Washington Trust Bancorp
Annual Report 2017

Plain-text annual report

2 0 1 7 A n n u a l R e p o r t M e s s a g e t o S h a r e h o l d e r s banking, wealth management, and trust services – has been the key to our continued success, allowing us to generate a diverse stream of earnings in all economic cycles. We reached a record $3.2 billion in total deposits at year-end with solid increases in demand deposit accounts. Branch expansion contributed to deposit growth by helping us attract and build customer relationships in 2017 was another good year for Washington new markets. In November 2017, we opened Trust, as we reached a record level of total a branch in Coventry, RI, providing full-service loans, total deposits and wealth manage- banking and added convenience to customers ment assets under administration. Earnings and businesses in the central part of the state. were solid, as net income for the year ended While Washington Trust continued to rank December 31, 2017 totaled $45.9 million, third, behind Bank of America and Citizens, or $2.64 per diluted share. Income before in Rhode Island deposit market share, our income taxes for 2017 amounted to $77.6 expanded branch network and strong brand million, up by 13% over 2016. Capital levels reputation helps us compete against these remained healthy and continued to exceed larger, national institutions. regulatory requirements. Mortgage lending had another successful On December 22, 2017, the Tax Cuts and year, recording the second highest production Jobs Act (the “Tax Act”) was signed into law, level in Washington Trust’s 217-year history. permanently lowering the corporate federal While mortgage activity was steady through- income tax rate from 35% to 21%, effective out the region, our Massachusetts loan January 1, 2018. The enactment of the Tax production offices had an exceptionally good Act in 2017 required companies to revalue year. Personal service is a key part of our and reassess deferred tax assets and liabilities mortgage banking model and recent efforts reflecting the new federal income tax rate. to attract seasoned lending professionals As a result, in the fourth quarter of 2017, and implement new technology have helped Washington Trust’s net deferred tax assets improve our internal processing and the were written down by a non-cash charge of delivery of service to our customers. Mortgage $6.2 million, with a corresponding increase to banking generates significant revenues for the income tax expense. This write-down reduced Corporation, so future growth is dependent 2017 earnings per diluted share by $0.36. on developing new programs and strategies to broaden our customer base. In 2017 we Washington Trust’s overall performance con- introduced I Luv Rhode Island Community tinues to rank us high among banks of similar Lending, an innovative affordable housing size in both the Northeast region and nation- program designed to help low-to-moderate wide. Our unique business model – personal income borrowers achieve home ownership. banking, mortgage banking, commercial M e s s a g e t o S h a r e h o l d e r s c o n t ’ d Our commercial lending area had another One of the Corporation’s core values is Financial Officer and Secretary, after 31 years good year, generating new commercial and “community,” and Washington Trust (and our with Washington Trust. David played a key industrial loans and commercial real estate employees) actively supports the communities role in the Corporation’s growth and success deals throughout the region. Our commercial in which we live and work through financial over time and deserves our utmost apprecia- portfolio exhibited good diversity and our donations and voluntary support. In May tion for his personal and professional commit- credit quality remained pristine. The com- 2017, more than 100 employees participated ment and unparalled work ethic. mercial team works in close partnership with in the 1st Annual Washington Trust Statewide the cash management area to build client Beach Cleanup, beautifying eight Rhode Washington Trust begins a new chapter in relationships. In 2017, our cash management Island State beaches in preparation for the 