UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
(Mark One)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1995
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or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from ____________________ to _____________________
Commission file Number 0-13091
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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
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (401) 348-1200
--------------------
Securities registered pursuant to Section 12 (b) of the Act:
Name of each exchange on
Title of each class which registered
NONE NONE
- ---------------------- -----------------------
Securities registered pursuant to Section 12 (g) of the Act:
COMMON STOCK, $.0625 PAR VALUE
- -------------------------------------------------------------------------------
(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. [ X ] Yes [ ] No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of voting stock held by non-affiliates of the
registrant was $80,652,096 at March 18, 1996 which includes $7,687,792 held
by The Washington Trust Company under trust agreements and other instruments.
The number of shares of common stock of the registrant outstanding as of
March 18, 1996 was 2,880,432.
Page 1 of 92
Exhibit Index page 23
DOCUMENTS INCORPORATED BY REFERENCE
1. Portions of the Registrant's 1995 Annual Report to Shareholders. (Parts I,
II and IV)
2. Portions of the Registrant's Proxy Statement dated March 18, 1996 for the
1996 Annual Meeting of Shareholders. (Part III).
===============================================================================
FORM 10-K
WASHINGTON TRUST BANCORP, INC.
For the Year Ended December 31, 1995
TABLE OF CONTENTS
-----------------
Description Page Number
--------------- -----------
Part I
- ------
Item 1 - Business 3
Item 2 - Properties 16
Item 3 - Legal Proceedings 17
Item 4 - Submission of Matters to a Vote of Security Holders 17
Executive Officers of the Registrant 18
Part II
- -------
Item 5 - Market for the Registrant's Common Stock
and Related Stockholder Matters 20
Item 6 - Selected Financial Data 21
Item 7 - Management's Discussion and Analysis of Financial
Condition and Results of Operations 21
Item 8 - Financial Statements and Supplementary Data 21
Item 9 - Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 21
Part III
- --------
Item 10 - Directors and Executive Officers of the Registrant 22
Item 11 - Executive Compensation 22
Item 12 - Security Ownership of Certain Beneficial Owners and
Management 22
Item 13 - Certain Relationships and Related Transactions 22
Part IV
- -------
Item 14 - Exhibits, Financial Statement Schedules and Reports
on Form 8-K 23
Signatures 24
- ----------
-2-
PART I
------
ITEM 1. BUSINESS
- ----------------
Washington Trust Bancorp, Inc.
- ------------------------------
Washington Trust Bancorp, Inc. (the "Corporation") is a publicly-owned,
registered bank holding company, organized in 1984 under the laws of the state
of Rhode Island, whose subsidiaries are permitted to engage in banking and other
financial services and businesses. The Corporation conducts its business
through its wholly-owned subsidiary, The Washington Trust Company (the "Bank"),
a Rhode Island chartered commercial bank. The deposits of the Bank are insured
by the Federal Deposit Insurance Corporation ("FDIC"), subject to regulatory
limits.
The Corporation was formed in 1984 under a plan of reorganization in which
outstanding common shares of The Washington Trust Company were exchanged for
common shares of Washington Trust Bancorp, Inc. At December 31, 1995 the
Corporation had total consolidated assets of $548 million, deposits of $468
million and equity capital of $53 million.
The Washington Trust Company
- ----------------------------
The Washington Trust Company was originally chartered in 1800 as the Washington
Bank and is the oldest banking institution headquartered in its market area.
Its current corporate charter dates to 1902. See "Market Area and Competition"
below for further information.
A broad range of financial services are provided by the Bank, including:
- - Residential mortgages - Commercial and consumer demand deposits
- - Commercial loans - Savings, NOW and money market deposits
- - Construction loans - Certificates of deposit
- - Consumer installment loans - Retirement accounts
- - Home equity lines of credit - Cash management services
- - VISA and Mastercard accounts - Safe deposit boxes
- - Merchant credit card services - Trust and investment services
Automated teller machines (ATM's) are located at each of the Bank's six banking
offices. The Bank is a member of the NYCE, Plus and Cashstream ATM networks.
Data processing for most of the Bank's deposit and loan accounts and other
applications is conducted internally using owned equipment. Application
software is primarily obtained through purchase or licensing agreements.
The Bank's Trust and Investment Department provides fiduciary services as
trustee under wills and trust agreements; as executor or administrator of
estates; as a provider of agency and custodial investment services to
individuals and institutions; and as a trustee for employee benefit plans. The
market value of total trust assets amounted to $467 million as of December 31,
1995.
-3-
The Bank's primary source of income is net interest income, the difference
between interest earned on interest-earning assets and interest paid on
interest-bearing deposits and other borrowed funds. Sources of noninterest
income include fees for management of customer investment portfolios, trusts and
estates, service charges on deposit accounts, merchant processing fees and other
banking-related fees. Noninterest expenses include the provision for loan
losses, salaries and employee benefits, occupancy, equipment, office supplies
deposit taxes and assessments, foreclosed property costs and other
administrative expenses.
The following is a summary of the relative amounts of income producing functions
as a percentage of gross operating income during the past five years:
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
Interest and fees on:
Residential real estate loans 29% 31% 33% 37% 37%
Commercial and other loans 33 32 30 31 33
Installment and consumer loans 10 9 8 9 10
---- ---- ---- ---- ----
Total loan income 72 72 71 77 80
Interest and dividends on securities 13 13 13 9 7
Trust income 7 7 7 6 5
Other noninterest income 8 8 9 8 8
---- ---- ---- ---- ----
Gross operating income 100% 100% 100% 100% 100%
==== ==== ==== ==== ====
The percentage of gross income derived from interest and fees on loans was 72%
in 1995, down from a five-year high of 80% in 1991, primarily as a result of the
lower interest rate environment that existed in 1993, 1994 and 1995.
