Washington Trust Bancorp
Annual Report 2012

Plain-text annual report

Corporate Profile Washington Trust is the largest independent bank in Rhode Island and one of the premier financial institutions in the region, offering comprehensive personal banking, commercial banking, wealth management, and trust services. We are a company rich in history and the oldest community bank in the nation. The last decade has been a period of significant growth for Washington Trust. We have bolstered our capabilities and increased our competitive advantage through geographic expansion and superior service delivery. And we have capitalized on opportunities in the marketplace – in challenging economic times, we have been a source of stability for depositors, borrowers, and investors, as we have been for more than two centuries. We are poised for future growth, thanks to our financial strength, outstanding talent, comprehensive product offerings, and exceptional personalized service, which truly differentiates us from the competition. We are committed to our vision of being the best bank and trust company in New England. Letter to Shareholders 2012 was an excellent year for Washington Trust, with our company’s strong operating performance resulting in record earnings. We continued to take advantage of marketplace dynamics that favor our unique strengths. As big banks reinvented themselves to become less complicated and small banks attempted to expand their business lines, we found ourselves in a familiar sweet spot. We are the bank of choice for companies large and small that turn to us for our significant capabilities, local agility, and can-do service culture. These attributes continue to distinguish our company and generate value for our shareholders. For the second consecutive year, we posted record net income – $35.1 million in 2012, up from $29.7 million in 2011. We earned $2.13 per diluted share, up 17% over 2011. All profitability measures increased, with return on average equity (ROE) reaching 11.97% for 2012, up from 10.61% for the previous year. Contributing to our success were the expansion of our branch and mortgage footprint and a growing awareness in an expanding market area of Washington Trust as one of the premier financial institutions in New England. While we recognize the uncertainties in the present economy, we are hopeful that the business climate locally and nationally will begin to show signs of recovery in 2013, however modest. In such an environment, we believe that we can expand on our successes by leveraging our statewide brand and taking advantage of business opportunities faster than our competitors. Consistency has been a hallmark of Washington Trust since its founding more than two centuries ago. We believe that the personalized service that we deliver to customers every day not only differentiates us from our competitors, but also contributes directly to the steady financial performance that our company has achieved. Our ability to customize solutions and turn things around quickly makes people want to deepen their relationship with us and take more advantage of the sophisticated services that we offer them. True to our roots as the nation’s oldest community bank, we continue to actively support the cities and towns where we work and live. Our “I ♥ RI” campaign celebrates the state that we’ve called home since 1800 while providing a platform for local businesses to showcase their products and services. The campaign reflects our fundamental belief that the success of our communities and our businesses is intertwined. For individuals, companies, municipalities, and non-profit organizations, Washington Trust is Rhode Island’s Bank of Choice. For people looking for a great place to work, we are an employer of choice, named again among Rhode Island’s “Best Places To Work” by Providence Business News. And for the investment community, we are a top-performing United States bank – the only Rhode Island bank named to Bank Director’s Scorecard and Keefe Bruyette & Woods Honor Roll of superior performers. None of these accolades would be possible without the talent and enthusiasm of our people. They make it possible for us to deliver a superior customer experience every