form10-k20081231.htm
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
DC 20549
|
x
|
Annual
report pursuant to section 13 or 15(d) of the Securities Exchange Act of
1934 for the fiscal year ended DECEMBER 31, 2008
or
|
|
o
|
Transition
report pursuant to section 13 or 15(d) of the Securities Exchange Act of
1934 for the transition period from ____________ to
____________
|
Commission
file number: 000-13091
|
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
|
|
(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: NONE
Securities
registered pursuant to Section 12(g) of the Act:
COMMON
STOCK, $.0625 PAR VALUE PER SHARE
(Title
of class)
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act. oYes xNo
Indicate
by checkmark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act. oYes xNo
Indicate
by check mark whether the registrant: (1) has filed all reports required to be
filed by Section 13 or 15(d) of the 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. xYes oNo
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. o
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company. See definitions of “large accelerated filer,” “accelerated
filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange
Act. (Mark one):
|
Large
accelerated filer o
|
Accelerated
filer x
|
|
Non-accelerated
filer o
|
Smaller
reporting company o
|
|
(Do
not check if a smaller reporting company)
|
|
Indicate
by check mark whether the registrant is a shell company (as defined in Exchange
Act Rule 12b-2)
oYes xNo
The
aggregate market value of voting stock held by non-affiliates of the registrant
at June 30, 2008 was $215,971,363 based on a closing sales price of $19.70
per share as reported for the NASDAQ Global Select Market, which includes
$10,645,827 held by The Washington Trust Company under trust agreements and
other instruments.
The
number of shares of the registrant’s common stock, $.0625 par value per share,
outstanding as of February 25, 2009 was 15,949,541.
DOCUMENTS
INCORPORATED BY REFERENCE
Portions
of the Registrant’s Proxy Statement dated March 11, 2009 for the Annual
Meeting of Shareholders to be held April 28, 2009 are incorporated by
reference into Part III of this Form 10-K.
FORM
10-K
WASHINGTON
TRUST BANCORP, INC.
For
the Year Ended December 31, 2008
Washington
Trust Bancorp, Inc.
Washington
Trust Bancorp, Inc. (the “Bancorp”), a publicly-owned registered bank holding
company and financial holding company, was organized in 1984 under the laws of
the state of Rhode Island. The Bancorp owns all of the outstanding
common stock of The Washington Trust Company (the “Bank”), a Rhode Island
chartered commercial bank. The Bancorp was formed in 1984 under a
plan of reorganization in which outstanding common shares of the Bank were
exchanged for common shares of the Bancorp. See additional
information under the caption “Subsidiaries”.
Through
its subsidiaries, the Bancorp offers a broad range of financial services to
individuals and businesses, including wealth management, through its offices in
Rhode Island, Massachusetts and southeastern Connecticut, ATMs, and its Internet
website (www.washtrust.com). The Bancorp’s common stock is traded on
the NASDAQ Global SelectÒ Market under the symbol
“WASH.”
The
accounting and reporting policies of the Bancorp and its subsidiaries
(collectively, the “Corporation” or “Washington Trust”) are in accordance with
U. S. generally accepted accounting principles (“GAAP”) and conform to general
practices of the banking industry. At December 31, 2008,
Washington Trust had total assets of $3.0 billion, total deposits of
$1.8 billion and total shareholders’ equity of
$235.1 million.
Commercial
Banking
The
Corporation offers a variety of banking and related financial services,
including:
|
Residential
mortgages
|
Consumer
installment loans
|
Merchant
credit card services
|
|
Reverse
mortgages
|
Commercial
and consumer demand deposits
|
Telephone
banking services
|
|
Commercial
loans
|
Savings,
NOW and money market deposits
|
Internet
banking services
|
|
Construction
loans
|
Certificates
of deposit
|
Cash
management services
|
|
Home
equity lines of credit
|
Retirement
accounts
|
Remote
deposit capture
|
|
Home
equity loans
|
Automated
teller machines (ATMs)
|
Safe
deposit boxes
|
The
Corporation’s largest 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.
The
Corporation’s lending activities are conducted primarily in southern New England
and, to a lesser extent, other states. Washington Trust offers a
variety of commercial and retail lending products. In addition,
Washington Trust purchases loans for its portfolio from various other financial
institutions. In making commercial loans, Washington Trust may
occasionally solicit the participation of other banks and may also occasionally
participate in commercial loans originated by other banks. From time
to time, we sell the guaranteed portion of Small Business Administration (“SBA”)
loans to investors. Washington Trust generally underwrites its
residential mortgages based upon secondary market
standards. Residential mortgages are originated both for sale in the
secondary market as well as for retention in the Corporation’s loan
portfolio. Loan sales in the secondary market provide funds for
additional lending and other banking activities. The majority of
loans are sold with servicing released. We also originate residential
loans for various investors in a broker capacity, including conventional
mortgages and reverse mortgages.
Washington
Trust offers a wide range of banking services, including the acceptance of
demand, savings, NOW, money market and time deposits. Banking
services are accessible through a variety of delivery channels including branch
facilities, ATMs, telephone and Internet banking. Washington Trust
also sells various business services products including merchant credit card
processing and cash management services.
