007
increased $74 thousand, or 19.7%, from the same period last year primarily
due to increased consulting expenses.
Debt
prepayment penalty expense, resulting from the prepayment of $26.5 million
in higher cost advances from the FHLBB, amounted to $1.1 million during the
first quarter of 2007. The source of funds for the paydowns was maturities
of
investments as well as other borrowings.
Income
Taxes
Income
tax expense amounted to $2.7 million and $2.9 million, respectively,
for the three months ended March 31, 2007 and 2006. The Corporation’s
effective tax rate for the three months ended March 31, 2007 was 31.4%,
down slightly from 32.0% from the same period in 2006. These rates differed
from
the federal rate of 35% due to the benefits of tax-exempt income, the dividends
received deduction and income from BOLI.
Financial
Condition
Summary
Total
assets amounted to $2.400 billion, essentially unchanged from
December 31, 2006. Total liabilities declined $1.7 million in the
first quarter of 2007, with total deposits increasing $5.6 million, other
borrowings increasing $11.1 million and FHLB advances decreasing
$17.4 million. Shareholders’ equity totaled $175.5 million at
March 31, 2007, up $2.5 million, compared to $173.1 million at
December 31, 2006.
Securities
Washington
Trust’s securities portfolio is managed to generate interest income, to
implement interest rate risk management strategies, and to provide a readily
available source of liquidity for balance sheet management. At March 31,
2007 the securities portfolio totaled $706.4 million, up $2.6 million
from December 31, 2006.
The
net
unrealized losses on securities available for sale and held to maturity amounted
to $198 thousand at March 31, 2007, compared to $1.7 million at
December 31, 2006. The decrease in unrealized losses in the first quarter
is primarily attributable to the effect a decrease in the intermediate to long
term rates had on the
Corporation’s
securities portfolio. See Note 3 to the Consolidated Financial Statements
for detail of unrealized gains and losses on securities.
Federal
Home Loan Bank Stock
The
Corporation is required to maintain a level of investment in FHLB stock that
currently is based on the level of its FHLB advances. As of March 31, 2007
and 2006, the Corporation’s investment in FHLB stock totaled
$28.7 million.
Loans
Loan
growth was modest in the first quarter of 2007. Total loans increased by
$10.2 million, or 0.7%, in the first quarter of 2007 due to growth in
commercial loans.
Commercial
loans, including commercial real estate and construction loans, totaled
$599.2 million at March 31, 2007, up $11.8 million, or 2.0%, in
the first quarter of 2007. Residential real estate loans totaled
$589.6 million at March 31, 2007, increasing $894 thousand, or
0.2%, during the three months ended March 31, 2007. Demand for residential
mortgages has been modest and consumer balances experienced runoff due to
refinancing into first mortgages. Consumer loans declined $2.5 million, or
0.9%, during the three months ended March 31, 2007.
Asset
Quality
Allowance
for Loan Losses
Establishing
an appropriate level of allowance for loan losses necessarily involves a high
degree of judgment. The Corporation uses a methodology to systematically measure
the amount of estimated loan loss exposure inherent in the loan portfolio for
purposes of establishing a sufficient allowance for loan losses. For a more
detailed discussion on the allowance for loan losses, see additional information
in Item 7 under the caption “Application of Critical Accounting Policies
and Estimates” of Washington Trust’s Annual Report on Form 10-K for the fiscal
year ended December 31, 2006.
The
allowance for loan losses is management’s best estimate of the probable loan
losses incurred as of the balance sheet date. The allowance is increased by
provisions charged to earnings and by recoveries of amounts previously charged
off, and is reduced by charge-offs on loans.
At
March 31, 2007, the allowance for loan losses was $19.4 million, or
1.32% of total loans, and 624% of total nonaccrual loans. This compares with
an
allowance of $18.9 million, or 1.29% of total loans, and 694% of nonaccrual
loans at December 31, 2006. Loan recoveries, net of charge-offs, amounted
to $166 thousand and $29 thousand, respectively, for the three months
ended March 31, 2007 and 2006.
