Washington Trust Bancorp, Inc. · NASDAQ:WASH
Washington Trust Bancorp — Virtual KBW Community Bank Investor Conference 2020
58 slides from Washington Trust Bancorp's conference presentation, Jul 28, 2020
Slide 1: Virtual KBW Community Bank Investor Conference July 28-30, 2020
Virtual KBW Community Bank Investor Conference July 28 ‐ 30, 2020
Slide 2: Agenda and forward-looking statements
Page Executive Team ……….………….…….……….…..…. 3 Who We Are ………………..………………….........… 4 Strategic Priorities .…………….......................... 10 COVID‐19 Update ……………….…………………….. 14 Earnings Capacity .……………............................ 19 Credit Quality ……………………………………......…. 25 Capital Management …………………
Slide 3: Executive Team
Ned Handy Chairman & Chief Executive Officer Mark Gim President and Chief Operating Officer Ron Ohsberg Senior EVP, Chief Financial Officer and Treasurer Pictured left to right: Mark Gim, Ned Handy, and Ron Ohsberg Investor Information Elizabeth B. Eckel Senior Vice President, Chief Marketing & Corp
Slide 4: Washington Trust Bancorp, Inc.
WASHINGTON TRUST BANCORP, INC.
Slide 5: Who We Are
• Oldest community bank in the US • High‐performing regional bank • Largest state‐chartered bank in RI o $5.9 B assets o $4.3 B loans o $4.1 B deposits • Diversified financial services company • Premier regional wealth management firm o $6.1 B assets under administration • Market capitalization(1):
Slide 6: Awards and recognition
• American Banker “Best Banks to Work For” • American Banker “Top‐Performing Mid‐Tier Bank” 5th consecutive year • Bank Director “Bank Performance Score Card” 6th consecutive year • Providence Business News “Best Places to Work” 9th consecutive year • S&P Global “Best‐Performing Community Banks” • F
Slide 7: Sustainable relevant scalable business lines
Sustainable Commercial Retail Banking Banking Relevant Scalable Wealth Management 7
Slide 8: History of acquisitions and expansion
RI, CT & MA CT & MA Bank & Wealth Management Acquisitions Mortgage Market 2015 Halsey Associates Rhode Island Expansion 2005 Weston Financial 2002 First Financial Organic Branch 2016 Wellesley, MA Expansion 2014 Braintree, MA 2000 Phoenix Investment 1999 PierBank 2019 North Providence 2011 Burlingto
Slide 9: Strategic Priorities
STRATEGIC PRIORITIES WASHINGTON TRUST BANCORP, INC.
Slide 10: Geographic diversification of lending
• Enhanced lending activity into adjacent New England states • Reduced dependence on Rhode Island asset generation • Develop greater presence in attractive markets 10
Slide 11: Market expansion and growth
• Expand into markets dominated by key competitors • Continue organic and contiguous growth • Leverage key deposit, wealth and mortgage relationships • Capitalize on brand strength and service quality reputation 11
Slide 12: Client experience and technology
• Blend high service solutions with clients’ technology needs • Create seamless client experiences across all channels • Deepen client relationships • Optimize branch delivery • Invest in key technology 12
Slide 13: Performance goals
• Top‐quartile performance • Pristine asset quality • Consistent profitability • Managed risk EPS Technology Efficiency 13
Slide 14: COVID-19 Update
COVID-19 UPDATE 14 WASHINGTON TRUST BANCORP, INC.
Slide 15: CEO comments on COVID-19 preparedness
“We implemented our business continuity and pandemic plans and were as prepared as we could be for COVID‐19 and economic disruption that followed. Our second quarter performance was a testament to our people and our unwavering care for our customers. It also once again demonstrated how our diversifi
Slide 16: Regional reopening status
• Reopening status: • Rhode Island and MA are both in Phase 3 • CT is in Phase 2, poised to move to Phase 3 • THE COVID‐19 pandemic response in Rhode Island, Massachusetts and Connecticut rank among the best in the US • Rhode Island officials have received praise for quick and decisive action to rei
Slide 17: Phased COVID-19 operating response
Phase 1 (March 21 –July 5) Phase 2 (July 6 – tbd) Phase 3 (tbd) • Implemented health and safety • Reopened branches lobbies to • Lift restrictions for employee protocols across the company foot traffic with new safety customer interactions • Limited employees working onsite; encouraged noncustomer‐
Slide 18: PPP lending, loan modifications and customer relief
Paycheck Protection Program (PPP) • One of the top PPP lenders in Rhode Island • 1,748 loans registered with the SBA totaling $221 million • 21 loans pending for $1.5 million • Working with eligible borrowers on PPP forgiveness Loan Modifications • Modified 234 commercial accounts and 361 consumer a
Slide 19: Earnings Capacity
EARNINGS CAPACITY 19 WASHINGTON TRUST BANCORP, INC.