Market Area and Competition
- ---------------------------
The Bank's market area includes Washington County and a portion of Kent County
in southern Rhode Island as well as a portion of New London County in
southeastern Connecticut. The Bank's six banking offices are located in the
following Rhode Island communities:
- Westerly (2) - Charlestown - New Shoreham (Block Island)
- Richmond - Narragansett
The Bank's offices in Charlestown and on Block Island are the only bank
facilities in those communities. The Block Island office was acquired from
another Rhode Island bank in 1984. The Charlestown office was opened in 1988
and the Narragansett office was opened in 1989. Plans to construct a new branch
facility in North Kingstown, Rhode Island are currently in process.
The Bank faces strong competition from branches of major Rhode Island and
regional commercial banks, local branches of certain Connecticut banks, as well
as various credit unions, savings institutions and, to some extent, finance
-4-
companies. The principal methods of competition are through interest rates,
financing terms and other customer conveniences. The Washington Trust Company
had 36% of total deposits reported by financial institutions for banking offices
within its market area as of June 30, 1994. The two closest competitors held
16% each, and the third closest competitor held 6% of total deposits in the
market area. The Corporation believes that being the largest commercial banking
institution headquartered within the market area provides a competitive
advantage over other financial institutions. The Bank has a marketing
department which is responsible for the review of existing products and services
and the development of new products and services.
Employees
- ---------
As of December 31, 1995 the Corporation employed approximately 233 full-time and
55 part-time employees. Management believes that its employee relations are
good.
Supervision and Regulation
- --------------------------
General - The business in which the Corporation and the Bank are engaged is
subject to extensive supervision, regulation, and examination by various bank
regulatory authorities and other agencies of federal and state government. The
supervisory and regulatory activities of these authorities are often intended
primarily for the protection of customers or are aimed at carrying out broad
public policy goals that may not be directly related to the financial services
provided by the Corporation and the Bank, nor intended for the protection of the
Corporation's shareholders. Proposals to change regulations and laws which
affect the banking industry are frequently raised at the federal and state
level. The potential impact on the Corporation of any future revisions to the
supervisory or regulatory structure cannot be determined.
The Corporation and the Bank are required by various authorities to file
extensive periodic reports of financial and other information and such other
reports as the regulatory and supervisory authorities may require. The
Corporation is also subject to the reporting and other requirements of the
Securities Exchange Act of 1934.
The Corporation is a bank holding company registered under the Bank Holding
Company Act of 1956, as amended (the "BHC Act"). As a bank holding company, the
activities of the Corporation are regulated by the Board of Governors of the
Federal Reserve System (the "Federal Reserve Board"). The BHC Act requires that
the Corporation obtain prior approval of the Federal Reserve Board to acquire
control over a bank or certain nonbank entities and restricts the activities of
the Corporation to those closely related to banking. Federal law also regulates
transactions between the Corporation and the Bank, including loans or extensions
of credit.
The Bank is subject to the supervision of, and examination by, the FDIC and the
State of Rhode Island. The Washington Trust Company is also subject to various
Rhode Island business and banking regulations.
Federal Deposit Insurance Corporation Improvement Act of 1991 (FDICIA) - FDICIA
was enacted in December 1991 and has resulted in extensive changes to the
federal banking laws. Among other things, FDICIA requires the federal banking
-5-
regulators to take prompt corrective action with respect to depository
institutions that do not meet minimum capital requirements.
FDICIA established five capital tiers, ranging from "well-capitalized" to
"critically undercapitalized." A depository institution is well-capitalized if
it significantly exceeds the minimum level required by regulation for each
relevant capital measure. Under FDICIA, an institution that is not well-
capitalized is generally prohibited from accepting brokered deposits and
offering interest rates on deposits higher than the prevailing rate in its
market. In addition, "pass through" deposit insurance coverage may not be
available for certain employee benefit accounts. At December 31, 1995, the
Bank's capital ratios placed it in the well-capitalized category.
Another primary purpose of FDICIA was to recapitalize the Bank Insurance Fund
(BIF). The FDIC adopted a risk-related premium system for the assessment period
beginning January 1, 1993. Under this new system, each institution's assessment
rate is based on its capital ratios in combination with a supervisory evaluation
of the risk the institution poses to the BIF. Banks deemed to be well-
capitalized and who pose the lowest risk to the BIF will pay the lowest
assessment rates, while undercapitalized banks, who present the highest risk,
will pay the highest rates.
FDICIA contained other significant provisions that require the federal banking
regulators to establish standards for safety and soundness for depository
institutions and their holding companies in three areas: (i) operational and
managerial; (ii) asset quality, earnings and stock valuation; and (iii)
management compensation. The legislation also required that risk-based capital
requirements contain provisions for interest rate risk, credit risk and risks of
nontraditional activities. FDICIA also imposed expanded accounting and audit
reporting requirements for depository institutions. In addition, FDICIA imposed
numerous restrictions on state-chartered banks, including those which generally
limit investments and activities to those permitted to national banks, and
contains several consumer banking law provisions.
The provisions of FDICIA are being phased in over several years. While final
rules have been issued on most provisions, others have yet to be issued.
Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 - On
September 30, 1994, the Riegle-Neal Interstate Banking and Branching Efficiency
Act of 1994 was signed into law. Effective September 30, 1995, adequately
capitalized bank holding companies are permitted to acquire banks in any state
subject to certain concentration limits and other conditions. Also, on a
phased-in basis over three years from the date of its enactment, other
limitations on interstate bank mergers, consolidations and branching will be
eased, subject to a state's ability to "opt in" or "opt out" of certain
provisions of the law by passage of state law. In 1995, Rhode Island passed
legislation to "opt in" to interstate merger and branching provisions that
effectively eliminated state law barriers.