Nonperforming
Assets
Nonperforming
assets are summarized in the following table:
(Dollars
in thousands)
|
|
March 31,
|
|
December
31,
|
|
|
|
2007
|
|
2006
|
|
Nonaccrual
loans 90 days or more past due
|
|
$
|
2,068
|
|
$
|
1,470
|
|
Nonaccrual
loans less than 90 days past due
|
|
|
1,035
|
|
|
1,253
|
|
Total
nonaccrual loans
|
|
|
3,103
|
|
|
2,723
|
|
Other
real estate owned, net
|
|
|
-
|
|
|
-
|
|
Total
nonperforming assets
|
|
$
|
3,103
|
|
$
|
2,723
|
|
Nonaccrual
loans as a percentage of total loans
|
|
|
0.21
|
%
|
|
0.19
|
%
|
Nonperforming
assets as a percentage of total assets
|
|
|
0.13
|
%
|
|
0.11
|
%
|
Allowance
for loan losses to nonaccrual loans
|
|
|
623.91
|
%
|
|
693.87
|
%
|
Allowance
for loan losses to total loans
|
|
|
1.32
|
%
|
|
1.29
|
%
|
Nonperforming
assets amounted to $3.1 million, or 0.13% of total assets, at
March 31, 2007, compared to $2.7 million, or 0.11%, at
December 31, 2006.
There
were no accruing loans 90 days or more past due at March 31, 2007 or
December 31, 2006.
Impaired
loans consist of all nonaccrual commercial loans. At March 31, 2007, the
recorded investment in impaired loans was $2.2 million, which had a related
allowance of $282 thousand. Also during the three months ended
March 31, 2007, interest income recognized on impaired loans amounted to
approximately $149 thousand. Interest income on impaired loans is
recognized on a cash basis only.
The
following is an analysis of nonaccrual loans by loan category:
(Dollars
in thousands)
|
|
March 31,
|
|
December
31,
|
|
|
|
2007
|
|
2006
|
|
Residential
real estate
|
|
$
|
709
|
|
$
|
721
|
|
Commercial:
|
|
|
|
|
|
|
|
Mortgages
|
|
|
1,157
|
|
|
981
|
|
Construction
and development
|
|
|
-
|
|
|
-
|
|
Other
|
|
|
1,021
|
|
|
831
|
|
Consumer
|
|
|
216
|
|
|
190
|
|
Total
nonaccrual loans
|
|
$
|
3,103
|
|
$
|
2,723
|
|
Deposits
Deposits
totaled $1.684 billion at March 31, 2007, down $5.6 million, or
0.3%, from December 31, 2006. Excluding a $12.5 million decrease in
brokered certificates of deposit, in-market deposits were up $18.1 million,
or 1.2%, for the three months ended March 31, 2007. The Corporation has
continued to experience a shift in the mix of deposits away from lower cost
demand deposit accounts and into higher cost money market accounts and
certificates of deposit. Deposit gathering continues to be extremely
competitive.
Demand
deposits amounted to $175.0 million at March 31, 2007, down
$11.5 million, or 6.2%, from December 31, 2006.
NOW
account balances totaled $176.0 million at March 31, 2007, up
$527 thousand, or 0.3%, from the end of 2006.
Money
market account balances totaled $290.3 million at March 31, 2007, up
$3.3 million, or 1.1%, from December 31, 2006.
Savings
deposits declined $1.5 million, or 0.7%, and amounted to
$204.5 million.
Time
deposits (including brokered certificates of deposit) amounted to
$837.8 million, up $14.8 million, or 1.8%, during the first quarter of
2007. The Corporation utilizes brokered time deposits as part of its overall
funding program along with other sources. Brokered time deposits amounted to
$163.1 million, down $12.5 million, or 7.1%, during the three months
ended March 31, 2007. Excluding
the brokered time deposits, time deposits rose $27.4 million, or 4.2%,
during the three months ended March 31, 2007 due to growth in consumer and
commercial certificates of deposit.
