Washington Trust Bancorp
Annual Report 2018

Plain-text annual report

2 0 1 8 A n n u a l R e p o r t L e a d e r s h i p Washington Trust Bancorp, Inc. Board of Directors John J. Bowen, Chancellor Emeritus, 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. Constance A. Howes, Esq., Retired Healthcare Executive 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 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 The Washington Trust Company Directors’ Advisory Council Alcino G. Almeida Gary P. Bennett Larry J. Hirsch Barry G. Hittner 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 F i n a n c i a l H i g h l i g h t s Net Income $68.4 Diluted Earnings Per Common Share $3.93 $46.5 $45.9 $2.70 $2.64 2016 2017 2018 2016 2017 2018 In Millions Cash Dividends Declared Per Share $1.76 $1.46 $1.54 2016 2017 2018 Total Loans $3.7 $3.2 $3.4 8% 37% 55% Revenues $184.3 $194.4 $175.6 7% 5% 20% 68% 2016 2017 2018 In Millions Net Interest Income Mortgage Banking Revenue Wealth Management Revenues Other Total Deposits $3.1 $3.2 $3.5 36% 29% 35% 2016 2017 2018 Year-end; In Billions Commercial Residential Consumer 2016 2017 2018 Year-end; In Billions Money Market & Savings Demand & NOW Time Deposits L e t t e r t o S h a r e h o l d e r s Washington Trust delivered strong 2018 results as we reported record earnings, reached $5 billion in total assets for the first time in our history, and posted all-time high levels of deposits and loans. These achievements are testaments to our continued success in growing our key business lines and expanding our presence throughout the region. Our record 2018 performance once again places us among the top mid- sized banks in the Northeast and nationwide. Total deposits reached $3.5 billion at year-end, thanks to effective product promotions, cash management efforts, and continued branch ex- pansion. Deposit generation is critical to future loan growth and is highly competitive in our marketplace. We acted quickly when the Federal Reserve increased interest rates, offered attractive certificates of deposit, and garnered a healthy share of new deposits. Branch expansion has also been a key source of new deposits and we deployed this strategy once again in January 2019 by opening a branch in North Providence, Rhode Island. Washington Trust continues to rank third in deposit market share in Rhode Island, behind two much larger, nationally-char- tered financial institutions. Double-digit percentage growth in both residential mortgages and commercial loans brought us to $3.7 billion in total loans at year-end. Commercial loans topped the $2 billion mark for the first time in our 218-year history, led by solid production from our commercial real es- tate and commercial and industrial areas. Our mortgage banking area had solid production throughout the year, despite four Federal Reserve interest rate hikes in 2018, which slowed homebuying nationwide. We implemented new programs and processes to ensure that our mortgage banking model is sustainable and will continue to serve as a good source of revenue for the Company. Assets under management stood at $5.9 billion at December 31, 2018. Recent market volatility and economic uncertainty has created many challenges for both investors and financial advisors. We remain committed to working with our clients to advise them about risks and op- portunities, and to help them plan accordingly. In 2018, we introduced a new client portal for our Wealth Management Rhode Island clients, providing them with access to their accounts online and through mobile devices. This technology, coupled with a new client service team approach dedicated to providing personal attention from portfolio, investment, and key team members, has helped improve the overall client experience. As always, Washington Trust and its employees remain committed to the communities in which we live and work. Our employees continue to log hundreds of volunteer hours at organizations throughout our region, and they once again contributed to making Washington Trust one of the largest supporters of The United Way of Rhode Island. Washington Trust continues to be recognized as one of the best banks in its class, being named American Banker’s “Top-Performing Mid-Ti- er Bank” for the 5th consecutive year, earning Bank Director’s “Bank Performance Score Card” for the 6th consecutive year, and receiving one of Providence Business News’ “Best Places To Work” award for the 8th consecutive year. We are grateful for the ongoing support of our shareholders and were pleased to introduce the Investor Choice Dividend Reinvestment & Direct Stock Purchase Plan earlier this year. This enhanced dividend reinvestment plan provides our shareholders with greater flexibility and additional benefits, including the ability to purchase additional Washington Trust shares through American Stock Transfer, with no fees or broker’s commissions. We encourage you to learn more about the Plan to take full advantage of the many benefits it offers. As always, thank you for your investment in Washington Trust. It is a privilege to lead your company. Sincerely, Edward O. Handy III Chairman & Chief Executive Officer Q u e s t i o n & A n s w e r In March 2018, Edward “Ned” Handy was appointed