WASHINGTON TRUST BANCORP INC - FORM 8-K - EX-99.1 - EXHIBIT 99.1

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8-K - 8-K - WASHINGTON TRUST BANCORP INC	form8-k2016q2earningsrelease.htm

Exhibit 99.1

NASDAQ: WASH

Contact: Elizabeth B. Eckel

Senior Vice President, Marketing

Telephone: (401) 348-1309

E-mail: ebeckel@washtrust.com

Date: July 25, 2016

FOR IMMEDIATE RELEASE

Washington Trust Reports Second Quarter 2016 Earnings

WESTERLY, R.I., July 25, 2016 (GLOBE NEWSWIRE)…Washington Trust Bancorp, Inc. (Nasdaq:WASH), parent company of The Washington Trust Company, today announced net income of $11.1 million, or $0.64 per diluted share, for the second quarter of 2016, compared to net income of $10.9 million, or $0.64 per diluted share, reported for the first quarter of 2016.

"Washington Trust posted solid second quarter earnings in a challenging economic environment," stated Joseph J. MarcAurele, Washington Trust Chairman and CEO. "Total loans reached a record level, as a result of strong commercial loan and residential mortgage activity during the quarter. Wealth management revenues and assets under administration also achieved all-time highs, despite financial market volatility."

Selected highlights for the second quarter of 2016 include:


•	Returns on average equity and average assets remain solid at 11.50% and 1.14%, respectively. Comparable amounts for the first quarter of 2016 were 11.50% and 1.16%, respectively.


•	Mortgage banking revenues amounted to $2.7 million, up by 23% on a linked quarter basis. Mortgage loans sold to the secondary market totaled $139 million; the second highest quarterly volume in the past three years.


•	Total loans stood at $3.1 billion at June 30, 2016, up by 1% in the quarter and up by 5% from a year ago.


•	Total deposits amounted to $2.8 billion at March 31, 2016, down by 3% in the quarter and up by 2% from a year ago.

Net Interest Income

Net interest income totaled $26.8 million for the second quarter of 2016, compared to $27.7 million, in the first quarter. Prior quarter net interest income included loan prepayment fee income of $1.0 million, compared to $48 thousand in the most recent quarter. Excluding the impact of the loan prepayment fee income from both periods, net interest income was down slightly on a linked quarter basis. The net interest margin was 3.05% for the second quarter of 2016, down by 19 basis points from the previous quarter. Excluding the impact of the loan prepayment fee income in each period, the second quarter net interest margin was 3.05%, down by 8 basis points from the prior quarter. The reduction in the net interest margin was largely due to lower yields on interest-earning assets as a result of the downward movement in longer-term market interest rates in 2016. Other significant linked quarter changes included:

Washington Trust

Page 2, July 25, 2016


•	Average interest-earning assets increased by $94 million, due to growth in average balances of commercial loans in the quarter as well as an increase in average investment securities driven by portfolio additions near the end of the previous quarter.


•	Average interest-bearing liabilities rose by $88 million, reflecting increases in the average balance of Federal Home Loan Bank of Boston ("FHLBB") advances. The cost of interest-bearing funds was 0.74%, unchanged from the previous quarter.

Noninterest Income

Noninterest income totaled $15.9 million for the second quarter of 2016, up by $1.3 million, or 9%, from the first quarter of 2016. Significant linked quarter changes included:

•

Wealth management revenues totaled $9.5 million for the second quarter, up by $307 thousand, or 3%, from the prior quarter. The increase included a $291 thousand increase in tax preparation fees, which are generally concentrated in the second quarter. Wealth management assets under administration amounted to $5.9 billion at June 30, 2016, up by $26 million on a linked quarter basis. Managed assets continue to represent over 90% of total wealth management assets at June 30, 2016.

•

Mortgage banking benefited from strong activity levels as revenues totaled $2.7 million for the second quarter, up by $512 thousand, or 23%, on a linked quarter basis. These results reflect both a higher volume and yield on loans sold to the secondary market. Residential mortgage loans sold to the secondary market amounted to $139.0 million in the second quarter, compared to $106.0 million in the previous quarter.


•	Income from bank-owned life insurance ("BOLI") amounted to $1.1 million in the the second quarter, up by $591 thousand, from the the first quarter of 2016. Included in the second quarter was a $589 thousand non-taxable gain due to the receipt of life insurance proceeds.


•	Loan related derivative income amounted to $508 thousand in the second quarter, down by $137 thousand, or 21%, from the prior quarter. The decrease reflected a lower volume of commercial borrower interest rate swaps transactions.

Noninterest Expenses

Noninterest expenses totaled $26.0 million for the second quarter of 2016, up by $580 thousand, or 2%, from the prior quarter. The largest increase was a $1.0 million increase in salaries and employee benefit costs, which included costs of $425 thousand incurred in the second quarter for various employee severance matters. The remaining increase in salaries and employee benefit costs was concentrated in transaction-based commission expense associated with the increase in mortgage banking activities. In first quarter of 2016, noninterest expenses included $431 thousand of debt prepayment penalty expense associated with the prepayment of $10.0 million in FHLBB advances. There were no such expenses in the latest quarter.

Income tax expense amounted to $5.2 million for the second quarter of 2016, down by $331 thousand from the amount recognized in the previous quarter. The effective tax rate for the second quarter of 2016 was 31.8%, compared to 33.4% for the first quarter of 2016. The reduction in the effective tax rate for the second quarter is primarily due to the non-taxable gain related to the receipt of BOLI proceeds.