Borrowings
The
Corporation utilizes advances from the FHLB as well as other borrowings as
part
of its overall funding strategy. FHLB advances are used to meet short-term
liquidity needs, to purchase securities and to purchase loans from other
institutions. FHLB advances declined $17.4 million during the quarter ended
March 31, 2007. See Note 8 to the Consolidated Financial Statements
for additional information on borrowings.
Liquidity
and Capital Resources
Liquidity
is the ability of a financial institution to meet maturing liability obligations
and customer loan demand. Washington Trust’s primary source of liquidity is
deposits. Deposits (demand, NOW, money market, savings and time deposits) funded
approximately 70% of total average assets in the first three months of 2007.
Other sources of funding include discretionary use of purchased liabilities
(e.g., FHLB term advances and other borrowings), cash flows from the
Corporation’s securities portfolios and loan repayments. In addition, securities
designated as available for sale may be sold in response to short-term or
long-term liquidity needs.
The
Corporation’s Asset/Liability Committee (“ALCO”) establishes and monitors
internal liquidity measures to manage liquidity exposure. Liquidity remained
well within target ranges established by the ALCO during the first three months
of 2007.
For
the
three months ended March 31, 2007, net cash used in financing activities
amounted to $4.9 million and was used primarily to repay FHLB advances,
offset in part by overall growth in deposits and other borrowings. See
additional discussion on the first quarter 2007 prepayment of FHLB advances
under the caption “Noninterest Expense”. Net cash used in investing activities
was $11.8 million for the three months ended March 31, 2007 and
resulted primarily from internal loan growth and purchases of loans. Net cash
provided by operating activities amounted to $5.2 million in the quarter of
2007, generated primarily by net income. See the Corporation’s Consolidated
Statements of Cash Flows for further information about sources and uses of
cash.
Total
shareholders’ equity amounted to $175.5 million at March 31, 2007, up
$2.5 million since December 31, 2006. The increase in retained
earnings reflected the Corporations net income of $6.0 million, and was
offset in part by the Corporations dividend declared of $2.7 million. The
dividend represents a $0.20 per share dividend, which was paid to shareholders
on April 12, 2007. This was an increase from the $0.19 per share rate paid
throughout 2006 and represents the fifteenth consecutive year with a dividend
increase. Under the Corporation’s 2006 Common Stock Repurchase Plan, 61,100
shares were repurchased at a total cost of $1.7 million during the first
quarter of 2007. Book value per share as of March 31, 2007 and
December 31, 2006 amounted to $13.12 and $12.89, respectively
The
ratio
of total equity to total assets amounted to 7.3% and 7.2% at March 31, 2007
and December 31, 2006, respectively. Book value per share as of
March 31, 2007 and December 31, 2006 amounted to $13.12 and $12.89,
respectively. The tangible book value per share was $8.86 at March 31,
2007, compared to $8.61 at the end of 2006.
Contractual
Obligations and Commitments
The
Corporation has entered into numerous contractual obligations and commitments.
The following table summarizes our contractual cash obligation and other
commitments at March 31, 2007.