day, which is at the heart of our success. We appreciate their efforts, as we do the support of shareholders. We are committed to continuing to grow your Corporation in a conservative and profitable manner. Thank you for giving us that privilege. Joseph J. MarcAurele Chairman, President and Chief Executive Officer 40 35 30 25 20 15 10 5 0 2.0 1.5 1.0 0.5 0.0 Shareholder Information Washington Trust Profile Washington Trust Bancorp, Inc. is the publicly-owned holding company of The Washington Trust Company (the Bank), a Rhode Island chartered commercial bank founded in 1800. Through the Bank and its other subsidiaries, Washington Trust offers a broad range of financial services, including wealth management, through its offices in Rhode Island, eastern Massachusetts and Connecticut. Annual Meeting of Shareholders Tuesday, April 23, 2013, 11:00 a.m., Westerly Public Library, 44 Broad Street, Westerly, Rhode Island 02891 Vote Your Proxy Online Or By Phone For your convenience, you can vote your shares online or by phone. Please have your proxy card available. INTERNET – Access www.voteproxy.com and follow the on-screen instructions. TELEPHONE – Call toll-free 800-PROXIES (800-776-9437) from any touch-tone telephone and follow the instructions. Stock Transfer and Dividend Disbursing Agent American Stock Transfer & Trust Company, 6201 15th Avenue, Brooklyn, NY 11219 800-852-0354 www.amstock.com The Corporation’s 2013 Proxy Statement, Form 10-K and Annual Report for 2012 are available online by visiting the Corporation’s website www.washtrust.com under Investor Relations – SEC Filings, or by calling the Corporation’s toll-free number 800-475-2265 extension 1566, or by email at investor.relations@washtrust.com. Auditors Counsel KPMG LLP, Providence, Rhode Island Goodwin Procter LLP, Boston, Massachusetts Market and Dividend Information Washington Trust’s common stock trades on the NASDAQ Global Select® Market under the symbol WASH. As of December 31, 2012, there were 16,379,771 shares outstanding and 1,836 shareholders of record. 2012 Quarters 1 2 3 4 Stock prices: High $26.76 $24.74 $27.75 $27.46 Low 23.01 22.53 23.85 23.50 Close 24.14 24.38 26.27 26.31 Dividend declared .23 .23 .24 .24 2011 Quarters 1 2 3 4 Stock prices: High $24.96 $24.00 $23.65 $24.72 Low 19.83 21.50 18.67 18.62 Close 23.74 22.97 19.78 23.86 Dividend declared .22 .22 .22 .22 30 25 20 15 10 5 0 1.0 0.8 0.6 0.4 0.2 0.0 Leading from a position of strength As the largest independent bank in Rhode Island and one of the premier bank and trust companies in New England, Washington Trust is looked to as a financial leader. In fact, leadership qualities define us in all aspects of our company. We believe it is our responsibility to lead – as trusted advisors to our customers, as a great place to work for our employees, and as a good corporate citizen, directly involved in the communities where we work and live. The confidence and enthusiasm that we bring to our leadership roles are rooted in our financial strength, which was evident throughout 2012: • For the year, our stock price was up 10% • Our capital ratios remained robust, continuing to exceed regulatory requirements • Our asset quality continues to be strong Solid financial performance throughout the year allowed us to generate value for our shareholders and pay an increased dividend – twice. It also enabled us to deliver consistent and exceptional personalized service to our customers, which truly sets Washington Trust apart from competitors. A core belief at our company is that when you do the right thing for customers, good financial results follow. Even in challenging economic times, we have been able to adhere to this maxim based on the strength of our balance sheet – to the benefit of customers and shareholders alike. Expanding to attract more customers We are committed to growing in a measured way to take advantage of our strong brand and enable more people to do business with us. Toward this end, in 2012 we opened two new Rhode Island offices: our third Cranston branch and a new mortgage office in Warwick. Like the two Cranston branches that preceded it, our new Plainfield Pike location was an immediate success and expanded our presence in north-central