2018 with a new executive leadership team at team attracted a significant number of new summer tourist season. We held our 17th the helm. Upon my retirement in March, I will commercial deposits from commercial and Annual Peanut Butter Drive to help stock the continue to serve as a member of Washing- institutional clients. local food banks’ shelves and feed hungry ton Trust’s board of directors, Ned Handy will families. Our Charitable Foundation contribut- assume my position as Chairman and Chief Wealth management had a record 2017, as ed to a number of notable causes, including Executive Officer, and Mark Gim will become wealth management revenues amounted to the Station Fire Memorial Foundation and President and Chief Operating Officer. They an all-time high $39.3 million. A robust stock the Westerly Higher Education and Job Skills will be joined by Ron Ohsberg, who succeed- market and market appreciation contribut- Center. ed to a record $6.7 billion in assets under ed David Devault. I am confident that Ned, Mark, Ron, and the entire leadership team administration at year-end. Throughout 2017, In appreciation of our employees’ hard work will continue to guide the Corporation by our wealth management and technology and dedication, and as a result of the antici- the same core values and principles that have teams worked diligently to implement and pated reduction in corporate taxes from the been key to our success for more than 217 test a new integrated wealth management Tax Act, Washington Trust provided special years. We remain committed to our custom- platform, which will be introduced in April employee compensation enhancements in ers, employees, and shareholders and thank 2018. The platform features a portal which January 2018. you for your continued support. will provide clients with a comprehensive view of their investment accounts. The portal is Washington Trust received numerous acco- accessible both online and through a mobile lades both locally and nationally. We were application and promises to deliver positive named one of the Best Places to Work in client experiences. Rhode Island by Providence Business News for the 7th consecutive year. We received the We undertook several key technological Exemplary Worksite Health Award from Blue initiatives in 2017, as we sought to enhance Cross & Blue Shield of Rhode Island and the the customer experience across all delivery Greater Providence Chamber of Commerce channels, reduce enterprise risk and improve for effective programs encouraging employ- internal processes. In October 2017, a team ee health and well-being. Keefe, Bruyette & of more than 100 employees successfully Woods, Inc. named Washington Trust Ban- conducted a data migration of our in-house corp, Inc. to its “Bank Honor Roll” of superior core operating system to an externally hosted performers for the 6th consecutive year. environment. The spirit of cooperation among the team was critical to ensuring the project In September 2017, we announced the was completed on time and on budget. planned retirement in January 2018 of David Devault, who served as Vice Chair, Chief Joseph J. MarcAurele Chairman and Chief Executive Officer* Washington Trust’s New Executive Leadership Team, pictured left to right: Mark Gim, President and Chief Operating Officer; Ned Handy, Chairman and Chief Executive Officer; and Ron Ohsberg, Senior Executive Vice President, Chief Financial Officer and Treasurer. F i n a n c i a l H i g h l i g h t s Net Income Cash Dividends Declared Per Share $43.5 $46.5 $45.9 $1.36 $1.46 $1.54 2015 2016 2017 2015 2016 2017 In Millions In Dollars Total Revenues Total Loans Total Deposits $162.3 $175.6 $184.3 $3.0 $3.2 $3.4 $2.9 $3.1 $3.2 2015 2016 2017 2015 2016 2017 2015 2016 2017 In Millions Year-end; In Billions Year-end; In Billions Mortgage Banking Revenue Other Wealth Management Revenues Net Interest Income Consumer Residential Commercial Time Deposits Money Market & Savings Demand & NOW Mortgage Originations $758.7 $865.3 $852.6 Wealth Management Assets Under Administration $5.8 $6.1 $6.7 2015 2016 2017 2015 2016 2017 Including Brokered Loans as Agent; In Millions Year-end; In Billions F i n a n c i