Washington Trust

Page 3, July 25, 2016

Loans

Total loans amounted to $3.1 billion at June 30, 2016, up by $34 million, or 1.1%, from the balance at the end of the first quarter. The linked quarter change was due to growth of $57 million in the commercial real estate portfolio, which was partially offset by a decline of $23 million in the commercial and industrial portfolio. The residential and consumer loan portfolio balances were relatively consistent with the period-end balances at March 31, 2016. Included in the residential loan portfolio balance at the end of the second quarter was a $16.1 million purchase of whole loans acquired on June 28, 2016. These loans were individually evaluated to our underwriting standards and predominantly secured by properties in Massachusetts.

Investment Securities

The securities portfolio amounted to $420 million at June 30, 2016, down by $11 million, or 2.5%, from the balance at March 31, 2016, due to calls, maturities and routine principal pay-downs, which were partially offset by the purchases of $52 million of additional U.S. government agency and agency mortgage-backed debt securities. Investment securities were 11% of total assets as of June 30, 2016.

Deposits and Borrowings

Total deposits amounted to $2.8 billion at June 30, 2016, down by $90 million, or 3.1%, in the second quarter. Excluding wholesale brokered time deposits, in-market deposits decreased by $75 million, or 2.9%, in the quarter. The largest outflow during the quarter was $88 million of money market deposits, attributable to outflows associated with various institutional and governmental depositors. A substantial portion of these outflows are considered to be seasonal in nature based on the business cycles of the underlying depositors.

FHLBB advances amounted to $640 million at June 30, 2016, up by $153 million, or 31.4%, from March 31, 2016.

Asset Quality

Total past due loans amounted to $17.1 million, or 0.56% of total loans, at June 30, 2016, compared to $18.3 million, or 0.60% of total loans, at March 31, 2016. Total nonaccrual loans amounted to $17.2 million, or 0.56% of total loans, at June 30, 2016, compared to $17.4 million, or 0.57% of total loans, at March 31, 2016.

A loan loss provision totaling $450 thousand was charged to earnings in the second quarter of 2016, compared to a loan loss provision of $500 thousand recognized in the first quarter of 2016. The loan loss provision was based on management’s assessment of loss exposure, as well as loan loss allocations commensurate with changes in the loan portfolio during the quarter. Net charge-offs amounted to $761 thousand in the second quarter of 2016 and included a $737 thousand charge-off associated with one commercial and industrial relationship. A substantial portion of the loss exposure associated with this charge-off was recognized as of March 31, 2016. The allowance for loan losses was $25.8 million, or 0.84% of total loans, at June 30, 2016, compared to $26.1 million, or 0.86% of total loans, at March 31, 2016.

Capital and Dividends

Total shareholder's equity was $388 million at June 30, 2016, up by $7 million from March 31, 2016. Capital levels at June 30, 2016 exceeded the regulatory minimum levels to be considered well capitalized, with a total risk-based capital ratio of 12.43% at June 30, 2016, compared to 12.45% at March 31, 2016. At June 30, 2016, book value per share amounted to $22.73, up from $22.40 in the prior quarter.

Washington Trust

Page 4, July 25, 2016

The Board of Directors declared a quarterly dividend of 36 cents per share for the quarter ended June 30, 2016. The dividend was paid on July 14, 2016 to shareholders of record on July 1, 2016.

Conference Call

Washington Trust will host a conference call to discuss its second quarter results, business highlights and outlook on Tuesday, July 26, 2016 at 8:30 a.m. (Eastern Time). Individuals may dial in to the call at 1-877-407-0784. An audio replay of the call will be available, shortly after the conclusion of the call, by dialing 1-877-870-5176 and entering the Replay PIN Number 13639564; the audio replay will be available through August 5, 2016. Also, a webcast of the call will be posted in the Investor Relations section of Washington Trust's web site, www.washtrustbancorp.com, and will be available through September 30, 2016.

Background

Washington Trust Bancorp, Inc. is the parent of The Washington Trust Company, a state-chartered bank headquartered in Westerly, Rhode Island. Founded in 1800, Washington Trust is the oldest community bank in the nation and is the largest independent bank headquartered in Rhode Island. Washington Trust offers a full range of financial services, including commercial banking, small business banking, personal banking, and wealth management and trust services through its offices located in Rhode Island, Connecticut and Massachusetts. The Corporation’s common stock trades on NASDAQ OMX® under the symbol WASH. Investor information is available on the Corporation’s web site: www.washtrustbancorp.com.

Forward-Looking Statements

This press release contains statements that are “forward-looking statements”. We may also make forward-looking statements in other documents we file with the SEC, in press releases and other written materials, and in oral statements made by our officers, directors or employees. You can identify forward-looking statements by the use of the words “believe,” “expect,” “anticipate,” “intend,” “estimate,” “assume,” “outlook,” “will,” “should,” and other expressions that predict or indicate future events and trends and which do not relate to historical matters. You should not rely on forward-looking statements, because they involve known and unknown risks, uncertainties and other factors, some of which are beyond the control of Washington Trust. These risks, uncertainties and other factors may cause the actual results, performance or achievements of Washington Trust to be materially different from the anticipated future results, performance or achievements expressed or implied by the forward-looking statements.