Dividend Restrictions - The Corporation's revenues consist of cash dividends
paid to it by the Bank. Such payments are restricted pursuant to various state
and federal regulatory limitations. Reference is made to Note 16 to the
Corporation's Consolidated Financial Statements included in its 1995 Annual
Report to Shareholders incorporated herein by reference for additional
discussion of the Corporation's ability to pay dividends.
-6-
Capital Guidelines - Regulatory guidelines have been established that require
bank holding companies and banks to maintain minimum ratios of capital to risk-
adjusted assets. Banks are required to have minimum core capital (Tier 1) of 4%
and total risk-adjusted capital (Tier 1 and Tier 2) of 8%. For the Corporation,
Tier 1 capital is essentially equal to shareholders' equity excluding the net
unrealized gain on securities available for sale. Tier 2 capital consists of a
portion of the allowance for loan losses (limited to 1.25% of total risk-
weighted assets). As of December 31, 1995, net risk-weighted assets amounted to
$344.9 million, the Tier 1 capital ratio was 14.08% and the total risk-based
capital ratio was approximately 15.34%.
The Tier 1 leverage ratio is defined as Tier 1 capital (as defined under the
risk-based capital guidelines) divided by average assets (net of intangible
assets and excluding the effects of accounting for securities available for sale
under SFAS No. 115). The minimum leverage ratio is 3% for banking organizations
that do not anticipate significant growth and that have well-diversified risk
(including no undue interest rate risk), excellent asset quality, high
liquidity and strong earnings. Other banking organizations are expected to have
ratios of at least 4 - 5%, depending on their particular condition and growth
plans. Higher capital ratios could be required if warranted by the particular
circumstances or risk profile of a given banking organization. The
Corporation's Tier 1 leverage ratio was 8.99% as of December 31, 1995. The
Federal Reserve has not advised the Corporation of any specific minimum Tier 1
leverage capital ratio applicable to it.
GUIDE 3 STATISTICAL DISCLOSURES
- -------------------------------
The following tables contain additional consolidated statistical data about the
Corporation and its subsidiary.
I. Distribution of Assets, Liabilities and Shareholders' Equity;
Interest Rates and Interest Differential
-------------------------------------------------------------
A. Average balance sheets are presented on page 21 of the Corporation's 1995
Annual Report to Shareholders under the caption "Average Balances/Net
Interest Margin (Fully Taxable Equivalent Basis)", and are incorporated
herein by reference. Nonaccrual loans are included in average loan
balances. Average balances are based upon daily averages.
B. An analysis of net interest earnings, including interest earned and paid,
average yields and costs, and net yield on interest-earning assets is
presented on page 21 of the Corporation's 1995 Annual Report to
Shareholders under the caption "Average Balances/Net Interest Margin (Fully
Taxable Equivalent Basis)", and is incorporated herein by reference.
Interest income is reported on the fully taxable-equivalent basis. Tax
exempt income is converted to a fully taxable equivalent basis by assuming
a 34% marginal federal income tax rate adjusted for applicable state income
taxes net of the related federal tax benefit. For dividends on corporate
stocks, the 70% federal dividends received deduction is also used in the
calculation of tax equivalency. Interest on nonaccrual loans is included
in the analysis of net interest earnings to the extent that such interest
income has been recognized in the Consolidated Statements of Income. See
Guide 3 Item III.C.1.
-7-
C. An analysis of rate/volume changes in interest income and interest expense
is presented on page 22 of the Corporation's 1995 Annual Report to
Shareholders under the caption "Volume/Rate Analysis - Interest Income and
Expense (Fully Taxable Equivalent Basis)", and is incorporated herein by
reference. The net change attributable to both volume and rate has been
allocated proportionately.
II. SECURITIES HELD TO MATURITY AND SECURITIES AVAILABLE FOR SALE
-------------------------------------------------------------
A. The carrying amounts of securities held to maturity as of the dates
indicated are presented in the following table:
December 31, 1995 1994 1993
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U.S. Treasury obligations and
obligations of U.S. government-
sponsored agencies $ -- $20,413,017 $19,419,860
Mortgage-backed securities 13,947,011 21,696,508 25,401,432
States and political subdivisions 14,925,980 10,387,091 7,676,540
---------- ---------- ----------
$28,872,991 $52,496,616 $52,497,832
========== ========== ===========
The carrying amounts of securities available for sale as of the dates
indicated are summarized in the table below. Effective January 1, 1994, the
Corporation adopted Statement of Financial Accounting Standards No. 115,
"Accounting for Certain Investments in Debt and Equity Securities" (SFAS No.
115). The Statement requires that securities available for sale be reported
at fair value, with any unrealized gains and losses excluded from earnings
and reported as a separate component of shareholders' equity, net of tax,
until realized. Therefore, the carrying value of securities available for
sale at December 31, 1995 and 1994 presented below is equal to market value.
Prior to the adoption of SFAS No. 115, securities available for sale were
carried at the lower of aggregate cost, adjusted for amortization of premium
or accretion of discount in the case of debt securities, or market value.
During the fourth quarter of 1995, the Corporation transferred a pool of
debt securities with a book value of $37.1 million, consisting primarily of
U.S. Treasury and government agency obligations and mortgage-backed
securities, from the held-to-maturity category to the available-for-sale
category. The transfer was made in response to a special report issued by
the Financial Accounting Standards Board which allowed enterprises a one-
time opportunity to reassess the appropriateness of their securities
classifications under SFAS No. 115.