(Dollars
in thousands)
|
|
Payments
Due by Period
|
|
|
|
Total
|
|
Less
Than
1
Year
|
|
1-3
Years
|
|
4-5
Years
|
|
After
5
Years
|
|
Contractual
Obligations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FHLB
advances (1)
|
|
$
|
457,145
|
|
$
|
155,896
|
|
$
|
184,741
|
|
$
|
47,389
|
|
$
|
69,119
|
|
Junior
subordinated debentures
|
|
|
22,681
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
22,681
|
|
Operating
lease obligations
|
|
|
1,628
|
|
|
723
|
|
|
775
|
|
|
123
|
|
|
7
|
|
Software
licensing arrangements
|
|
|
1,514
|
|
|
877
|
|
|
507
|
|
|
130
|
|
|
-
|
|
Treasury,
tax and loan demand note
|
|
|
2,121
|
|
|
2,121
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Deferred
acquisition obligations
|
|
|
3,769
|
|
|
1,925
|
|
|
1,844
|
|
|
-
|
|
|
-
|
|
Other
borrowed funds
|
|
|
19,902
|
|
|
26
|
|
|
59
|
|
|
19,569
|
|
|
248
|
|
Total
contractual obligations
|
|
$
|
508,760
|
|
$
|
161,568
|
|
$
|
187,926
|
|
$
|
67,211
|
|
$
|
92,055
|
|
(1) |
All
FHLB advances are shown in the period corresponding to their scheduled
maturity.
|
(Dollars
in thousands)
|
|
Amount
of Commitment Expiration - Per Period
|
|
|
|
Total
|
|
Less
Than
1
Year
|
|
1-3
Years
|
|
4-5
Years
|
|
After
5
Years
|
|
Other
Commitments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
loans
|
|
$
|
156,944
|
|
$
|
110,702
|
|
$
|
9,225
|
|
$
|
12,340
|
|
$
|
24,677
|
|
Home
equity lines
|
|
|
182,290
|
|
|
879
|
|
|
2,939
|
|
|
9,008
|
|
|
169,464
|
|
Other
loans
|
|
|
11,906
|
|
|
9,419
|
|
|
1,430
|
|
|
1,057
|
|
|
-
|
|
Standby
letters of credit
|
|
|
8,898
|
|
|
8,898
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Forward
loan commitments to:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Originate
loans
|
|
|
4,868
|
|
|
4,868
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Sell
loans
|
|
|
6,988
|
|
|
6,988
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Total
commitments
|
|
$
|
371,894
|
|
$
|
141,754
|
|
$
|
13,594
|
|
$
|
22,405
|
|
$
|
194,141
|
|
See
additional discussion in Note 10 to the Consolidated Financial Statements
for more information regarding the nature and business purpose of financial
instruments with off-balance sheet risk and derivative financial
instruments.
Off-Balance
Sheet Arrangements
For
the
quarter ended March 31, 2007, Washington Trust engaged in no off-balance
sheet transactions reasonably likely to have a material effect on the
consolidated financial condition.
Asset/Liability
Management and Interest Rate Risk
The
ALCO
is responsible for establishing policy guidelines on liquidity and acceptable
exposure to interest rate risk. Interest rate risk is the risk of loss to future
earnings due to changes in interest rates. The objective of the ALCO is to
manage assets and funding sources to produce results that are consistent with
Washington Trust’s liquidity, capital adequacy, growth, risk and profitability
goals.
The
ALCO
manages the Corporation’s interest rate risk using income simulation to measure
interest rate risk inherent in the Corporation’s on-balance sheet and
off-balance sheet financial instruments at a given point in time by showing
the
effect of interest rate shifts on net interest income over a 12-month horizon,
the month 13 to month 24 horizon and a 60-month horizon. The simulations assume
that the size and general composition of the Corporation’s balance sheet remain
static over the simulation horizons and take into account the specific
repricing, maturity, call options, and prepayment characteristics of differing
financial instruments that may vary under different interest rate scenarios.
The
characteristics of financial instrument classes are reviewed periodically by
the
ALCO to ensure their accuracy and consistency.
The
ALCO
reviews simulation results to determine whether the Corporation’s exposure to a
decline in net interest income remains within established tolerance levels
over
the simulation horizons and to develop appropriate strategies to manage this
exposure. As of March 31, 2007 and December 31, 2006, net interest
income simulations indicated that exposure to changing interest rates over
the
simulation horizons remained within tolerance levels established by the
Corporation. The Corporation defines maximum unfavorable net interest income
exposure to be a change of no more than 5% in net interest income over the
first
12 months, no more than 10% over the second 12 months, and no more than 10%
over
the full 60-month simulation horizon. All changes are measured in comparison
to
the projected net interest income that would result from an “unchanged” rate
scenario where both interest rates and the composition of the Corporation’s
balance sheet remain stable for a 60-month period. In addition to measuring
the
change in net interest income as compared to an unchanged interest rate
scenario, the ALCO also measures the trend of both net interest income and
net
interest margin over a 60-month horizon to ensure the stability and adequacy
of
this source of earnings in different interest rate scenarios.