Some of the factors that might cause these differences include the following: weakness in national, regional or international economic conditions or conditions affecting the banking or financial services industries or financial capital markets; volatility in national and international financial markets; additional government intervention in the U.S. financial system; reductions in net interest income resulting from interest rate volatility as well as changes in the balance and mix of loans and deposits; reductions in the market value of wealth management assets under administration; changes in the value of securities and other assets; reductions in loan demand; changes in loan collectibility, default and charge-off rates; changes in the size and nature of the our competition; changes in legislation or regulation and accounting principles, policies and guidelines; and changes in the assumptions used in making such forward-looking statements. In addition, the factors described under “Risk Factors” in Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2015, as updated by our Quarterly Reports on Form 10-Q and other filings submitted to the SEC, may result in these differences. 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 we assume no obligation to update any forward-looking statements to reflect changes in underlying assumptions or factors, new information, future events or other changes.

Supplemental Information - Explanation of Non-GAAP Financial Measures

In addition to results presented in accordance with generally accepted accounting principles (“GAAP”), this press release contains certain non-GAAP financial measures. Washington Trust's management believes that the supplemental non-GAAP information, which consists of measurements and ratios based on tangible equity and tangible assets, is utilized by regulators and market analysts to evaluate a company's financial condition and therefore, such information is useful to investors. These disclosures should not be viewed as a substitute for financial results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures which may be presented by other companies. Because non-GAAP financial measures are not standardized, it may not be possible to compare these financial measures with other companies' non-GAAP financial measures having the same or similar names.



Washington Trust Bancorp, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(Unaudited; Dollars in thousands)

	Jun 30, 2016			Mar 31, 2016			Dec 31, 2015			Sep 30, 2015			Jun 30, 2015
Assets:
Cash and due from banks		$116,658			$89,966			$93,222			$106,445			$79,795
Short-term investments	3,255			4,931			4,409			3,629			4,298
Mortgage loans held for sale	38,554			22,895			38,554			31,805			37,389
Securities:
Available for sale, at fair value	401,749			411,352			375,044			323,795			351,378
Held to maturity, at amortized cost	17,917			19,040			20,023			21,140			22,523
Total securities	419,666			430,392			395,067			344,935			373,901
Federal Home Loan Bank stock, at cost	34,303			26,515			24,316			37,730			37,730
Loans:
Commercial	1,732,220			1,698,811			1,654,547			1,579,854			1,583,537
Residential real estate	1,005,036			1,004,349			1,013,555			1,024,214			1,001,263
Consumer	343,628			343,833			345,025			345,850			343,784
Total loans	3,080,884			3,046,993			3,013,127			2,949,918			2,928,584
Less allowance for loan losses	25,826			26,137			27,069			27,161			27,587
Net loans	3,055,058			3,020,856			2,986,058			2,922,757			2,900,997
Premises and equipment, net	29,590			29,882			29,593			28,180			28,124
Investment in bank-owned life insurance	65,036			66,000			65,501			65,000			64,502
Goodwill	64,059			64,059			64,059			64,196			58,114
Identifiable intangible assets, net	10,814			11,137			11,460			11,793			4,539
Other assets	80,088			71,577			59,365			58,366			55,088
Total assets		$3,917,081			$3,838,210			$3,771,604			$3,674,836			$3,644,477
Liabilities:
Deposits:
Demand deposits		$512,307			$539,119			$537,298			$513,856			$457,755
NOW accounts	414,532			394,873			412,602			358,973			357,922
Money market accounts	675,896			763,565			823,490			855,858			789,334
Savings accounts	342,579			331,800			326,967			305,775			300,108
Time deposits	844,036			850,294			833,898			801,818			834,000
Total deposits	2,789,350			2,879,651			2,934,255			2,836,280			2,739,119
Federal Home Loan Bank advances	640,010			487,189			378,973			381,649			471,321
Junior subordinated debentures	22,681			22,681			22,681			22,681			22,681
Other liabilities	76,708			67,409			60,307			63,699			52,189
Total liabilities	3,528,749			3,456,930			3,396,216			3,304,309			3,285,310
Shareholders’ Equity:
Common stock	1,068			1,064			1,064			1,062			1,052
Paid-in capital	112,314			111,641			110,949			109,724			103,408
Retained earnings	282,666			277,810			273,074			268,166			263,790
Accumulated other comprehensive loss	(7,716		)	(9,235		)	(9,699		)	(8,425		)	(9,083		)
Total shareholders’ equity	388,332			381,280			375,388			370,527			359,167
Total liabilities and shareholders’ equity		$3,917,081			$3,838,210			$3,771,604			$3,674,836			$3,644,477