-8-
December 31, 1995 1994 1993
-------------------------------------------------------------------------
U.S. Treasury obligations and
obligations of U.S. government-
sponsored agencies $37,877,528 $24,533,220 $25,120,650
Mortgage-backed securities 30,026,897 -- --
Corporate debt securities -- -- 1,000,000
Corporate stocks 17,647,910 9,076,095 8,143,093
---------- ---------- ----------
$85,552,335 $33,609,315 $34,263,743
========== ========== ===========
B. Maturities of debt securities as of December 31, 1995 are presented in the
following tables. Mortgage-backed securities are included based on their
weighted average maturities, adjusted for anticipated future prepayments.
Yields on tax exempt obligations were not computed on a tax equivalent
basis.
Mortgage- States and
backed Political Total Debt
Securities Held to Maturity Securities Subdivisions Securities
--------------------------- ---------- ------------ ----------
Due in 1 year or less: Amount $ 1,244,432 $ 3,488,507 $ 4,732,939
Yield 7.45% 4.20% 5.06%
After 1 but within 5 years: Amount 3,588,817 8,718,416 12,307,233
Yield 7.39 4.24 5.16
After 5 but within 10 years: Amount 3,414,764 2,419,743 5,834,507
Yield 7.40 4.38 6.15
After 10 years: Amount 5,698,998 299,314 5,998,312
Yield 7.67 5.03 7.54
---------- ---------- ----------
Totals: Amount $13,947,011 $14,925,980 $28,872,991
Yield 7.51% 4.27% 5.84%
========== ========== ==========
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Weighted
Amortized Fair average
Securities Available for Sale Cost Value yield
----------------------------- ---------- --------- --------
U.S. Treasury obligations and
obligations of U.S. government-
sponsored agencies due:
In 1 year or less $ 9,513,569 $ 9,595,620 6.78%
After 1 but within 5 years 27,342,389 27,519,409 5.97
After 10 years 490,738 762,499 13.02
---------- ---------- ------
Total 37,346,696 37,877,528 6.27
---------- ---------- ------
Mortgage-backed securities due:
In 1 year or less 3,512,499 3,508,734 7.50
After 1 but within 5 years 9,619,183 9,612,547 7.50
After 5 but within 10 years 9,199,652 9,106,160 6.91
After 10 years 7,693,274 7,799,456 7.35
---------- ---------- ------
Total 30,024,608 30,026,897 7.28
---------- ---------- ------
Total debt securities due:
In 1 year or less 13,026,068 13,104,354 6.98
After 1 but within 5 years 36,961,572 37,131,956 6.37
After 5 but within 10 years 9,199,652 9,106,160 6.91
After 10 years 8,184,012 8,561,955 7.69
---------- ---------- ------
Total debt securities $67,371,304 $67,904,425 6.72%
========== ========== ======
C. Not applicable.
-10-
III. LOAN PORTFOLIO
--------------
A. The following table sets forth the composition of the Corporation's loan
portfolio for each of the past five years. Amounts for years prior to 1995
have been restated to reflect the adoption of SFAS #114.
December 31, 1995 1994 1993 1992 1991
--------------------------------------------------------------------------------------------------------
Residential real estate:
Mortgages $167,510,929 $170,366,731 $153,506,179 $142,322,653 $168,505,925
Homeowner construction 3,071,177 6,933,793 6,120,171 5,124,603 4,482,367
----------- ----------- ----------- ----------- -----------
Total residential real estate 170,582,106 177,300,524 159,626,350 147,447,256 172,988,292
----------- ----------- ----------- ----------- -----------
Commercial:
Mortgages 58,837,483 56,014,628 49,194,243 41,952,619 40,962,685
Construction and development 5,968,404 12,089,966 10,719,271 11,923,274 18,644,654
Other 96,830,889 103,334,837 103,721,694 100,013,004 97,988,349
----------- ----------- ----------- ----------- -----------
Total commercial 161,636,776 171,439,431 163,635,208 153,888,897 157,595,688
----------- ----------- ----------- ----------- -----------
Installment 54,240,010 45,186,245 34,100,374 32,645,643 36,720,803
----------- ----------- ----------- ----------- -----------
$386,458,892 $393,926,200 $357,361,932 $333,981,796 $367,304,783
=========== =========== =========== =========== ===========
B. An analysis of the maturity and interest rate sensitivity of Real Estate
Construction and Other Commercial loans as of December 31, 1995 follows:
Maturity analysis:
One Year One to five After five
or Less Years Years Total
---------- ---------- ---------- -----------
Construction and development (*) $ 4,185,017 1,713,275 3,141,289 $ 9,039,581
Commercial - other 36,439,799 41,351,186 19,039,904 96,830,889
---------- ---------- ---------- -----------
$40,624,816 43,064,461 22,181,193 $105,870,470
========== ========== ========== ===========
<FN>
(*) Includes homeowner construction and commercial construction and development.
Maturities of homeowner construction loans are included based on their contractual
conventional mortgage repayment terms following the completion of construction.
Sensitivity to changes in interest rates for all such loans due after one
year is as follows:
Floating or
Predetermined Adjustable
Rates Rates Totals
------------- ---------- ----------
Principal due after one year $ 8,259,200 $56,986,453 $65,245,654
========== ========== ==========
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C. Risk Elements
Reference is made to the caption "Asset Quality" included in Management's
Analysis of Financial Statements on pages 26-28 of the Corporation's 1995
Annual Report to Shareholders incorporated herein by reference. Included
therein is a discussion of the Corporation's credit review and collection
practices. Also included therein is information concerning nonperforming
assets at December 31, 1995 and the Corporation's ongoing efforts to reduce
the level of nonperforming assets.
1. Nonaccrual, Past Due and Restructured Loans.
(a). Nonaccrual loans as of the dates indicated were as follows:
December 31, 1995 1994 1993 1992 1991
--------------------------------------------------------------------------
$8,573,656 $10,911,999 $16,221,963 $21,306,840 $24,149,690
========= ========== ========== ========== ==========
For the years 1992 through 1995, loans, with the exception of credit card
loans and certain well-secured residential mortgage loans, were placed on
nonaccrual status and interest recognition was suspended when such loans
were 90 days or more overdue with respect to principal and/or interest.