Washington Trust’s new Chairman and Chief Executive Officer and Mark Gim was named the corporation’s President and Chief Operating Officer. Here are a few of their thoughts on Washington Trust and the financial services industry. Why should a customer bank with Washington Trust? Ned Handy: At Washington Trust you will get solutions tailored to your needs at every stage of your life, from people who truly care about your financial security. We listen, provide solutions, and ensure timely deliv- ery across a broad array of capabilities. We recognize that every custom- er is interested in building financial independence and wealth, and it’s our job to help them achieve that goal. Mark Gim: We’ve been trusted advisors for generations and have continued to stay true to our core values of quality, integrity, and community. At the same time, we recognize that the world around us will change more in the next 10 years than it did in the last two centuries. We are vigilant about making sure our solutions are relevant and deliver value. What makes Washington Trust different from other banks? Ned: We offer the comprehensive services available at larger financial institutions with the flexibility and responsiveness provided by smaller banks and credit unions. But, most importantly, we’re different because of our people. Our employees are passionate about delivering solutions to help our customers reach their financial goals. Mark: In a world where large online corporations determine what a customer needs based on an algorithm, we believe human interaction and expert guidance are more important than ever. “... We consistently deliver outstanding products and individualized services to our customers, with the belief that good results will follow ...” - Mark Gim, Washington Trust President & COO How does Washington Trust employ technology to service its customers? Ned: We provide the banking conveniences that our customers want and expect in today’s digital world and will continue to invest in technology that enhances the customer experience. However, technology has not replaced the personalized service our customers receive at Washington Trust. Mark: Our business model has become even stronger and more sustainable be- cause we offer both a digital and personal experience. Many people still want to sit face-to-face with a banker when they are making a significant financial decision such as buying a home or planning for retirement. Our employees are trusted advisors who take the time to understand our customers’ needs and then tailor a solution specifically for them. Technology gives customers greater accessibility to conduct banking and monitor their finances after hours. Washington Trust has had significant expansion in the past 20 years. What are the Corporation’s future growth plans? Ned: We have the capacity to grow all our business lines well into the future. Branch expansion has been a proven strategy for attracting new customers and we will continue to open branches in the Rhode Island communities where we have a strong brand reputation. Q u e s t i o n & A n s w e r Mark: Another component of our growth strategy is our ability to deepen existing customer relationships. In January 2019, we launched a Private Client Group dedicated to offering a wide range of financial solutions to business owners, executives, and high net worth individuals. They will provide tailored solutions from a single touchpoint while creating a holistic client experience. Washington Trust has consistently delivered solid shareholder value over time. What’s the secret? Ned: I don’t think there is a secret as much as it is our focus. We have been committed to improving our internal processes and overall efficiency, while enhancing the customer experience. This focus has created genuine value. Mark: It’s not always easy to improve profits. However, we consistently deliver outstanding products and individualized services to our customers, with the belief that good results will follow…and that proved true again in 2018. Washington Trust has been recognized as a top employer for several years. What do you attribute that to? Ned: We have been named one of the Best Places to Work in Rhode Island for eight consecutive years by the Providence Business News. I think that reflects how our people enjoy their jobs and appreciate the opportunities we have provided them with to advance their careers and maintain a good work-life balance. Mark: There’s a strong link between making a difference in a customer’s life and enjoying your job. If our employees come to work each day with the intent of making our customers happy, everyone benefits – the customer, the employee, the company, and the shareholder. We win by solving the customer’s financial needs, not by pushing product. That has been true since we opened our doors in 1800. Washington Trust has a long history but has successfully remained true to its community banking roots. Why is that important? Ned: Community is one of our core values. Our success is intertwined with the communities we serve, so we have a huge vested interest in helping them grow and prosper. Mark: It’s worth noting that most of our employees volunteer each year. We’re attracting people who want to