-5-



CONSOLIDATED STATEMENTS OF INCOME
(Unaudited; Dollars in thousands, except per share amounts)
																For the Six Months Ended
	For the Three Months Ended
	Jun 30, 2016			Mar 31, 2016			Dec 31, 2015			Sep 30, 2015			Jun 30, 2015			Jun 30, 2016			Jun 30, 2015
Interest income:
Interest and fees on loans		$29,122			$29,998			$28,511			$28,626			$28,739			$59,120			$57,092
Taxable interest on securities	2,487			2,370			2,262			2,178			2,176			4,857			4,435
Nontaxable interest on securities	280			327			352			366			402			607			837
Dividends on Federal Home Loan Bank stock	231			210			315			309			164			441			329
Other interest income	70			64			37			47			29			134			54
Total interest and dividend income	32,190			32,969			31,477			31,526			31,510			65,159			62,747
Interest expense:
Deposits	2,981			2,968			3,097			3,308			3,348			5,949			6,737
Federal Home Loan Bank advances	2,313			2,152			1,966			1,987			1,891			4,465			3,793
Junior subordinated debentures	119			112			157			232			241			231			482
Other interest expense	1			2			2			2			2			3			5
Total interest expense	5,414			5,234			5,222			5,529			5,482			10,648			11,017
Net interest income	26,776			27,735			26,255			25,997			26,028			54,511			51,730
Provision for loan losses	450			500			750			200			100			950			100
Net interest income after provision for loan losses	26,326			27,235			25,505			25,797			25,928			53,561			51,630
Noninterest income:
Wealth management revenues	9,481			9,174			9,167			8,902			8,912			18,655			17,347
Mortgage banking revenues	2,710			2,198			2,582			1,990			2,741			4,908			5,329
Service charges on deposit accounts	935			907			971			986			973			1,842			1,908
Card interchange fees	860			797			810			849			826			1,657			1,540
Income from bank-owned life insurance	1,090			499			502			498			492			1,589			982
Loan related derivative income	508			645			752			327			717			1,153			1,362
Equity in losses of unconsolidated subsidiaries	(89		)	(88		)	(69		)	(69		)	(69		)	(177		)	(155		)
Other income	419			502			431			430			669			921			968
Total noninterest income	15,914			14,634			15,146			13,913			15,261			30,548			29,281
Noninterest expense:
Salaries and employee benefits	17,405			16,380			16,053			15,971			15,506			33,785			31,000
Net occupancy	1,803			1,807			1,724			1,721			1,669			3,610			3,555
Equipment	1,503			1,501			1,393			1,424			1,376			3,004			2,716
Outsourced services	1,294			1,363			1,337			1,250			1,277			2,657			2,524
Legal, audit and professional fees	662			629			825			630			610			1,291			1,286
FDIC deposit insurance costs	491			493			470			467			436			984			909
Advertising and promotion	420			265			325			356			578			685			845
Amortization of intangibles	322			323			333			260			156			645			311
Debt prepayment penalties	—			431			—			—			—			431			—
Acquisition related expenses	—			—			52			504			433			—			433
Other expenses	2,130			2,258			2,049			1,955			2,258			4,388			4,251
Total noninterest expense	26,030			25,450			24,561			24,538			24,299			51,480			47,830
Income before income taxes	16,210			16,419			16,090			15,172			16,890			32,629			33,081
Income tax expense	5,153			5,484			5,346			4,964			5,387			10,637			10,568
Net income		$11,057			$10,935			$10,744			$10,208			$11,503			$21,992			$22,513

Net income available to common shareholders:
Basic		$11,035			$10,910			$10,718			$10,181			$11,469			$21,945			$22,440
Diluted		$11,035			$10,910			$10,718			$10,180			$11,470			$21,945			$22,441
Weighted average common shares outstanding:
Basic	17,067			17,023			17,004			16,939			16,811			17,045			16,785
Diluted	17,194			17,157			17,167			17,102			16,989			17,185			16,977
Earnings per common share:
Basic		$0.65			$0.64			$0.63			$0.60			$0.68			$1.29			$1.34
Diluted		$0.64			$0.64			$0.62			$0.60			$0.68			$1.28			$1.32

Cash dividends declared per share		$0.36			$0.36			$0.34			$0.34			$0.34			$0.72			$0.68

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SELECTED FINANCIAL HIGHLIGHTS
(Unaudited; Dollars in thousands, except per share amounts)

	Jun 30, 2016			Mar 31, 2016			Dec 31, 2015			Sep 30, 2015			Jun 30, 2015
Share and Equity Related Data:
Book value per share		$22.73			$22.40			$22.06			$21.82			$21.34
Tangible book value per share - Non-GAAP (1)		$18.35			$17.98			$17.62			$17.36			$17.61
Market value per share		$37.92			$37.32			$39.52			$38.45			$39.48
Shares issued and outstanding at end of period	17,081			17,024			17,020			16,985			16,834

Capital Ratios:
Tier 1 risk-based capital	11.57% (i)			11.56		%	11.64		%	11.83		%	11.79		%
Total risk-based capital	12.43% (i)			12.45		%	12.58		%	12.80		%	12.78		%
Tier 1 leverage ratio	9.21% (i)			9.31		%	9.37		%	9.26		%	9.31		%
Common equity tier 1	10.84% (i)			10.82		%	10.89		%	11.05		%	11.00		%
Equity to assets	9.91		%	9.93		%	9.95		%	10.08		%	9.86		%
Tangible equity to tangible assets - Non-GAAP (1)	8.16		%	8.13		%	8.11		%	8.18		%	8.28		%
(i) - estimated



											For the Six Months Ended
	For the Three Months Ended										For the Six Months Ended
	Jun 30, 2016		Mar 31, 2016		Dec 31, 2015		Sep 30, 2015		Jun 30, 2015		Jun 30, 2016		Jun 30, 2015
Performance Ratios:
Net interest margin (FTE)	3.05	%	3.24	%	3.08	%	3.07	%	3.15	%	3.15	%	3.16	%
Return on average assets	1.14	%	1.16	%	1.16	%	1.11	%	1.27	%	1.15	%	1.25	%
Return on average tangible assets - Non-GAAP (1)	1.17	%	1.18	%	1.19	%	1.13	%	1.29	%	1.17	%	1.27	%
Return on average equity	11.50	%	11.50	%	11.52	%	11.13	%	12.88	%	11.50	%	12.71	%
Return on average tangible equity - Non-GAAP (1)	14.28	%	14.34	%	14.45	%	13.82	%	15.62	%	14.31	%	15.45	%


(1)	See the section labeled “Supplemental Information - Non-GAAP Financial Measures” at the end of this document.