Slide 20: Proven track record of earnings growth
Proven track record of earnings growth $4.50 80 $4.00 70 $3.50 60 $3.00 50 ($mils) $2.50 40 $2.00 income 30 Net $1.50 20 $1.00 $0.50 10 $‐ 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017* 2018 2019 YTD 06/2020 Net income ($mils) YTD 06/30 Net income ($mils) Diluted EPS At December 31st
Slide 21: Core ROE, ROA and peer comparison
Core ROE (1) Core ROA (1) 18.0% 1.8% 15.0% 1.5% 12.0% 1.2% 9.0% 0.9% 6.0% 0.6% 3.0% 0.3% 0.0% 0.0% ROATCE Dividend Yield 25.0% 6.0% 20.0% 5.0% 4.0% 15.0% 3.0% 10.0% 2.0% 5.0% 1.0% 0.0% 0.0% For the three months ended 3/31/2020; Peers are public banks & thrifts with $3 billion to $10 billion in total
Slide 22: Diversified revenue stream
Diversified revenue stream All Other Deposit 6% Fees Fee Income 1% 42% Net Interest Income 58% Mortgage Banking 19% Wealth Management 16% For the six months ended June 30, 2020 22
Slide 23: Noninterest income versus peers
Better than 96% of peer group (1) Noninterest Income as % of Total Revenue 50% 40% 30% 20% 10% 0% WASH Average peer Median peer (1) Percentile ranking for the three months ended March 31, 2020 unless otherwise noted among public banks & thrifts with $3 billion to $10 billion in total assets excludin
Slide 24: Efficiency ratio versus peers
Better than 62% of peer group (1) 70.0% 65.0% 60.0% 55.0% 50.0% 45.0% 40.0% 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Q1 2020 WASH efficiency ratio Average peer efficiency ratio Median peer efficiency ratio (1) Percentile ranking for the three months ended March 31, 2020
Slide 25: Credit Quality
CREDIT QUALITY 25 WASHINGTON TRUST BANCORP, INC.
Slide 26: Net charge-offs to average loans
NCO / Average Loans 1.4% 1.2% 1.0% 0.8% 0.6% 0.4% 0.2% 0.0% WASH NCO/Avg Loans Median NCO/Avg Loans Average NCO/Avg Loans Percentile ranking for the year ended December 31st unless otherwise noted among public banks & thrifts with $3 billion to $10 billion in total assets excluding Puerto Rico; Sour
Slide 27: Nonperforming assets and non-accrual loans
• Consistently low loss experience • Prudent risk profile • Strong credit quality metrics Nonperforming Assets / Total Assets Non‐accrual Loans / Total Loans 3.0% 3.0% 2.7% 2.5% 2.4% 2.1% 2.0% 1.8% 1.5% 1.5% 1.2% 1.0% 0.9% 0.6% 0.5% 0.3% 0.0% 0.0% At December 31st, unless otherwise noted Peers are p
Slide 28: COVID-19 related provision
Approximately $6 million of Q1 2020 provision related to COVID‐19 Incr / (Decr) $14,427 $ thousands 28
Slide 29: CECL methodology and assumptions
• Used the Current Expected Credit Loss (CECL) methodology. • Relied on FactSet’s 6/29 baseline forecast, which is roughly comparable to Moody’s baseline forecast. This showed unemployment peaking in Q2‐20 at 13.4%, dropping in Q3‐20 to 10.7%; in Q4‐20 to 9.4%; and remaining at 7.4% through 2021. •
Slide 30: Commercial real estate portfolio overview
Portfolio Overview as of June 30, 2020 (outstandings) and July 17, 2020 (deferments) • Total portfolio: $1.6 billion; $462.2 million (28%) deferred % of CRE Portfolio by Segment as of 6/30 Multi‐family dwelling (32%) 6% Retail (20%) 42% Office (18%) 26% Hospitality (9%) 81% Healthcare (7%) 54% Indus
Slide 31: Commercial and industrial portfolio and PPP
Portfolio Overview as of June 30, 2020 (outstandings) and July 17, 2020 (deferments) • Total portfolio: $852 million; $74.4 million (9%) deferred Paycheck Protect Program (PPP) • 1,748 SBA approved loans totaling $221 million • 21 pending loans totaling $1.48 million % of C&I Portfolio by Segment as
Slide 32: Residential and home equity portfolios
Residential Home Equity Total portfolio ($ millions) $1,508.2 $277.6 FICO score* 749 757 Total delinquencies 0.8% 0.6% CT 9% Other Nonperforming 0.9% 0.6% 1% Net charge‐offs to average loans 0.00% 0.12% LTV(1) 57.4% 62.9% RI MA 23% 67% • Home Equity deferments: 87 loans for $8.6 million • Residentia
Slide 33: Capital Management
CAPITAL MANAGEMENT 33 WASHINGTON TRUST BANCORP, INC.