The
ALCO
reviews a variety of interest rate shift scenario results to evaluate interest
risk exposure, including scenarios showing the effect of steepening or
flattening changes in the yield curve shape as well as parallel changes in
interest rates. Because income simulations assume that the Corporation’s balance
sheet will remain static over the simulation horizon, the results do not reflect
adjustments in strategy that the ALCO could implement in response to rate
shifts.
The
following table sets forth the estimated change in net interest income from
an
unchanged interest rate scenario over the periods indicated for parallel changes
in market interest rates using the Corporation’s on and off-balance sheet
financial instruments as of March 31, 2007 and December 31, 2006.
Interest rates are assumed to shift by a parallel 100 or 200 basis points upward
or 100 basis points downward over the periods indicated, except for core savings
deposits, which are assumed to shift by lesser amounts due to their relative
historical insensitivity to market interest rate movements. Further, deposits
are assumed to have certain minimum rate levels below which they will not fall.
It should be noted that the rate scenarios shown do not necessarily reflect
the
ALCO’s view of the “most likely” change in interest rates over the periods
indicated.
|
|
March 31,
2007
|
|
December 31,
2006
|
|
|
|
Months
1 - 12
|
|
Months
13 - 24
|
|
Months
1 - 12
|
|
Months
13 - 24
|
|
100
basis point rate decrease
|
|
|
-1.86
|
%
|
|
-2.08
|
%
|
|
-1.63
|
%
|
|
-2.47
|
%
|
100
basis point rate increase
|
|
|
-1.12
|
%
|
|
-5.65
|
%
|
|
-1.18
|
%
|
|
-5.03
|
%
|
200
basis point rate increase
|
|
|
-0.72
|
%
|
|
-9.08
|
%
|
|
-0.78
|
%
|
|
-8.01
|
%
|
The
ALCO
estimates that the small negative exposure of net interest income to falling
rates as compared to an unchanged rate scenario results from asset yields
declining as current asset holdings mature or reprice, while rates paid on
certain core savings deposits are unlikely to fall significantly given their
already low current levels. If rates were to fall and remain low for a sustained
period, core savings deposit rates would likely decline more slowly than other
market rates, while asset yields would decline as current asset holdings mature
or reprice with increasing cash flows from more rapid mortgage-related
prepayments and redemption of callable securities.
The
neutral exposure of net interest income to rising rates in Year 1 as compared
to
an unchanged rate scenario results from a relative balance between anticipated
increases in asset yields and funding costs over the near term. For simulation
purposes, core savings rate changes are anticipated to lag other market rates
related to loan and investment yields in both timing and magnitude. The ALCO’s
estimate of interest rate risk exposure to rising rate environments, including
those involving a further flattening or inversion of the yield curve,
incorporates certain assumptions regarding the shift in mix from low-cost core
savings deposits to higher-cost deposit categories, which has characterized
a
shift in funding mix during the current rising interest rate cycle.
The
negative exposure of net interest income to rising rates in Year 2 as compared
to an unchanged rate scenario is primarily attributable to an increase in
funding costs associated with retail deposits. With the flattening of the yield
curve, consumer demand for higher cost money market and time deposits continues
to be greater than growth in other lower-cost deposit categories. The ALCO
believes that this shift in deposit mix towards higher cost deposit categories
accurately reflects historical operating conditions during the recent increase
in interest rates. Although asset yields would also increase in a rising
interest rate environment, the cumulative impact of relative growth in the
rate-sensitive higher cost deposit category suggests that by Year 2 of rising
interest rate scenarios, the increase in the Corporation’s cost of funds could
result in a relative decline in net interest margin compared to an unchanged
rate scenario.