give something back to their community and are pleased to work for a company whose values align with their own. Whether our employees are offering financial guidance, serving on boards, or rolling up their sleeves and pitching in on projects that are important to them, we’re here to meet the needs of our neighbors. “We recognize that every customer is interested in building financial independence and wealth, and it’s our job to help them achieve that goal.” - Ned Handy, Washington Trust Chairman & CEO Washington Trust is celebrating its 219th year in business. What’s the significance of that milestone? Ned: We’ve been around for a long time and people like doing business with the oldest community bank in the United States. History is an important differentiator and will remain so, but only if our products and services are attuned to our customers’ needs. Mark: Our strength and stability for more than 200 years, in good times and bad, gives people the peace of mind knowing that we’ve seen it all and the confidence that we will be here to help them in the future. F i n a n c i a l H i g h l i g h t s In millions, except per share and ratio data 2018 2017 2016 At or for the years ended December 31, 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 Other noninterest income Total noninterest expenses 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 $5,010.8 938.2 3,680.4 27.1 3,524.0 448.2 25.90 12.56% 8.94% $132.3 1.6 38.3 10.4 13.5 106.2 86.7 18.3 68.4 3.93 1.76 1.46% 16.20% 3.01% 0.28% 0.37% 0.74% 0.03% $4,529.9 793.5 3,374.1 26.5 3,242.7 413.3 23.99 12.45% 9.12% $119.5 2.6 39.3 11.4 14.1 104.1 77.6 31.7 45.9 2.64 1.54 1.04% 11.23% 2.93% 0.34% 0.59% 0.79% 0.06% $4,381.1 755.5 3,234.4 26.0 3,063.8 390.8 22.76 12.26% 8.92% $110.5 5.7 37.6 13.2 14.4 101.1 68.9 22.4 46.5 2.70 1.46 1.16% 11.94% 3.02% 0.53% 0.76% 0.80% 0.21% 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, 2018, 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. S h a r e h o l d e r I n f o r m a t i o n 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 2019 Proxy Statement, Form 10-K and Annual Report for 2018 are available online by visiting the Corporation’s website ir.washtrust.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 Investor Choice Dividend Reinvestment & Direct Stock Purchase and Sale Plan • Apply cash dividends towards the purchase of additional WASH shares with no minimum amount, and without a fee or broker’s commission. • Purchase additional WASH shares through AST without a fee or broker’s commission: - Invest as little as $25 or as much as $10,000 per transaction - Purchase shares by check or by direct debit of your bank account - Make a one-time investment, or set up recurring transfers from your bank account - Invest any dollar increment you choose - no need to purchase whole shares - Make your investment at any time • Sell or transfer WASH shares held in the Plan directly through AST, without going through an outside broker. See enclosed brochure for applicable fees. • Complete share transactions through AST’s secure online website. • Deposit WASH shares you currently own in stock certificate form into the Plan for safekeeping. • Access your WASH shareholder account via AST’s secure online client portal to view statements, tax forms, transaction history, and more. Visit www.astfinancial.com, or contact our Plan Administrator at 800-852-0354 for more information. E x e c u t i v e L e a d e r s h i p The Washington Trust Company 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 Debra A. Gormley, Executive Vice President and Chief Retail Banking Officer 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, Chief Retail Lending Officer 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 Elizabeth B. Eckel, Senior Vice President, Chief Marketing and Communications Officer C. Scott Ostrowski, Senior Vice President and Chief Audit Executive As of publication date On the cover Ned Handy, Washington Trust Chairman and CEO, was joined by more than 50 Washington Trust executive leaders, senior managers, and employees to ring the NASDAQ opening bell and celebrate 218 years of service as the oldest community bank in the nation. Founded in 1800, Washington Trust was already 171 years old when, in 1971, NASDAQ began trading as the world’s first electronic stock market. 13 years later, in 1984, Washington Trust Bancorp, Inc. started trading on the NASDAQ market under the symbol WASH. Photography courtesy of Libby Greene/Nasdaq, Inc. 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 NORTH PROVIDENCE, RI North Providence Office 1588 Mineral Spring Avenue North Providence, RI 02904 401-473-2921 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 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 ir.washtrust.com www.washtrust.com www.washtrustmortgage.com www.washtrustwealth.com www.westonfinancial.net www.halseyassociates.com Ticker Symbol NASDAQ: WASH 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 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 GLASTONBURY, CT* 200 Glastonbury Boulevard, Suite 203 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 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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