Slide 34: Capital ratios and book value
Total Risk‐based Capital • Suits solid balance sheet, fee‐ 25.0% intensive business model 20.0% • Supports dividend & future growth 15.0% 10.0% 5.0% Tangible Book Value 0.0% Book Value per Share per Share (1) $30.14 $26.04 $29.00 $24.94 $25.90 $21.74 Tangible Equity / Tangible Assets 12.5% 10.0% 7.5
Slide 35: Capital stress testing analysis
Stress testing analysis performed using 3rd party Trepp model against our call report data, modeled on regulator DFAST* scenarios Standards for Internal Actual Scenario Minimums Capital Ratio "well‐capitalized" thresholds Q1/20 Baseline Sev Adv Common equity tier 1 6.50% 7.00% 11.08% 10.16% 8.35% Ti
Slide 36: Dividend contribution to shareholder value
• Important contributor to shareholder value • Q2‐2020 dividend of 51¢ per share $2.00 • Dividend yield 6.09% (1) $1.02 16¢ (1) As of July 24, 2020 36
Slide 37: Tangible book value plus dividends CAGR
Tangible Book Value per Share Plus Cumulative Dividend per Share CAGR 12/31/2006 to 3/31/2020 12.6% 8.4% 7.3% WASH Average peer Median peer As of March 31, 2020 Public banks & thrifts with $3 billion to $10 billion in total assets excluding Puerto Rico; Source: S&P Global Market Intelligence 37
Slide 38: Total return versus SNL U.S. Bank index
WASH Total Return (%) versus SNL U.S. Bank 350 300 250 200 150 100 50 0 ‐50 WASH SNL U.S. Bank Source: S&P Global Market Intelligence as of July 24, 2020 38
Slide 39: Financial Highlights
FINANCIAL HIGHLIGHTS 39 WASHINGTON TRUST BANCORP, INC.
Slide 40: Net interest income and margin
3.20% 200 3.02% 3.01% 180 3.00% 2.93% 160 $133.6 $134.7 2.77% 140 2.80% $121.9 $113.2 120 2.60% 100 2.46% 80 2.40% $64.10 60 40 2.20% 20 2.00% 0 2016 2017 2018 2019 YTD 6/30/20 Net Interest Income (FTE) YTD 6/30 Net Interest Income (FTE) Net Interest Margin (FTE) $ millions; as of and for the years
Slide 41: Asset sensitivity and adjustable rate loans
• Balance sheet is asset sensitive • Adjustable rate loans mainly 1M LIBOR and Prime • Adjustable rate loans largely funded with short‐term adjustable liabilities (<= 1 year) Q3 2020 Q4 2020 Q1 2021 Q2 2021 Total Adjustable rate loans $1,967 81 83 75 2,207 Wholesale funding 719 482 256 36 1,494 Reta
Slide 42: Wealth management assets under administration
Assets Under Administration (AUA) ($ billions) $6.7 • Key contributor to pre‐tax income $5.9 $6.2 $6.1 • Average client size: $2.3 million • 79% high net worth individuals • Average fee: 56 basis points 2017 2018 2019 6/30/2020 Asset Mix Revenues ($ millions) Fixed Other Income 10% $39.3 $38.3 $36.8
Slide 43: Loan portfolio composition
$4.3 $3.9 7% $3.7 $3.4 $3.2 20% $3.0 Consumer 10% 18% C&I 38% 37% CRE 35% Residential 35% 2015 2016 2017 2018 2019 6/30/20 • Well‐diversified portfolio • 71% variable loans $ billions; at December 31st unless otherwise noted 43
Slide 44: Mortgage banking revenues and originations
Mortgage Banking Revenues (1) Mortgage Originations (2) $20.9 $945.5 $852.6 $14.8 $762.6 $717.9 $11.4 37% $10.4 33% 63% 67% 2017 2018 2019 YTD 2017 2018 2019 YTD 6/30/20 6/30/20 Originated for Sale Originated for Portfolio • Expense base is largely variable with volumes • Current pipeline is healthy
Slide 45: Residential mortgage portfolio distribution
As % of Total Loan Amount Range CT MA NH RI Other Total < $250,000 2% 7% 6% 0% 0% 15% > $250,000 up to $484,350 2% 17% 6% 0% 0% 25% > $484,350 (Jumbo) up to 1M 2% 29% 8% 1% 0% 40% > 1 Million 2% 15% 3% 0% 0% 20% Grand Total 9% 67% 23% 1% 0% 100% By State Loan Amount Range CT MA NH RI Other < $250,00