Loans were also placed on nonaccrual status when, in the opinion of
management, full collection of principal and interest was doubtful.
Interest previously accrued, but not collected on such loans was reversed
against current period income. Cash receipts on nonaccrual loans were
recorded as interest income, or as a reduction of principal if full
collection of the loan was doubtful or if impairment of the collateral was
identified. Loans were removed from nonaccrual status when they had been
current as to principal and interest for a period of time, the borrower had
demonstrated an ability to comply with repayment terms, and when, in
management's opinion, the loans were considered to be fully collectible.
In years prior to 1992, commercial loans were placed on nonaccrual status
and interest recognition was suspended when they were 90 days or more
overdue. Residential mortgages and consumer loans were placed on
nonaccrual status when, in management's judgment, the probability of
collection was deemed insufficient to warrant further income recognition.
For the year ended December 31, 1995, the gross interest income that would
have been recognized if loans on nonaccrual status had been current in
accordance with their original terms was approximately $598,000. Interest
recognized on these loans amounted to approximately $458,000.
There were no significant commitments to lend additional funds to borrowers
whose loans were on nonaccrual status at December 31, 1995.
-12-
(b). Loans contractually past due 90 days or more and still accruing for
the dates indicated were as follows:
December 31, 1995 1994 1993 1992 1991
--------------------------------------------------------------------
$256,276 $24,124 $22,455 $42,648 $6,064,648
======= ====== ====== ====== =========
(c). Restructured accruing loans for the dates indicated were as follows:
December 31, 1995 1994 1993 1992 1991
-----------------------------------------------------------------------
$ --- $364,824 $ --- $1,476,000 $1,522,282
======= ======== ========= ========= =========
Restructured accruing loans include those for which concessions, such as
reduction of interest rates other than normal market rate adjustments or
deferral of principal or interest payments, have been granted due to a
borrower's financial condition. Interest on restructured loans is accrued
at the reduced rate. Loans restructured during 1995 amounted to
approximately $1,632,000, all of which are included in nonaccrual loans
reported in Section III.C.1.(a) above.
2. Potential Problem Loans.
Potential problem loans consist of certain accruing commercial loans that
were less than 90 days past due at December 31, 1995, but were identified
by management of the Bank as potential problem loans. Such loans are
characterized by weaknesses in the financial condition of borrowers or
collateral deficiencies. Based on historical experience, the credit
quality of some of these loans may improve as a result of collection
efforts, while the credit quality of other loans may deteriorate,
resulting in some amount of losses. These loans are not included in the
analysis of nonaccrual, past due and restructured loans in III.C.1 above.
At December 31, 1995, potential problem loans amounted to approximately
$7.1 million. The Corporation's loan policy provides guidelines for the
review of such loans in order to facilitate collection.
Depending on future events, the potential problem loans referred to above,
and others not currently identified, could be classified as nonperforming
in the future.
3. Foreign Outstandings. None
4. Loan Concentrations. The Corporation has no concentration of loans which
exceed 10% of its total loans except as disclosed by types of loan in
Section III.A.
D. Other Interest-Bearing Assets: None
-13-
IV. SUMMARY OF LOAN LOSS EXPERIENCE
-------------------------------
A. The allowance for loan losses is available for future credit losses inherent
in the loan portfolio. The level of the allowance is based on management's
ongoing review of the growth and composition of the loan portfolio, net
charge-off experience, current and expected economic conditions, and other
pertinent factors. Loans (or portions thereof) deemed to be uncollectible
are charged against the allowance and recoveries of amounts previously
charged off are added to the allowance. Loss provisions charged to earnings
are added to the allowance to bring it to the desired level. Loss experience
on loans is presented in the following table for the years indicated.
Amounts for years prior to 1995 have been restated to reflect the adoption of
SFAS #114.
Analysis of the Allowance for Loan Losses
-----------------------------------------
December 31, 1995 1994 1993 1992 1991
--------------------------------------------------------------------------------------------
Balance at beginning of year $9,327,942 $9,089,775 $7,872,351 $6,474,272 $8,487,196
Charge-offs (domestic):
Residential:
Mortgages 301,182 158,526 203,472 260,848 331,130
Homeowner construction -- -- -- -- --
Commercial:
Mortgages 795,858 405,624 927,720 24,154 2,097,532
Construction and development 526,224 9,250 -- 114,315 1,312,452
Other 1,451,066 512,020 374,424 2,522,916 2,928,730
Installment 341,737 250,840 378,575 494,756 771,705
--------- --------- --------- --------- ---------
Total charge-offs 3,416,067 1,336,260 1,884,191 3,416,989 7,441,549
--------- --------- --------- --------- ---------
Recoveries (domestic):
Residential:
Mortgages 114,083 21,329 2,278 -- 272
Homeowner construction -- -- -- -- --
Commercial:
Mortgages 13,384 21,830 84,351 200 --
Construction and development -- 10,948 20,756 29,424 100,997
Other 217,078 188,722 174,976 192,844 23,981
Installment 128,096 74,686 44,847 62,524 103,375
--------- --------- --------- --------- ---------
Total recoveries 472,641 317,515 327,208 284,992 228,625
--------- --------- --------- --------- ---------
Net charge-offs 2,943,426 1,018,745 1,556,983 3,131,997 7,212,924
Additions charged to earnings 1,400,000 1,256,912 2,774,407 4,530,076 5,200,000
--------- --------- --------- --------- ---------
Balance at end of period $7,784,516 $9,327,942 $9,089,775 $7,872,351 $6,474,272
========= ========= ========= ========= =========
Net charge-offs to average loans .75% .27% .45% .87% 1.93%
======== ========= ========= ========= =========
-14-
B. The following table presents the allocation of the allowance for loan losses.
Amounts for years prior to 1995 have been restated to reflect the adoption of
SFAS #114.