-7-



SELECTED FINANCIAL HIGHLIGHTS
(Unaudited; Dollars in thousands)
															For the Six Months Ended
	For the Three Months Ended														For the Six Months Ended
	Jun 30, 2016			Mar 31, 2016		Dec 31, 2015			Sep 30, 2015			Jun 30, 2015			Jun 30, 2016			Jun 30, 2015
Wealth Management Results
Wealth Management Revenues:
Trust and investment management fees		$8,195			$8,065		$8,001			$7,768			$7,238			$16,260			$14,380
Mutual fund fees	812			843		952			989			1,032			1,655			2,068
Asset-based revenues	9,007			8,908		8,953			8,757			8,270			17,915			16,448
Transaction-based revenues	474			266		214			145			642			740			899
Total wealth management revenues		$9,481			$9,174		$9,167			$8,902			$8,912			$18,655			$17,347

Assets Under Administration:
Balance at beginning of period		$5,878,967			$5,844,636		$5,714,201			$5,211,548			$5,159,663			$5,844,636			$5,069,966
Acquisition of Halsey Associates, Inc.	—			—		—			839,994			—			—			—
Net investment appreciation (depreciation) & income	71,447			22,389		153,953			(316,121		)	(13,932		)	93,835			66,940
Net client asset flows	(45,395		)	11,942		(23,518		)	(21,220		)	65,817			(33,452		)	74,642
Balance at end of period		$5,905,019			$5,878,967		$5,844,636			$5,714,201			$5,211,548			$5,905,019			$5,211,548

Mortgage Banking Results
Mortgage Banking Revenues:
Gains & commissions on loan sales, net		$2,804			$2,134		$2,528			$1,964			$2,748			$4,938			$5,333
Residential mortgage servicing fee income, net	(94		)	64		54			26			(7		)	(30		)	(4		)
Total mortgage banking revenues		$2,710			$2,198		$2,582			$1,990			$2,741			$4,908			$5,329

Residential Mortgage Loan Originations:
Originations for retention in portfolio		$54,080			$47,545		$38,080			$76,963			$65,134			$101,626			$119,809
Originations for sale to secondary market (1)	154,043			90,458		134,125			126,353			134,360				$244,501		263,356
Total mortgage loan originations		$208,123			$138,003		$172,205			$203,316			$199,494			$346,127			$383,165

Residential Mortgage Loans Sold:
Sold with servicing rights retained		$45,804			$26,454		$44,493			$37,782			$32,693			$72,258			$79,949
Sold with servicing rights released (1)	93,239			79,507		82,906			94,645			110,484				$172,746		191,125
Total mortgage loans sold		$139,043			$105,961		$127,399			$132,427			$143,177			$245,004			$271,074


(1)	Also includes loans originated in a broker capacity.

-8-



END OF PERIOD LOAN AND DEPOSIT COMPOSITION
(Unaudited; Dollars in thousands)

	Jun 30, 2016		Mar 31, 2016		Dec 31, 2015		Sep 30, 2015		Jun 30, 2015
Commercial:
Mortgages		$1,074,747		$976,931		$931,953		$873,767		$876,589
Construction & development	81,812		123,032		122,297		121,857		110,989
Commercial & industrial	575,661		598,848		600,297		584,230		595,959
Total commercial	1,732,220		1,698,811		1,654,547		1,579,854		1,583,537
Residential real estate:
Mortgages	978,399		980,274		984,437		994,808		971,705
Homeowner construction	26,637		24,075		29,118		29,406		29,558
Total residential real estate	1,005,036		1,004,349		1,013,555		1,024,214		1,001,263
Consumer:
Home equity lines	260,541		258,513		255,565		252,862		249,845
Home equity loans	39,572		45,499		46,649		47,610		47,437
Other	43,515		39,821		42,811		45,378		46,502
Total consumer	343,628		343,833		345,025		345,850		343,784
Total loans		$3,080,884		$3,046,993		$3,013,127		$2,949,918		$2,928,584



	June 30, 2016				December 31, 2015
	Balance		% of Total		Balance		% of Total
Commercial Real Estate Loans by Property Location:
Rhode Island, Connecticut, Massachusetts		$1,073,506	92.9	%		$959,883	91.0	%
New York, New Jersey, Pennsylvania	69,872		6.0	%	80,989		7.7	%
New Hampshire	13,181		1.1	%	13,377		1.3	%
Total commercial real estate loans (1)		$1,156,559	100.0	%		$1,054,249	100.0	%

Residential Mortgages by Property Location:
Rhode Island, Connecticut, Massachusetts		$989,085	98.5	%		$995,743	98.2	%
New Hampshire, Vermont	9,500		0.9	%	10,186		1.0	%
New York, Virginia, New Jersey, Maryland, Pennsylvania	3,434		0.3	%	4,163		0.4	%
Ohio	1,132		0.1	%	1,557		0.2	%
Other	1,885		0.2	%	1,906		0.2	%
Total residential mortgages		$1,005,036	100.0	%		$1,013,555	100.0	%


(1)	Commercial real estate loans consist of commercial mortgages and construction and development loans. Commercial mortgages are loans secured by income producing property.