a l H i g h l i g h t s c o n t ’ d Note: Font and layout of the information in this file are to be determined by E. Eckel. Financial Highlights Dollars in thousands, except per share amounts 2017 At or for the years ended December 31, 2014 2015 2016 2013 Financial Condition Total assets Total securities Total loans Allowance for loan losses Total deposits Total shareholders’ equity Book value per share Total risk-based capital ratio Equity to assets Operating Results Net interest income Provision for loan losses Wealth management revenues Mortgage banking revenues Income before income taxes Income tax expense Net income Diluted earnings per common share Cash dividends declared per share Return on average assets Return on average equity Net interest margin (taxable equivalent basis) Asset Quality Nonperforming assets to total assets Total past due loans to total loans Allowance for loan losses to total loans Net loan charge-offs to average loans $4,529,850 793,495 3,374,071 26,488 3,242,707 413,284 23.99 12.45% 9.12% $4,381,115 755,545 3,234,371 26,004 3,063,752 390,804 22.76 12.26% 8.92% $3,771,604 395,067 3,013,127 27,069 2,934,255 375,388 22.06 12.58% 9.95% $3,586,874 382,884 2,859,276 28,023 2,754,818 346,279 20.68 12.56% 9.65% $3,188,867 422,808 2,462,884 27,886 2,505,321 329,646 19.84 13.29% 10.34% $119,531 2,600 39,346 11,392 77,640 31,715 45,925 2.64 1.54 1.04% 11.26% 2.93% $110,478 5,650 37,569 13,183 68,854 22,373 46,481 2.70 1.46 1.16% 11.96% 3.02% $103,982 1,050 35,416 9,901 64,343 20,878 43,465 2.54 1.36 1.19% 12.00% 3.12% $99,505 1,850 33,378 7,152 59,823 18,999 40,824 2.41 1.22 1.23% 11.87% 3.28% $91,785 2,400 31,825 13,293 52,680 16,527 36,153 2.16 1.03 1.17% 11.65% 3.28% 0.34% 0.59% 0.79% 0.06% 0.53% 0.76% 0.80% 0.21% 0.58% 0.58% 0.90% 0.07% 0.48% 0.63% 0.98% 0.07% 0.62% 0.89% 1.13% 0.23% Stock Transfer and Dividend Disbursing Agent: American Stock Transfer & Trust Company 6201 15th Avenue Brooklyn, NY 11219 800-852-0354 www.astfinancial.com The Corporation’s 2018 Proxy Statement, Form 10-K and Annual Report for 2017 are available online by visiting the Corporation’s website www.washtrustbancorp.com/proxy, by calling the Corporation’s toll-free number 800-475-2265 extension 1566, or by email at investor.relations@washtrust.com. Auditors: KPMG, LLP, Providence, Rhode Island Counsel: Goodwin Procter LLP, Boston, Massachusetts 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, 2017, 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. L e a d e r s h i p 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 Edward O. Handy III, Chairman and Chief Executive Officer*, Washington Trust Bancorp, Inc. Barry G. Hittner, Esq., Retired Attorney Katherine W. Hoxsie, CPA, Retired Vice President, Hoxsie Buick-Pontiac-GMC Truck, Inc. Joseph J. MarcAurele, Retired Chairman 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., Law Office of Victor J. Orsinger II H. Douglas Randall III, Chief Executive Officer, The Randall Family of Companies, Kinlin Grover, Pequot Commercial, Page Taft & Randall Edwin J. Santos, Chairman, Prospect CharterCARE, LLC John F. Treanor, Retired President and Chief Operating Officer, Washington Trust Bancorp, Inc. Officers of the Corporation Joseph J. MarcAurele, Retired Chairman and Chief Executive Officer* Edward O. Handy III, Chairman and Chief Executive Officer* Mark K. W. Gim, President & Chief Operating Officer* Ronald S. Ohsberg, Senior Executive Vice President, Chief Financial Officer and Treasurer Kristen L. DiSanto, Senior Executive Vice President, Chief Human Resources Officer and Corporate Secretary Maria N. Janes, CPA, Executive Vice President and Controller Debra A. Gormley, Executive Vice President, Retail Banking James M. Hagerty, Executive Vice President and Chief Lending Officer Maria N. Janes, CPA, Executive Vice President and Controller Mary E. Noons, Executive Vice President, Retail Lending Kathleen A. Ryan, Esq., Executive Vice President and Chief Wealth Management Officer Dennis L. Algiere, Senior Vice President, Chief Compliance Officer and Director of Community Affairs Colleen O. Anderson, Senior Vice President, Wealth Management Support Services Michael T. Clarkin, Senior