Rhode Island. Our new Warwick Home Loan Center is situated in central Rhode Island, with a highly visible location off of Route 95 – in effect, an excellent billboard for our brand. The office demonstrates our commitment to growing our mortgage business footprint statewide and beyond, and has enabled us to attract talented new originators to our ranks. In 2012, we also made it easier for people to do business with us with the introduction of our mobile banking platform. Now customers can bank with us anytime, anywhere – from their computer, phone, or tablet. Washington Trust’s ongoing expansion in Rhode Island reflects our commitment to the state and our conviction that there are good opportunities for all our lines of business statewide. We will continue to look for the right places and vehicles to increase the availability of our products and services. Growing across all lines of business Washington Trust delivered growth across all of its business lines in 2012. What’s our recipe for success? Our financial strength puts us in position to take advantage of new opportunities as they present themselves. And our agility as an organization gives us an edge in the marketplace – our decision-making is faster, our service more responsive and personalized. This translates into a consistently superior customer experience. Our balance sheet management contributed to our success, as well. We were able to grow net interest income and improve our margin despite a challenging rate environment. We also maintained outstanding credit quality through an adverse cycle. As Rhode Island’s largest independent bank, Washington Trust is leveraging its agility and speed of service delivery to gain market share. The talent and experience of our people, their accessibility, and their ability to get the job done differentiates us in a way that has meaning and value to our customers. It has been that way since our founding, and we look forward to sustaining our legacy of providing exceptional personalized service in 2013 and beyond. 2012 Highlights: • Mortgage origination production hit record levels – $782 million – as we continued to take advantage of a strong refinancing environment in Rhode Island, Connecticut, and Massachusetts. • Healthy commercial loan growth came at the expense of larger competitors, as we attracted new commercial real estate and C&I relationships in Rhode Island. • New cash management relationships – from both businesses and municipalities – provided valuable new transaction accounts. • Deposits grew to record levels and our deposit mix improved, due to increased marketing promotions, business development efforts, and new branch openings – we are now first in deposit market share among independent Rhode Island banks and third overall. • Checking relationships increased as we attracted low-cost deposits with highly successful retail promotions. • Wealth management revenues continue to be a major source of non-interest income, with record revenues of $29.6 million in 2012. Wealth management assets under administration stood at $4.2 billion at the end of 2012. Financial Highlights At or for the years ended December 31, 2012 2011 2010 (Dollars in thousands, except per share amounts) Financial Condition Total assets $3,071,884 $3,064,098 $2,909,525 Total securities 415,879 593,392 594,100 Total loans 2,294,003 2,147,159 1,995,638 Allowance for loan losses 30,873 29,802 28,583 Total deposits 2,312,631 2,126,315 2,036,330 Total shareholders’ equity 295,652 281,351 268,864 Book value per share 18.05 17.27 16.63 Total risk-based capital ratio 13.26% 12.86% 12.79% Equity to assets 9.62% 9.18% 9.24% Operating Results Net interest income $90,696 $84,955 $77,191 Provision for loan losses 2,700 4,700 6,000 Wealth management revenues 29,641 28,306 26,392 Net gains on loan sales and commissions on loans originated for others 14,092 5,074 4,052 Other noninterest income 21,481 19,384 18,029 Noninterest expense 102,338 90,373 85,311 Net income 35,074 29,724 24,051 Diluted earnings per common share 2.13 1.82 1.49 Cash dividends declared per share 0.94 0.88 0.84 Return on average assets 1.16% 1.02% 0.82% Return on average equity 11.97% 10.61% 9.09% Net interest margin (taxable equivalent basis) 3.29% 3.20% 2.93% Asset Quality Nonperforming assets to total assets 0.83% 0.81% 0.79% Allowance for loan losses to total loans 1.35% 1.39% 1.43% Net loan charge-offs to average loans 0.07% 0.17% 0.24% The information presented above is derived from the Corporation’s Annual Report on Form 10-K for the fiscal year ended December 31, 2012, as filed with the Securities and Exchange Commission. 