	Jun 30, 2016		Mar 31, 2016		Dec 31, 2015		Sep 30, 2015		Jun 30, 2015
Deposits:
Non-interest bearing demand deposits		$476,848		$474,477		$475,398		$472,349		$429,904
Interest-bearing demand deposits	35,459		64,642		61,900		41,507		27,851
NOW accounts	414,532		394,873		412,602		358,973		357,922
Money market accounts	675,896		763,565		823,490		855,858		789,334
Savings accounts	342,579		331,800		326,967		305,775		300,108
Time deposits (in-market)	549,935		540,815		531,419		534,266		549,410
Wholesale brokered time deposits	294,101		309,479		302,479		267,552		284,590
Total deposits		$2,789,350		$2,879,651		$2,934,255		$2,836,280		$2,739,119

-9-



CREDIT & ASSET QUALITY DATA
(Unaudited; Dollars in thousands)

	Jun 30, 2016			Mar 31, 2016			Dec 31, 2015			Sep 30, 2015			Jun 30, 2015
Asset Quality Ratios:
Nonperforming assets to total assets	0.48		%	0.49		%	0.58		%	0.48		%	0.45		%
Nonaccrual loans to total loans	0.56		%	0.57		%	0.70		%	0.57		%	0.52		%
Allowance for loan losses to nonaccrual loans	149.73		%	150.00		%	128.61		%	161.25		%	182.32		%
Allowance for loan losses to total loans	0.84		%	0.86		%	0.90		%	0.92		%	0.94		%

Nonperforming Assets:
Commercial mortgages		$4,054			$4,054			$5,711			$4,915			$4,915
Commercial construction & development	—			—			—			—			—
Commercial & industrial	1,204			2,659			3,018			1,137			1,039
Residential real estate mortgages	10,409			9,367			10,666			9,472			7,411
Consumer	1,581			1,345			1,652			1,320			1,766
Total nonaccrual loans	17,248			17,425			21,047			16,844			15,131
Other real estate owned	1,515			1,326			716			955			1,388
Total nonperforming assets		$18,763			$18,751			$21,763			$17,799			$16,519

Past Due Loans:
Commercial mortgages		$4,062			$4,564			$4,555			$5,062			$4,929
Commercial & industrial	1,978			2,906			462			4,337			5,518
Residential real estate mortgages	8,893			8,703			9,286			10,567			10,904
Consumer loans	2,201			2,122			3,256			1,845			2,678
Total past due loans		$17,134			$18,295			$17,559			$21,811			$24,029

Total past due loans to total loans	0.56		%	0.60		%	0.58		%	0.74		%	0.82		%
Accruing loans 90 days or more past due		$—			$—			$—			$—			$—
Nonaccrual loans included in past due loans		$13,211			$14,030			$13,635			$13,964			$12,397



																For the Six Months Ended
	For the Three Months Ended
	Jun 30, 2016			Mar 31, 2016			Dec 31, 2015			Sep 30, 2015			Jun 30, 2015			Jun 30, 2016			Jun 30, 2015
Nonaccrual Loan Activity:
Balance at beginning of period		$17,425			$21,047			$16,844			$15,131			$15,865			$21,047			$15,945
Additions to nonaccrual status	2,072			1,352			7,029			3,319			2,567			3,424			4,175
Loans returned to accruing status	—			(206		)	(303		)	(156		)	(1,756		)	(206		)	(2,122		)
Loans charged-off	(860		)	(1,475		)	(904		)	(725		)	(355		)	(2,335		)	(676		)
Loans transferred to other real estate owned	(435		)	(610		)	(716		)	—			(261		)	(1,045		)	(491		)
Payments, payoffs and other changes	(954		)	(2,683		)	(903		)	(725		)	(929		)	(3,637		)	(1,700		)
Balance at end of period		$17,248			$17,425			$21,047			$16,844			$15,131			$17,248			$15,131

Allowance for Loan Losses:
Balance at beginning of period		$26,137			$27,069			$27,161			$27,587			$27,810			$27,069			$28,023
Provision charged to earnings	450			500			750			200			100			950			100
Charge-offs	(860		)	(1,475		)	(904		)	(725		)	(355		)	(2,335		)	(676		)
Recoveries	99			43			62			99			32			142			140
Balance at end of period		$25,826			$26,137			$27,069			$27,161			$27,587			$25,826			$27,587

Net Loan Charge-Offs (Recoveries):
Commercial mortgages		$65			$1,249			$405			($4	)		$196			$1,314			$316
Commercial & industrial	684			(18		)	217			348			26			666			19
Residential real estate mortgages	2			134			117			12			4			136			50
Consumer	10			67			103			270			97			77			151
Total		$761			$1,432			$842			$626			$323			$2,193			$536

Net charge-offs to average loans (annualized)	0.10		%	0.19		%	0.11		%	0.08		%	0.04		%	0.14		%	0.04		%

-10-

The following table presents average balance and interest rate information. Tax-exempt income is converted to a fully taxable equivalent basis using the statutory federal income tax rate adjusted for applicable state income taxes net of the related federal tax benefit. Unrealized gains (losses) on available for sale securities and fair value adjustments on mortgage loans held for sale are excluded from the average balance and yield calculations. Nonaccrual and renegotiated loans, as well as interest recognized on these loans are included in amounts presented for loans.