December 31, 1995 1994 1993 1992 1991
--------------------------------------------------------------------------------------------
Residential:
Mortgages $1,066,281 1,134,916 1,136,341 1,132,855 1,225,000
% of these loans to all loans 43.4% 43.2% 43.0% 42.6% 45.9%
Homeowner construction 19,412 44,047 33,661 35,222 --
% of these loans to all loans .8% 1.8% 1.7% 1.5% 1.2%
Commercial:
Mortgages 1,640,176 1,364,993 1,246,070 1,253,447 1,305,509
% of these loans to all loans 15.2% 14.2% 13.8% 12.6% 11.1%
Construction and development 133,754 275,681 150,110 247,535 494,694
% of these loans to all loans 1.5% 3.1% 3.0% 3.6% 5.1%
Other 2,245,789 2,870,242 2,890,785 2,899,120 2,453,753
% of these loans to all loans 25.1% 26.2% 29.0% 29.9% 26.7%
Installment 911,069 862,323 561,177 694,390 726,000
% of these loans to all loans 14.0% 11.5% 9.5% 9.8% 10.0%
Unallocated 1,768,035 2,775,740 3,071,631 1,609,782 269,316
--------- --------- --------- --------- ---------
$7,784,516 9,327,942 9,089,775 7,872,351 6,474,272
100.0% 100.0% 100.0% 100.0% 100.0%
========= ========= ========= ========= =========
V. DEPOSITS
--------
A. Average deposit balances outstanding and the average rates paid thereon
are presented in the following table:
1995 1994 1993
--------------------- -------------------- --------------------
Average Average Average Average Average Average
Amount Rate Paid Amount Rate Paid Amount Rate Paid
----------- --------- ---------- --------- ---------- ---------
Demand deposits $ 55,189,000 -- 49,369,000 -- 40,097,000 --
Savings deposits:
Regular 92,739,000 2.69% 98,851,000 2.70% 79,567,000 2.83%
NOW accounts 55,831,000 1.39% 57,834,000 1.36% 58,930,000 1.84%
Money market accounts 30,096,000 2.23% 40,101,000 2.17% 59,473,000 2.74%
----------- ----------- -----------
Total savings 178,666,000 2.21% 196,786,000 2.20% 197,970,000 2.51%
Time deposits 224,169,000 5.25% 183,950,000 4.30% 176,148,000 4.60%
----------- ----------- -----------
Total deposits $458,024,000 430,105,000 414,215,000
=========== =========== ===========
-15-
B. Not Applicable
C. Not Applicable
D. The maturity schedule of time deposits in amounts of $100,000 or more at
December 31, 1995 was as follows:
Over 3 Over 6
3 months through through Over 12
or less 6 months 12 months months Total
---------- --------- --------- --------- ----------
Time remaining
until maturity: $15,257,004 2,873,657 7,174,196 3,644,067 28,948,924
========== ========= ========= ========= ==========
E. Not applicable
VI. RETURN ON EQUITY AND ASSETS
---------------------------
1995 1994 1993
---- ---- ----
Return on average assets 1.44% 1.25% 1.01%
Return on average shareholders' equity 15.47% 14.11% 12.92%
Dividend payout ratio 33.97% 33.02% 34.30%
Average equity to average total assets 9.31% 8.84% 7.81%
VII. SHORT-TERM BORROWINGS
---------------------
The average balance of short-term borrowings during the reported periods
was less than 30% of shareholders' equity at the end of each reported
period.
ITEM 2. PROPERTIES
- ------------------
As of December 31, 1995 the Corporation was operating six facilities including
its main office located in Westerly, Rhode Island and five branch banking
facilities located in Westerly, Charlestown, Narragansett, Richmond and Block
Island, Rhode Island. All sites are owned, except for the Block Island branch
facility, which is leased. The main office premises, containing the corporate
offices and a banking facility, consists of a five story building and an
adjacent two story building. The buildings, which are connected, contain
approximately 50,000 square feet of space, 42,000 square feet of which is
occupied by the Corporation. The remaining space is leased to merchant and
professional tenants under short-term lease arrangements and could be used for
expansion of the Corporation's offices. The main office location also contains
a three level retail parking garage with 80,000 square feet of space.
The Corporation has made a substantial investment in its branch office
facilities. The Charlestown banking office opened in 1988 in a newly
constructed facility. The Narragansett banking office began operations in June
-16-
1989 in a building which had been acquired in 1988 and was completely renovated.
A major renovation and expansion of the Richmond banking office was completed in
January of 1990. The Richmond site also contains a separate building operated
as a restaurant by a restaurant chain under a long-term lease.
In 1996, the Corporation plans to expand its existing Trust and Investment
department facility and construct a new branch office in North Kingstown,
Rhode Island. The total cost of these projects is expected to be approximately
$4 million. These facilities expansion plans, along with existing structures,
are adequate to meet the Corporation's facilities needs in the forseeable
future.
ITEM 3. LEGAL PROCEEDINGS
- -------------------------
Neither the Corporation nor its subsidiary is a party to any material pending
legal proceedings, other than routine litigation incidental to their business
activities.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- -----------------------------------------------------------
No matters were submitted to a vote of security holders during the fourth
quarter of the year ended December 31, 1995.
-17-
EXECUTIVE OFFICERS OF THE REGISTRANT
- ------------------------------------
The following is a list of all executive officers of the Corporation and the
Bank with their titles, ages, and length of service with the Corporation.