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. Actual results, performance or achievements of Washington Trust may differ materially from those discussed in these forward-looking statements, as a result of, among other factors, the factors described under the caption “Risk Factors” in Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2012, as filed with the Securities and Exchange Commission and updated by our Quarterly Reports on Form 10-Q. You should carefully review all of these factors, and you should be aware that there may be other factors that could cause these differences. These forward-looking statements were based on information, plans and estimates at the date of this report, and Washington Trust assumes no obligation to update forward-looking statements to reflect changes in underlying assumptions or factors, new information, future events or other changes. Corporate Directory Washington Trust Bancorp, Inc. Board of Directors John J. Bowen, Chancellor, President and Chief Executive Officer, Johnson & Wales University Steven J. Crandall, Vice President, Ashaway Line & Twine Mfg. Co. Robert A. DiMuccio, CPA, Chairman, President and Chief Executive Officer, Amica Mutual Insurance Company Barry G. Hittner, Retired Attorney Katherine W. Hoxsie, CPA, Retired Vice President, Hoxsie Buick-Pontiac-GMC Truck, Inc. Joseph J. MarcAurele, Chairman, President and Chief Executive Officer, Washington Trust Bancorp, Inc. Kathleen E. McKeough, Retired Senior Vice President of Human Resources, GTECH Holdings Corporation Victor J. Orsinger II, Esq., Of Counsel, Orsinger Nardone Lallo & Thomsen H. Douglas Randall III, Chief Executive Officer, Randall, Realtors, Kinlin Grover Real Estate, Page Taft Real Estate, Pequot Commercial and Kinlin Grover Commercial Edwin J. Santos, Chairman, CharterCARE Health Partners Patrick J. Shanahan Jr., Former Chairman, President and Chief Executive Officer, First Financial Corp. John F. Treanor, Retired President and Chief Operating Officer, Washington Trust Bancorp, Inc. John C. Warren, Retired Chairman and Chief Executive Officer, Washington Trust Bancorp, Inc. Officers of the Corporation Joseph J. MarcAurele, Chairman, President and Chief Executive Officer David V. Devault, Senior Executive Vice President, Secretary and Chief Financial Officer Galan G. Daukas, Executive Vice President, Wealth Management Mark K. W. Gim, Executive Vice President and Treasurer The Washington Trust Company Directors’ Advisory Council Alcino G. Almeida, Gary P. Bennett, Charles C. Buffum, Richard A. Grills, Larry J. Hirsch, Joseph J. Kirby, Jacques de Laporte, Edward M. Mazze, James W. McCormick Jr., Thomas F. Moore, Brendan P. O’Donnell, Joseph H. Potter, Joyce Olson Resnikoff, Anthony J. Rose Jr., James P. Sullivan, Neil H. Thorp, William Blunt White As of publication date Corporate Directory The Washington Trust Company Joseph J. MarcAurele, Chairman, President and Chief Executive Officer Senior Management David V. Devault, Senior Executive Vice President, Secretary and Chief Financial Officer Stephen M. Bessette, Executive Vice President, Retail Lending Galan G. Daukas, Executive Vice President, Wealth Management Kristen L. DiSanto, Executive Vice President, Human Resources Mark K. W. Gim, Executive Vice President and Treasurer James M. Hagerty, Executive Vice President and Chief Lending Officer Barbara J. Perino, CPA, Executive Vice President, Operations and Technology Dennis L. Algiere, Senior Vice President, Chief Compliance Officer and Director of Community Affairs Carl M. Amaral, Senior Vice President, Small Business Banking Michael T. Clarkin, Senior Vice President and Corporate Sales Manager Elizabeth B. Eckel, Senior Vice President, Marketing Jeffrey J. Frenette, Senior Vice President, Technology Services Philip L. Friend, Senior Vice President, Retail