CONSOLIDATED AVERAGE BALANCE SHEETS
(Unaudited; Dollars in thousands)

For the Three Months Ended	June 30, 2016					March 31, 2016					June 30, 2015
	Average Balance		Interest		Yield/ Rate	Average Balance		Interest		Yield/ Rate	Average Balance		Interest		Yield/ Rate

Assets:
Commercial mortgages		$1,019,290		$8,992	3.55		$933,939		$8,215	3.54		$873,212		$7,779	3.57
Construction & development	117,204		985		3.38	129,217		1,108		3.45	99,435		773		3.12
Commercial & industrial	591,893		6,408		4.35	604,519		7,681		5.11	601,536		7,378		4.92
Total commercial loans		$1,728,387		$16,385	3.81		$1,667,675		$17,004	4.10		$1,574,183		$15,930	4.06
Residential real estate loans, including loans held for sale	1,024,653		9,980		3.92	1,031,260		10,155		3.96	1,025,029		10,102		3.95
Consumer loans	342,866		3,311		3.88	343,519		3,393		3.97	338,809		3,183		3.77
Total loans	3,095,906		29,676		3.86	3,042,454		30,552		4.04	2,938,021		29,215		3.99
Cash, federal funds sold and short-term investments	69,839		70		0.40	68,488		64		0.38	63,858		29		0.18
FHLBB stock	31,723		231		2.93	25,597		210		3.30	37,730		164		1.74
Taxable debt securities	396,428		2,487		2.52	359,060		2,370		2.65	320,643		2,176		2.72
Nontaxable debt securities	28,531		433		6.10	33,313		507		6.12	40,886		627		6.15
Total securities	424,959		2,920		2.76	392,373		2,877		2.95	361,529		2,803		3.11
Total interest-earning assets	3,622,427		32,897		3.65	3,528,912		33,703		3.84	3,401,138		32,211		3.80
Noninterest-earning assets	247,081					240,113					221,577
Total assets		$3,869,508					$3,769,025					$3,622,715
Liabilities and Shareholders' Equity:
Interest-bearing demand deposits		$42,952		$7	0.07		$50,704		$13	0.10		$38,129		$3	0.03
NOW accounts	403,136		53		0.05	386,488		56		0.06	363,434		53		0.06
Money market accounts	710,075		459		0.26	786,633		515		0.26	820,887		941		0.46
Savings accounts	338,504		49		0.06	328,174		49		0.06	298,286		50		0.07
Time deposits (in-market)	542,621		1,345		1.00	538,035		1,315		0.98	554,839		1,390		1.00
Wholesale brokered time deposits	302,707		1,068		1.42	296,801		1,020		1.38	285,844		911		1.28
FHLBB advances	587,395		2,313		1.58	453,019		2,152		1.91	391,152		1,891		1.94
Junior subordinated debentures	22,681		119		2.11	22,681		112		1.99	22,681		241		4.26
Other	66		1		6.09	79		2		10.18	116		2		6.92
Total interest-bearing liabilities	2,950,137		5,414		0.74	2,862,614		5,234		0.74	2,775,368		5,482		0.79
Demand deposits	473,731					471,782					441,355
Other liabilities	60,923					54,287					48,627
Shareholders' equity	384,717					380,342					357,365
Total liabilities and shareholders' equity		$3,869,508					$3,769,025					$3,622,715
Net interest income (FTE)				$27,483					$28,469					$26,729
Interest rate spread					2.91					3.10					3.01
Net interest margin					3.05					3.24					3.15

Interest income amounts presented in the preceding table include the following adjustments for taxable equivalency:



For the Three Months Ended	Jun 30, 2016		Mar 31, 2016		Jun 30, 2015
Commercial loans		$554		$554		$476
Nontaxable debt securities	153		180		225
Total		$707		$734		$701

-11-



CONSOLIDATED AVERAGE BALANCE SHEETS
(Unaudited; Dollars in thousands)

For the Six Months Ended	June 30, 2016					June 30, 2015
	Average Balance		Interest		Yield/ Rate	Average Balance		Interest		Yield/ Rate