Years of
Officers of the Corporation Age service (1)
- --------------------------- --- ----------
Joseph J. Kirby Chief Executive Officer 64 33
John C. Warren President and Chief Operating 50 0
Officer
Joseph H. Potter Executive Vice President 62 37
David V. Devault, CPA Vice President and
Chief Financial Officer 41 9
Louis J. Luzzi Vice President and Treasurer 54 35
Harvey C. Perry, II Vice President and Secretary 45 21
(1) Includes years of service with the Bank.
Joseph H. Potter and Louis J. Luzzi are first cousins.
Joseph J. Kirby joined the Bank in 1963 as an Investment Officer. He was
elected Vice President and Investment Officer in 1965 and Executive Vice
President in 1972. He was elected President in 1982 and was named Chief
Executive Officer in February, 1996.
John C. Warren joined the Bank and the Corporation in 1996 as President and
Chief Operating Officer. He served as President and Chief Executive Officer of
Sterling Bancshares Corporation from 1990 to 1994 and as Chairman from 1993 to
1994.
Joseph H. Potter joined the Bank in 1958 and was elected Secretary in 1967. He
was elected Vice President and Secretary in 1973 and Executive Vice President in
1982.
David V. Devault joined the Bank in 1986 as Controller. He was elected Vice
President and Chief Financial Officer of the Corporation and the Bank in 1987.
He was elected Senior Vice President and Chief Financial Officer of the Bank in
1990. Prior to joining the Bank he was a Senior Manager with the firm of KPMG
Peat Marwick LLP.
Louis J. Luzzi joined the Bank in 1960 and was elected Assistant Vice President
in 1969. He was elected Vice President in 1979 and Vice President and Treasurer
in 1983.
Harvey C. Perry, II joined the Bank in 1974 and was elected Assistant Trust
Officer in 1977, Trust Officer in 1981 and Secretary and Trust Officer in 1982.
He was elected Vice President and Secretary of the Corporation and the Bank in
1984, and Senior Vice President and Secretary of the Bank in 1990.
-18-
Years
Officers of the Bank Age of service
- -------------------- --- ----------
Vernon F. Bliven Senior Vice President - 46 23
Human Resources
Robert G. Cocks, Jr. Senior Vice President - Lending 51 3
Louis W. Gingerella, Jr. Senior Vice President - 43 5
Credit Administration
B. Michael Rauh, Jr. Senior Vice President - 36 4
Retail Banking
Vernon F. Bliven joined the Bank in 1972 and was elected Assistant Vice
President in 1980, Vice President in 1986 and Senior Vice President - Human
Resources in 1993.
Robert G. Cocks, Jr. joined the Bank in 1992 as Senior Vice President - Lending.
Prior to joining the Bank he served as Executive Vice President at Bay Bank
South from 1987 to 1991. From 1991 to 1992 he worked as an independent
consultant.
Louis W. Gingerella, Jr. joined the Bank in 1990 as Vice President - Credit
Administration. He was elected Senior Vice President - Credit Administration in
1992. Prior to joining the Bank he held the position of Senior Vice President
with Bank of New England since 1988.
B. Michael Rauh, Jr. joined the Bank in 1991 as Vice President - Marketing and
was promoted in 1993 to Senior Vice President - Retail Banking. Prior to
joining the Bank he was Executive Vice President with the advertising agency of
Chaffee & Partners since 1989.
-19-
PART II
-------
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED
STOCKHOLDER MATTERS
- -------------------------------------------------------------
The Corporation's common stock has traded on the NASDAQ Small-Cap Market since
June 19, 1992. Previously, the Corporation's common stock had been listed on
the NASDAQ Over-The-Counter Market system since June 1987.
The quarterly common stock price ranges and dividends paid per share for the
years ended December 31, 1995 and 1994 are presented in the following table.
The stock prices are based on the high and low sales prices during the
respective quarter. Stock price and dividend amounts for the first and second
quarters of 1994 have been restated to reflect a 3-for-2 stock split paid in the
form of a stock dividend on August 31, 1994.
1995 Quarters 1 2 3 4
- --------------------------------------------------------------------
Stock prices:
high 22.50 27.50 28.00 30.00
low 19.00 20.50 26.00 26.00
Cash dividend declared .22 .22 .24 .24
1994 Quarters 1 2 3 4
- --------------------------------------------------------------------
Stock prices:
high 19.17 22.50 24.00 24.00
low 16.67 17.67 21.33 19.75
Cash dividend declared .16 .17 .20 .20
The Corporation will continue to review future common stock dividends based on
profitability, financial resources and economic conditions. The Corporation has
recorded consecutive quarterly dividends for over one hundred years. On
March 21, 1996, the Corporation's Board of Directors declared a cash dividend of
$.26 per share, an increase of 8.3% over the previous dividend amount. The
dividend is payable April 15, 1996 to shareholders of record as of April 1,
1996.
The Corporation's primary source of funds for dividends paid to shareholders is
the receipt of dividends from the Bank. A discussion of the restrictions on the
advance of funds or payment of dividends to the Corporation is included in Note
16 to the Consolidated Financial Statements included in the 1995 Annual Report
to Shareholders which is incorporated herein by reference.
At December 31, 1995 there were 1,257 holders of record of the Corporation's
common stock.
-20-
ITEM 6. SELECTED FINANCIAL DATA
- -------------------------------
Selected consolidated financial data for the five years ended December 31, 1995
appears under the caption "Five Year Summary of Selected Consolidated Financial
Data" on page 18 of the Corporation's 1995 Annual Report to Shareholders which
is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
- -------------------------------------------------------------------------------
The information required by this Item appears under the caption "Management's
Analysis of Financial Statements" on pages 19-32 of the Corporation's 1995
Annual Report to Shareholders which is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- ---------------------------------------------------
The financial statements and supplementary data are contained in the
Corporation's 1995 Annual Report to Shareholders, filed as Exhibit 13, on the
pages indicated in the following table, and are incorporated herein by
reference.