Lending Debra A. Gormley, Senior Vice President, Retail Banking Russell W. Hahn, Senior Vice President and Business Development Officer Maria N. Janes, CPA, Senior Vice President and Controller Robert R. Kent Jr., Senior Vice President, Commercial Lending Team Leader Rogean B. Makowski, Senior Vice President, Wealth Management Client Services Mary M. McGoldrick, Senior Vice President and Director of Investments, Washington Trust Investors Mary E. Noons, Senior Vice President, Lending Support Services C. Scott Ostrowski, Senior Vice President, Internal Audit Harvey C. Perry II, Senior Vice President and Director of Non-Profit Resources Timothy M. Pickering, Senior Vice President, Commercial Real Estate Group Brenda H. Senak, Senior Vice President, Risk Management L. Peter Sheehan, Chief Operating Officer and Director of Investments, Washington Trust Investors Julia Anne M. Slom, Senior Vice President, Commercial Real Estate Group John P. Sullivan, Senior Vice President, Technology Weston Financial Group, Inc. Galan G. Daukas, Executive Managing Director John W. Filoon III, President and Chief Operating Officer Kerry P. Falco, Managing Director Maria A. Staffiere, Managing Director Ronald A. Sugameli, Managing Director and Chief Investment Officer Nicole M. Tremblay, Esq., Senior Vice President, Chief Compliance Officer As of publication date Washington Trust Locations Commercial Lending Offices Wealth Management Offices PROVIDENCE, RI 66, 68, 70 South Main Street Providence, RI 02903 401-654-4801 NARRAGANSETT, RI 20 Point Judith Road Narragansett, RI 02882 401-782-1000 WESTERLY, RI 23 Broad Street Westerly, RI 02891 401-348-1238 WELLESLEY, MA Weston Financial Group Wellesley Office Park 100 William Street, Suite 200 Wellesley, MA 02481 781-235-7055 Customer Service Center RI: 401-348-1200 CT: 860-443-1508 Toll-free: 800-475-2265 Website www.washtrust.com PROVIDENCE, RI 10 Weybosset Street, Suite 100 Providence, RI 02903 401-331-5090 WARWICK, RI 236 Centerville Road Warwick, RI 02886 401-739-2353 WESTERLY, RI 23 Broad Street Westerly, RI 02891 401-348-1200 Mortgage Offices WARWICK, RI 171 Service Avenue Warwick, RI 02886 401-681-4224 GLASTONBURY, CT * 180 Glastonbury Boulevard, Suite 107 Glastonbury, CT 06033 860-430-9900 BURLINGTON, MA* 25 Mall Road, Suite 408 Burlington, MA 01803 781-229-2004 SHARON, MA* One Merchant Street, Suite 102 Sharon, MA 02067 781-784-3089 *Operating as Washington Trust Mortgage Company Branch Offices HEADQUARTERS 23 Broad Street Westerly, RI 02891 401-348-1200 BLOCK ISLAND, RI Block Island Office Ocean Avenue Block Island, RI 02807 401-466-7710 CHARLESTOWN, RI Charlestown Office 4137 Old Post Road Charlestown, RI 02813 401-364-4000 CRANSTON, RI Oaklawn Avenue Office 1203 Oaklawn Avenue Cranston, RI 02920 401-732-0049 Plainfield Pike Office 2174 Plainfield Pike Cranston, RI 02921 401-383-8223 Reservoir Avenue Office 645 Reservoir Avenue Cranston, RI 02910 401-946-1004 EAST PROVIDENCE, RI East Providence Office 587 Taunton Avenue East Providence, RI 02914 401-383-8800 NARRAGANSETT, RI Bonnet Shores Office 885 Boston Neck Road Narragansett, RI 02882 401-782-4800 Sweet Meadows Office 20 Point Judith Road Narragansett, RI 02882 401-782-1000 NORTH KINGSTOWN, RI North Kingstown Office 7625 Post Road North Kingstown, RI 02852 401-295-4700 PROVIDENCE, RI Providence Office 156 Westminster Street Providence, RI 02903 401-421-3600 RICHMOND, RI Richmond Office 1200 Main Street Wyoming, RI 02898 401-539-2427 SOUTH KINGSTOWN, RI Wakefield Office 730 Kingstown Road Wakefield, RI 02879 401-782-4200 WARWICK, RI Centerville Road Office 236 Centerville Road Warwick, RI 02886 401-739-2353 Governor Francis Office 1473 Warwick Avenue Warwick, RI 02888 401-921-2500 WESTERLY, RI Main Office 23 Broad Street Westerly, RI 02891 401-348-1200 Franklin Street Office 126 Franklin Street Westerly, RI 02891 401-348-1367 McQuade’s Marketplace 106 Main Street Westerly, RI 02891 401-348-1201 MYSTIC, CT McQuade’s Marketplace 14 Clara Drive Mystic, CT 06355 860-572-2058 The Corporation has an Affirmative Action Plan and is an Equal Opportunity Employer. Washington Trust is also a member of the FDIC and an Equal Housing Lender. 

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