While
the
ALCO reviews simulation assumptions to ensure that they are reasonable and
current, income simulation may not always prove to be an accurate indicator
of
interest rate risk or future net interest margin since the repricing, maturity
and prepayment characteristics of financial instruments and the composition
of
the Corporation’s balance sheet may change to a different degree than estimated.
Firstly, simulation modeling assumes a static balance sheet, with the exception
of certain modeled deposit mix shifts from low-cost core savings deposits to
higher-cost money market and time deposits noted above. The static balance
sheet
assumption does not necessarily reflect the Corporation’s expectation for future
balance sheet growth, which is a function of the business environment and
customer behavior. Another significant simulation assumption is the sensitivity
of core savings deposits to fluctuations in interest rates. Income simulation
results assume that changes in both core savings deposit rates and balances
are
related to changes in short-term interest rates. The assumed relationship
between short-term interest rate changes and core deposit rate and balance
changes used in income simulation may differ from the ALCO’s estimates. Lastly,
mortgage-backed securities and mortgage loans involve a level of risk that
unforeseen changes in prepayment speeds may cause related cash flows to vary
significantly in differing rate environments. Such changes could affect the
level of reinvestment risk associated with cash flow from these instruments,
as
well as their market value. Changes in prepayment speeds could also increase
or
decrease the amortization of premium or accretion of discounts related to such
instruments, thereby affecting interest income.
The
Corporation also monitors the potential change in market value of its available
for sale debt securities in changing interest rate environments. The purpose
is
to determine market value exposure that may not be captured by income
simulation, but which might result in changes to the Corporation’s capital
position. Results are calculated using industry-standard analytical techniques
and securities data. Available for sale equity securities are excluded from
this
analysis because the market value of such securities cannot be directly
correlated with changes in interest rates. The following table summarizes the
potential change in market value of the Corporation’s available for sale debt
securities as of March 31, 2007 and December 31, 2006 resulting from
immediate parallel rate shifts:
(Dollars
in thousands)
|
|
Down
100
|
|
Up
200
|
|
|
|
Basis
|
|
Basis
|
|
Security
Type
|
|
Points
|
|
Points
|
|
U.S.
Treasury and government-sponsored agency securities
(noncallable)
|
|
|
2,720
|
|
|
(4,990
|
)
|
U.S.
government-sponsored agency securities (callable)
|
|
|
982
|
|
|
(6,030
|
)
|
Mortgage-backed
securities
|
|
|
6,741
|
|
|
(17,308
|
)
|
Corporate
securities
|
|
|
396
|
|
|
(771
|
)
|
Total
change in market value as of March 31, 2007
|
|
$
|
10,839
|
|
$
|
(29,099
|
)
|
|
|
|
|
|
|
|
|
Total
change in market value as of December 31, 2006
|
|
$
|
11,567
|
|
$
|
(29,447
|
)
|
See
additional discussion in Note 10 to the Corporation’s Consolidated
Financial Statements for more information regarding the nature and business
purpose of financial instruments with off-balance sheet risk and derivative
financial instruments.
Information
regarding quantitative and qualitative disclosures about market risk appears
under Item 2, “Management’s Discussion and Analysis of Financial Condition
and Results of Operations,” under the caption “Asset/Liability Management and
Interest Rate Risk.”