Vice President and Corporate Sales Manager Joseph M. Confessore, Senior Vice President and Team Leader, Commercial Banking Laura L. Davis, Senior Vice President, Lending Support Services Elizabeth B. Eckel, Senior Vice President, Marketing Alfred L. Grant, Senior Vice President, Mortgage Origination Barbara K. Hart, Senior Vice President, Credit Risk Robert R. Kent Jr., Senior Vice President and Team Leader, Commercial Banking Thomas H. Klump, Senior Vice President and Chief Information Officer James A. Mignone, Senior Vice President and Chief Information Security Officer C. Scott Ostrowski, Senior Vice President, Internal Audit Timothy M. Pickering, Senior Vice President, Commercial Real Estate Group L. Peter Sheehan, Senior Vice President, Wealth Management Strategy and Investments Julia Anne M. Slom, Senior Vice President and Team Leader, Commercial Real Estate Group Richard T. Tjader, Senior Vice President and Director of Project Management The Washington Trust Company Directors’ Advisory Council Alcino G. Almeida Gary P. Bennett Larry J. Hirsch Joseph J. Kirby Edward M. Mazze James W. McCormick Jr. Thomas F. Moore Brendan P. O’Donnell Joseph H. Potter Joyce Olson Resnikoff Patrick J. Shanahan Jr. James P. Sullivan Neil H. Thorp John C. Warren William Blunt White Weston Financial Group, Inc. John W. Filoon III, President and Chief Operating Officer Kerry P. Falco, CPA, Managing Director Maria A. Staffiere, Managing Director Ronald A. Sugameli, Esq., Managing Director and Chief Investment Officer Nicole M. Tremblay, Esq., Senior Vice President and Chief Compliance Officer Senior Management of The Washington Trust Company Joseph J. MarcAurele, Retired Chairman and Chief Executive Officer* Edward O. Handy III, Chairman and Chief Executive Officer* Mark K. W. Gim, President and Chief Operating Officer* Ronald S. Ohsberg, Senior Executive Vice President, Chief Financial Officer and Treasurer Kristen L. DiSanto, Senior Executive Vice President, Chief Human Resources Officer and Corporate Secretary William K. Wray Sr., Senior Executive Vice President and Chief Risk Officer Halsey Associates, Inc. James S. Zoldy Jr., President Kenneth J. Julian, Executive Vice President *As of March 2, 2018 L o c a t i o n s 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 East Side Office 229 Waterman Street Providence, RI 02906 401-443-2800 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 Wealth Management Offices PROVIDENCE, RI 10 Weybosset Street, Suite 200 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 NEW HAVEN, CT Halsey Associates One Century Tower 265 Church Street, Suite 1006 New Haven, CT 06510 203-772-0740 Customer Solutions Center RI: 401-348-1200 CT: 860-443-1508 Toll-free: 800-475-2265 Websites www.washtrustbancorp.com www.washtrust.com www.washtrustmortgage.com www.washtrustwealth.com www.westonfinancial.net www.halseyassociates.com Ticker Symbol NASDAQ: WASH MYSTIC, CT McQuade’s Marketplace 14 Clara Drive Mystic, CT 06355 860-572-2058 Commercial Banking Offices 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 DARIEN, CT* 1025 Boston Post Road Darien, CT 06820 203-309-5571 GLASTONBURY, CT* 180 Glastonbury Boulevard, Suite 107 Glastonbury, CT 06033 860-430-9900 BRAINTREE, MA* 25 Braintree Hill Office Park, Suite 309 Braintree, MA 02184 781-428-7970 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 WELLESLEY, MA* 62 Walnut Street, Suite 102 Wellesley, MA 02481 781-489-3175 *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 COVENTRY, RI Coventry Office 732 Tiogue Avenue Coventry, RI 02816 401-262-3690 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 Rumford Office 330 Newport Avenue Rumford, RI 02916 401-228-6555 JOHNSTON, RI Johnston Office 1383 Atwood Avenue Johnston, RI 02919 401-654-4837 NARRAGANSETT, RI Bonnet Shores Office 885 Boston Neck Road Narragansett, RI 02882 401-782-4800 Parent Company of The Washington Trust Company The Corporation has an Affirmative Action Plan and is an Equal Opportunity Employer. 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. Washington Trust is also a member of the FDIC and an Equal Housing Lender. 

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