Page of 1995
Annual Report
-------------
Consolidated Balance Sheets 33
Consolidated Statements of Income 34
Consolidated Statements of Changes in Shareholders' Equity 35
Consolidated Statements of Cash Flows 36
Notes to Consolidated Financial Statements 37
Parent Company Financial Statements 53
Independent Auditors' Report 55
Summary of Unaudited Quarterly Financial Information 56
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
- ----------------------------------------------------------
None.
-21-
PART III
--------
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
- -----------------------------------------------------------
Required information regarding directors is presented under the caption
"Nominee and Director Information" in the Corporation's Proxy Statement dated
March 18, 1996 prepared for the 1996 Annual Meeting of Shareholders and
incorporated herein by reference.
Required information regarding executive officer of the Corporation is included
in Part I under the caption "Executive Officers of the Registrant".
Information required with respect to compliance with Section 16(a) of the
Exchange Act appears under the caption "Compliance with Section 16(a) of the
Exchange Act" in the Corporation's Proxy Statement dated March 18, 1996 prepared
for the 1996 Annual Meeting of Shareholders which is incorporated herein by
reference.
ITEM 11. EXECUTIVE COMPENSATION
- -------------------------------
The information required by this Item appears under the caption "Compensation of
Directors and Executive Officers - Executive Compensation" in the Corporation's
Proxy Statement dated March 18, 1996 prepared for the 1996 Annual Meeting of
Shareholders which is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
- -------------------------------------------------
The information required by this Item appears under the caption "Nominee and
Director Information" in the Corporation's Proxy Statement dated March 18, 1996
prepared for the 1996 Annual Meeting of Shareholders which is incorporated
herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- -------------------------------------------------------
The information required by this Item is incorporated herein by reference to
the caption "Indebtedness and Other Transactions" of the Corporation's Proxy
Statement dated March 18, 1996 prepared for the 1996 Annual Meeting of
Shareholders.
-22-
PART IV
-------
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
- ------------------------------------------------------------------------
(a) 1. The financial statements of Washington Trust Bancorp, Inc. required in
response to this Item are listed in response to Item 8 of this Report and
are incorporated herein by reference.
2. Financial Statement Schedules. All schedules normally required by
Article 9 of Regulation S-K and all other schedules to the consolidated
financial statements of the Corporation have been omitted because the
required information is either not required, not applicable, or is
included in the consolidated financial statements or notes thereto.
(b) No reports on Form 8-K have been filed during the fourth quarter of the
year ended December 31, 1995.
(c) Exhibit Index.
Exhibit Number
--------------
3.(i) Restated articles of incorporation ****
3.(ii) By-laws of the Corporation **
* 10.1 Supplemental Pension Benefit and Profit Sharing Plan ****
* 10.2 Outside Director's Retainer Continuation Plan ****
* 10.3 Plan for Deferral of Director's Fees ****
* 10.4 Amended and Restated 1988 Stock Option Plan ****
* 10.5 Short Term Incentive Plan ***
11 Computation of Earnings per share
13 1995 Annual Report to Shareholders
21 Subsidiaries of the Registrant
23 Consent of Independent Auditors
* Management contract or compensatory plan or arrangement.
** Incorporated herein by reference to Exhibit 3 of the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1990, previously filed
with the Commission.
*** Incorporated herein by reference to Exhibit 10 of the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1993, previously filed
with the Commission.
**** Incorporated herein by reference to Exhibits 3(i), 10.1, 10.2, 10.3 and
10.4 of the Registrant's Annual Report on Form 10-K for the year ended
December 31, 1994, previously filed with the Commission.
(d) Financial Statement Schedules.
None.
-23-
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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)
March 21, 1996 Joseph J. Kirby
Date ________________ By ______________________________________
Joseph J. Kirby, Chairman, Chief
Executive Officer and Director
March 21, 1996 David V. Devault
Date ________________ By ______________________________________
David V. Devault, Vice President,
Chief Financial Officer and Principal
Accounting Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
March 21, 1996 Gary P. Bennett
Date ________________ ______________________________________
Gary P. Bennett, Director
March 21, 1996 Steven J. Crandall
Date ________________ ______________________________________
Steven J. Crandall, Director
March 21, 1996 Richard A. Grills
Date ________________ ______________________________________
Richard A. Grills, Director
March 21, 1996 Larry J. Hirsch
Date ________________ ______________________________________
Larry J. Hirsch, Director
March 21, 1996 Katherine W. Hoxsie
Date ________________ ______________________________________
Katherine W. Hoxsie, Director
March 21, 1996 Mary E. Kennard
Date ________________ ______________________________________
Mary E. Kennard, Director
March 21, 1996 James W. McCormick, Jr.
Date ________________ ______________________________________
James W. McCormick, Jr., Director
March 21, 1996 Brendan P. O'Donnell
Date ________________ ______________________________________
Brendan P. O'Donnell, Director
March 21, 1996 Victor J. Orsinger
Date ________________ ______________________________________
Victor J. Orsinger, II, Director
March 21, 1996 Joseph H. Potter
Date ________________ ______________________________________
Joseph H. Potter, Executive Vice
President and Director
March 21, 1996 Anthony J. Rose, Jr.
Date ________________ ______________________________________
Anthony J. Rose, Jr., Director
March 21, 1996 James P. Sullivan
Date ________________ ______________________________________
James P. Sullivan, Director
March 21, 1996 Neil H. Thorp
Date ________________ ______________________________________
Neil H. Thorp, Director
March 21, 1996 John C. Warren
Date ________________ ______________________________________
John C. Warren, President, Chief
Operating Officer and Director
-25-