As
required by Rule 13a-15 under the Securities Exchange Act of 1934, as
amended (the “Exchange Act”), the Corporation carried out an evaluation under
the supervision and with the participation of the Corporation’s management,
including the Corporation’s principal executive officer and principal financial
and accounting officer, of the effectiveness of the design and operation of
the
Corporation’s disclosure controls and procedures as of the end of the quarter
ended March 31, 2007. Based upon that evaluation, the Corporation’s
principal executive officer and principal financial and accounting officer
concluded that the Corporation’s disclosure controls and procedures are
effective and designed to ensure that information required to be disclosed
by
the Corporation in the reports it files or submits under the Exchange Act is
recorded, processed, summarized and reported within the time periods specified
in the SEC’s rules and forms. The Corporation will continue to review and
document its disclosure controls and procedures and consider such changes in
future evaluations of the effectiveness of such controls and procedures, as
it
deems appropriate. There has been no change in our internal control over
financial reporting during the period ended March 31, 2007 that has
materially affected, or is reasonably likely to materially affect, our internal
control over financial reporting.
Other
Information
The
Corporation is involved in various claims and legal proceedings arising out
of
the ordinary course of business. Management is of the opinion, based on its
review with counsel of the development of such matters to date, that the
ultimate disposition of such matters will not materially affect the consolidated
financial position or results of operations of the Corporation.
There
have been no material changes in the risk factors described in Item 1A of
Washington Trust’s Annual Report on Form 10-K for the year ended
December 31, 2006.
The
following table provides information as of and for the quarter ended
March 31, 2007 regarding shares of common stock of the Corporation that
were repurchased under the Deferred Compensation Plan, the 2006 Stock Repurchase
Plan, the Amended and Restated 1988 Stock Option Plan (the “1988 Plan”), the
Bancorp’s 1997 Equity Incentive Plan, as amended (the “1997 Plan”), and the
Bancorp’s 2003 Stock Incentive Plan, as amended (the “2003 Plan”).
|
|
Total
number of shares purchased
|
|
Average
price paid per share
|
|
Total
number of shares purchased as part of publicly announced
plan(s)
|
|
Maximum
number of shares that may yet be purchased under the
plan(s)
|
|
Deferred
Compensation Plan (1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at beginning of period
|
|
|
|
|
|
|
|
|
|
|
|
N/A
|
|
1/1/2007
to 1/31/2007
|
|
|
193
|
|
$
|
28.05
|
|
|
193
|
|
|
N/A
|
|
2/1/2007
to 2/28/2007
|
|
|
10,783
|
|
|
27.67
|
|
|
10,783
|
|
|
N/A
|
|
3/1/2007
to 3/31/2007
|
|
|
204
|
|
|
27.00
|
|
|
204
|
|
|
N/A
|
|
Total
Deferred Compensation Plan
|
|
|
11,180
|
|
$
|
27.66
|
|
|
11,180
|
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
Stock Repurchase Plan (2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at beginning of period
|
|
|
|
|
|
|
|
|
|
|
|
400,000
|
|
1/1/2007
to 1/31/2007
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
400,000
|
|
2/1/2007
to 2/28/2007
|
|
|
32,100
|
|
$
|
27.36
|
|
|
32,100
|
|
|
367,900
|
|
3/1/2007
to 3/31/2007
|
|
|
29,000
|
|
|
26.82
|
|
|
29,000
|
|
|
338,900
|
|
Total
2006 Stock Repurchase Plan
|
|
|
61,100
|
|
$
|
27.10
|
|
|
61,100
|
|
|
338,900
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at beginning of period
|
|
|
|
|
|
|
|
|
|
|
|
N/A
|
|
1/1/2007
to 1/31/2007
|
|
|
20,717
|
|
$
|
14.93
|
|
|
20,717
|
|
|
N/A
|
|
2/1/2007
to 2/28/2007
|
|
|
195
|
|
|
18.25
|
|
|
195
|
|
|
N/A
|
|
3/1/2007
to 3/31/2007
|
|
|
713
|
|
|
11.56
|
|
|
713
|
|
|
N/A
|
|
Total
Other
|
|
|
21,625
|
|
$
|
14.85
|
|
|
21,625
|
|
|
N/A
|
|
Total
Purchases of Equity Securities
|
|
|
93,905
|
|
$
|
24.35
|
|
|
93,905
|
|
|
|
|
(1)
The
Deferred Compensation Plan was established on January 1, 1999. This plan
allows directors and officers to defer a portion of their compensation. The
deferred compensation is contributed to a rabbi trust that invests the assets
of
the trust into selected mutual funds as well as shares of the Bancorp’s common
stock pursuant to the direction of the plan participants. The Plan authorizes
Bancorp to acquire shares of Bancorp’s common stock to satisfy its obligation
under this plan. All shares are purchased in the open market.