Slide 46: Residential lending geography
• Primarily in home territory • 99% in RI, CT and MA 46
Slide 47: Loan geographic mix shift
Residential Mortgages Residential Mortgages Commercial Loans & Commercial Loans 5% 2% 1% 7% 5% 3% 61% 39% 53% 47% 62% 76% 54% 37% 42% 48% 35% 23% 12/31/2015 6/30/2020 12/31/2015 6/30/2020 12/31/2015 6/30/2020 • Enhanced lending activity into adjacent New England states • Reduced dependence on Rhode
Slide 48: Commercial real estate concentration and geography
• Predominantly in RI, CT and MA • Concentration: ~329% • 39% in CT • 30% in MA • 26% in RI 48
Slide 49: Deposit composition
$4.1 $3.5 $3.5 $3.2 $3.1 31% Time deposits $2.9 31% Money market & savings 30% 36% Demand & NOW 39% 33% 2015 2016 2017 2018 2019 6/30/2020 • 38% of deposits are commercial‐based • 11% market share in RI; rank 3rd $ billions; at December 31st unless otherwise noted (1) Excludes wholesale brokered CDs
Slide 50: Rhode Island deposit market share
Total Total Deposits in Market Rank Institution (ST) Branch Count Market ($B) Share 1 Citizens (RI) 73 $10.6 34% 2 Bank of America (NC) 29 $7.0 23% 3 Washington Trust (RI) 22 $3.4 11% 4 Santander 29 $2.3 7% 5 Bank Rhode Island (MA) 20 $1.8 6% 6 TD Bank 9 $1.6 5% 7 BankNewport (RI) 17 $1.4 4% 8 Centr
Slide 51: Deposits per branch over time
$100,000 $150,000 $200,000 $250,000 $300,000 $350,000 $50,000 $0 Q2‐2011 Q3‐2011 $2,011 Q1‐2012 Q2‐2012 East East Q3‐2012 Side Providence $2,012 Q1‐2013 Q2‐2013 Q3‐2013 $2,013 Q1‐2014 Coventry Plainfield Q2‐2014 Q3‐2014 $2,014 Pike Q1‐2015 Q2‐2015 Q3‐2015 $2,015 North Johnston Q1‐2016 Q2‐2016 Provid
Slide 52: Securities portfolio
Largely Agency MBS • Fair value: $938.4 million • Amortized cost: $919.9 million • Yield on securities: 2.44% (yield as of Q2‐20) • Duration of 1.14 years • Limited extension potential US Agency Agency MBS 16.7% Corporate Bonds 81.1% 1.0% Trust Preferred ‐ Individual Issuers 1.2% As of June 30, 2020
Slide 53: Why Washington Trust
WHY WASHINGTON TRUST 53 WASHINGTON TRUST BANCORP, INC.
Slide 54: Why Washington Trust
• Unique business model with diverse revenue streams • Strong credit profile throughout all economic cycles • Consistent top quartile returns and robust dividend payout • Distinguished history with demonstrated track record • Clear vision with proven growth strategy • Committed to enhancing sharehol
Slide 55: Supplemental Information
SUPPLEMENTAL INFORMATION 55
Slide 56: Quarterly income statement
For the Quarter Ended Jun 30, Mar 31, Dec 31, Sep 30, Jun 30, $s in thousands 2020 2020 2019 2019 2019 Interest and dividend income $ 42,612 $ 47,116 $ 47,383 $ 49,527 $ 50,559 Interest expense 11,667 14,514 15,389 16,549 16,701 Net interest income 30,945 32,602 31,994 32,978 33,858 Provision for lo
Slide 57: Quarterly balance sheet
Jun 30, Mar 31, Dec 31, Sep 30, Jun 30, $s in thousands 2020 2020 2019 2019 2019 Assets: Cash and cash equivalents $ 223,340 $ 185,269 $ 138,455 $ 146,104 $ 119,814 Mortgage loans held for sale 43,997 49,751 27,833 44,657 39,996 Total securities 938,446 917,392 899,490 887,020 969,168 FHLB stock 50,
Slide 58: Tangible book value non-GAAP reconciliation
Jun 30, Dec 31, Dec 31, Dec 31, $s in thousands, except per share amounts 2020 2019 2018 2017 Calculation of tangible book value per share Total shareholders’ equity at end of period $520,163 $503,492 $448,184 $413,284 Less: Goodwill 63,909 63,909 63,909 63,909 Identifiable intangible assets, net 6,
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