Assets:
Commercial mortgages		$976,619		$17,207	3.54		$862,638		$15,496	3.62
Construction & development	123,209		2,093		3.42	91,911		1,439		3.16
Commercial & industrial	598,203		14,089		4.74	604,984		14,307		4.77
Total commercial loans	1,698,031		33,389		3.95	1,559,533		31,242		4.04
Residential real estate loans, including loans held for sale	1,027,956		20,135		3.94	1,027,509		20,416		4.01
Consumer loans	343,193		6,704		3.93	337,578		6,351		3.79
Total loans	3,069,180		60,228		3.95	2,924,620		58,009		4.00
Cash, federal funds sold and short-term investments	69,164		134		0.39	57,492		54		0.19
FHLBB stock	28,660		441		3.09	37,730		329		1.76
Taxable debt securities	377,744		4,857		2.59	321,602		4,435		2.78
Nontaxable debt securities	30,922		940		6.11	42,762		1,291		6.09
Total securities	408,666		5,797		2.85	364,364		5,726		3.17
Total interest-earning assets	3,575,670		66,600		3.75	3,384,206		64,118		3.82
Noninterest-earning assets	243,597					221,686
Total assets		$3,819,267					$3,605,892
Liabilities and Shareholders' Equity:
Interest-bearing demand deposits		$46,828		$20	0.09		$37,991		$11	0.06
NOW accounts	394,812		110		0.06	346,605		100		0.06
Money market accounts	748,354		975		0.26	810,519		1,825		0.45
Savings accounts	333,339		96		0.06	296,117		96		0.07
Time deposits (in-market)	540,328		2,659		0.99	560,917		2,859		1.03
Wholesale brokered time deposits	299,754		2,089		1.40	290,230		1,846		1.28
FHLBB advances	520,207		4,465		1.73	397,925		3,793		1.92
Junior subordinated debentures	22,681		231		2.05	22,681		482		4.29
Other	73		3		8.26	122		5		8.26
Total interest-bearing liabilities	2,906,376		10,648		0.74	2,763,107		11,017		0.80
Demand deposits	472,757					440,136
Other liabilities	57,605					48,342
Shareholders' equity	382,529					354,307
Total liabilities and shareholders' equity		$3,819,267					$3,605,892
Net interest income (FTE)				$55,952					$53,101
Interest rate spread					3.01					3.02
Net interest margin					3.15					3.16

Interest income amounts presented in the preceding table include the following adjustments for taxable equivalency:

-12-



SUPPLEMENTAL INFORMATION - Calculation of Non-GAAP Financial Measures
(Unaudited; Dollars in thousands, except per share amounts)

	Jun 30, 2016			Mar 31, 2016			Dec 31, 2015			Sep 30, 2015			Jun 30, 2015
Tangible Book Value per Share:
Total shareholders' equity, as reported		$388,332			$381,280			$375,388			$370,527			$359,167
Less:
Goodwill	64,059			64,059			64,059			64,196			58,114
Identifiable intangible assets, net	10,814			11,137			11,460			11,793			4,539
Total tangible shareholders' equity		$313,459			$306,084			$299,869			$294,538			$296,514

Shares outstanding, as reported	17,081			17,024			17,020			16,985			16,834

Book value per share - GAAP		$22.73			$22.40			$22.06			$21.82			$21.34
Tangible book value per share - Non-GAAP		$18.35			$17.98			$17.62			$17.34			$17.61

Tangible Equity to Tangible Assets:
Total tangible shareholders' equity		$313,459			$306,084			$299,869			$294,538			$296,514

Total assets, as reported		$3,917,081			$3,838,210			$3,771,604			$3,674,836			$3,644,477
Less:
Goodwill	64,059			64,059			64,059			64,196			58,114
Identifiable intangible assets, net	10,814			11,137			11,460			11,793			4,539
Total tangible assets		$3,842,208			$3,763,014			$3,696,085			$3,598,847			$3,581,824

Equity to assets - GAAP	9.91		%	9.93		%	9.95		%	10.08		%	9.86		%
Tangible equity to tangible assets - Non-GAAP	8.16		%	8.13		%	8.11		%	8.18		%	8.28		%



	For the Three Months Ended															For the Six Months Ended
	Jun 30, 2016			Mar 31, 2016			Dec 31, 2015			Sep 30, 2015			Jun 30, 2015			Jun 30, 2016			Jun 30, 2015
Return on Average Tangible Assets:
Net income, as reported		$11,057			$10,935			$10,744			$10,208			$11,503			$21,992			$22,513

Total average assets, as reported		$3,869,508			$3,769,025			$3,700,441			$3,678,487			$3,622,715			$3,819,267			$3,605,892
Less average balances of:
Goodwill	64,059			64,059			64,194			62,524			58,114			64,059			58,114
Identifiable intangible assets, net	10,972			11,294			11,616			8,768			4,614			11,133			4,691
Total average tangible assets		$3,794,477			$3,693,672			$3,624,631			$3,607,195			$3,559,987			$3,744,075			$3,543,087

Return on average assets - GAAP	1.14		%	1.16		%	1.16		%	1.11		%	1.27		%	1.15		%	1.25		%
Return on average tangible assets - Non-GAAP	1.17		%	1.18		%	1.19		%	1.13		%	1.29		%	1.17		%	1.27		%

Return on Average Tangible Equity:
Net income, as reported		$11,057			$10,935			$10,744			$10,208			$11,503			$21,992			$22,513

Total average equity, as reported		$384,717			$380,342			$373,197			$366,724			$357,365			$382,529			$354,307
Less average balances of:
Goodwill	64,059			64,059			64,194			62,524			58,114			64,059			58,114
Identifiable intangible assets, net	10,972			11,294			11,616			8,768			4,614			11,133			4,691
Total average tangible equity		$309,686			$304,989			$297,387			$295,432			$294,637			$307,337			$291,502

Return on average equity - GAAP	11.50		%	11.50		%	11.52		%	11.13		%	12.88		%	11.50		%	12.71		%
Return on average tangible equity - Non-GAAP	14.28		%	14.34		%	14.45		%	13.82		%	15.62		%	14.31		%	15.45		%

-13-

For the Six Months Ended

Jun 30, 2016

Jun 30, 2015

Commercial loans

Nontaxable debt securities