(2)
The
2006 Stock Repurchase Plan was established in December 2006. A maximum of
400,000 shares were authorized under the plan. The Bancorp plans to hold the
repurchased shares as treasury stock for general corporate
purchases.
(3)
Pursuant to the Corporation’s share-based compensation plans, employees may
deliver back shares of stock previously issued in payment of the exercise price
of stock options. While required to be reported in this table, such transactions
are not reported as share repurchases in the Corporation’s Consolidated
Financial Statements. The Corporation’s share-based compensation plans (the 1988
Plan, the 1997 Plan and the 2003 Plan) have expiration dates of
December 31, 1997, April 29 2007 and April 29, 2013,
respectively.
(a)
Exhibits. The following exhibits are included as part of this Form
10-Q:
Exhibit
Number
|
|
10.1
|
Annual
Performance Plan — Filed herewith. (1)
|
10.2
|
Wealth
Management Business Building Incentive Plan — Filed herewith.
(1)
|
10.3
|
Amendment
to the Supplemental Pension Benefit and Profit Sharing Plan — Filed
herewith. (1)
|
15.1
|
Letter
re: Unaudited Interim Financial Information - Filed
herewith.
|
31.1
|
Certification
of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002. - Filed herewith.
|
31.2
|
Certification
of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002. - Filed herewith.
|
32.1
|
Certification
of Chief Executive Officer and Chief Financial Officer pursuant to
18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 - Filed herewith. (2)
|
|
|
(1)
|
Management
contract or compensatory plan or arrangement.
|
(2)
|
These
certifications are not “filed” for purposes of Section 18 of the Exchange
Act or incorporated by reference into any filing under the Securities
Act
or the Exchange Act.
|
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant
has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
|
|
|
WASHINGTON
TRUST BANCORP, INC.
|
|
|
|
(Registrant)
|
|
|
|
|
|
|
|
|
Date:
May 7, 2007
|
|
By:
|
/s/
John C.
Warren
|
|
|
|
John
C. Warren
|
|
|
|
Chairman
and Chief Executive Officer
|
|
|
|
(principal
executive officer)
|
|
|
|
|
|
|
|
|
Date:
May 7, 2007
|
|
By:
|
/s/
David V.
Devault
|
|
|
|
David
V. Devault
|
|
|
|
Executive
Vice President, Secretary, Treasurer and Chief Financial
Officer
|
|
|
|
(principal
financial and accounting officer)
|
|
|
|
|
Exhibit
Index
Exhibit
Number
|
|
10.1
|
Annual
Performance Plan — Filed herewith. (1)
|
10.2
|
Wealth
Management Business Building Incentive Plan — Filed herewith.
(1)
|
10.3
|
Amendment
to the Supplemental Pension Benefit and Profit Sharing Plan — Filed
herewith. (1)
|
15.1
|
Letter
re: Unaudited Interim Financial Information - Filed
herewith.
|
31.1
|
Certification
of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002. - Filed herewith.
|
31.2
|
Certification
of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002. - Filed herewith.
|
32.1
|
Certification
of Chief Executive Officer and Chief Financial Officer pursuant to
18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 - Filed herewith. (2)
|
|
|
(1)
|
Management
contract or compensatory plan or arrangement.
|
(2)
|
These
certifications are not “filed” for purposes of Section 18 of the Exchange
Act or incorporated by reference into any filing under the Securities
Act
or the Exchange Act.
|