Wealth
Management Services
The
Corporation generates fee income from providing investment management, trust and
financial planning services. Washington Trust provides personal trust
services, including services as executor, trustee, administrator, custodian and
guardian. Institutional trust services are also provided, including
services as trustee for pension and profit sharing plans. Investment
management and financial planning services are provided for both personal and
institutional
clients. At December 31, 2008 and 2007, wealth management assets
under administration totaled $3.1 billion and $4.0 billion,
respectively. These assets are not included in the Consolidated
Financial Statements.
Business
Segments
Segment
reporting information is presented in Note 17 to the Consolidated Financial
Statements.
The
following summarizes Washington Trust’s acquisition history:
On
August 31, 2005, the Bancorp completed the acquisition of Weston Financial
Group, Inc. (“Weston Financial”), a Registered Investment Adviser and financial
planning company located in Wellesley, Massachusetts, with broker-dealer and
insurance agency subsidiaries. Pursuant to the Stock Purchase Agreement, dated
March 18, 2005, as amended December 24, 2008, the acquisition was
effected by the Bancorp’s acquisition of all of Weston Financial’s outstanding
capital stock. (1)
On
April 16, 2002, the Bancorp completed the acquisition of First Financial
Corp., the parent company of First Bank and Trust Company, a Rhode Island
chartered community bank. First Financial Corp. was headquartered in
Providence, Rhode Island and its subsidiary, First Bank and Trust Company,
operated banking offices in Providence, Cranston, Richmond and North Kingstown,
Rhode Island. The Richmond and North Kingstown branches were closed
and consolidated into existing Bank branches in May 2002. Pursuant to
the Agreement and Plan of Merger, dated November 12, 2001, the acquisition
was effected by means of the merger of First Financial Corp. with and into the
Bancorp and the merger of First Bank with and into the Bank. (1)
On
June 26, 2000, the Bancorp completed the acquisition of Phoenix Investment
Management Company, Inc. (“Phoenix”), an independent investment advisory firm
located in Providence, Rhode Island. Pursuant to the Agreement and
Plan of Merger, dated April 24, 2000, the acquisition was effected by means
of merger of Phoenix with and into the Bank. (2)
On
August 25, 1999, the Bancorp completed the acquisition of Pier Bank, a
Rhode Island chartered community bank headquartered in South Kingstown, Rhode
Island. Pursuant to the Agreement and Plan of Merger, dated
February 22, 1999, the acquisition was effected by means of merger of Pier
Bank with and into the Bank. (2)
_____________
| (1) |
These
acquisitions have been accounted for as a purchase and, accordingly, the
operations of the acquired companies are included in the Consolidated
Financial Statements from their dates of acquisition. |
|
(2)
|
These
acquisitions were accounted for as poolings of interests and, accordingly,
all financial data was restated to reflect the combined financial
condition and results of operations as if these acquisitions were in
effect for all periods presented.
|
Subsidiaries
The
Bancorp’s subsidiaries include the Bank and Weston Securities Corporation
(“WSC”). The Bancorp also owns all of the outstanding common stock of
WT Capital Trust I, WT Capital Trust II and Washington Preferred Capital Trust,
special purpose finance entities formed with the sole purpose of issuing trust
preferred debt securities and investing the proceeds in junior subordinated
debentures of the Bancorp. See Note 11 to the Consolidated
Financial Statements for additional information.
The
following is a description of Bancorp’s primary operating
subsidiaries:
The
Washington Trust Company
The
Bank was originally chartered in 1800 as the Washington Bank and is the oldest
banking institution headquartered in its market area and is among the oldest
banks in the United States. Its current corporate charter dates to
1902.
The
Bank provides a broad range of financial services, including lending, deposit
and cash management services, wealth management services and merchant credit
card services. The deposits of the Bank are insured by the Federal
Deposit Insurance Corporation (“FDIC”), subject to regulatory
limits.
The
Bank’s subsidiary, Weston Financial, is a Registered Investment Adviser and
financial planning company located in Wellesley, Massachusetts, with an
insurance agency subsidiary. In addition, the Bank has other passive
investment subsidiaries whose primary functions are to provide servicing on
passive investments, such as residential and consumer loans acquired from the
Bank and investment securities.
Weston
Securities Corporation
WSC
is a licensed broker-dealer that markets several of Weston Financial’s
investment programs, including mutual funds and variable
annuities. WSC acts as the principal distributor to a group of mutual
funds for which Weston Financial is the investment advisor.
Market
Area and Competition
Washington
Trust faces considerable competition in its market area for all aspects of
banking and related financial service activities. Competition from
both bank and non-bank organizations is expected to continue.
The
Bank contends with strong competition both in generating loans and attracting
deposits. The primary factors in competing are interest rates,
financing terms, fees charged, products offered, personalized customer service,
online access to accounts and convenience of branch locations, ATMs and branch
hours. Competition comes from commercial banks, credit unions, and
savings institutions, as well as other non-bank institutions. The
Bank faces strong competition from larger institutions with greater resources,
broader product lines and larger delivery systems than the Bank.
The
Bank operates ten of its seventeen branch offices in Washington County, Rhode
Island. As of June 30, 2008, based upon information reported in
the FDIC’s Deposit Market Share Report, the Bank had 47% of total deposits
reported by all financial institutions for Washington County. We have excluded
our out-of-market brokered certificates of deposit from this measurement to
provide a more representative measurement of our market
share. Out-of-market brokered certificates of deposit are utilized by
the Corporation as part of its overall funding program along with other
sources. The closest competitor held 26%, and the second closest
competitor held 8% of total deposits in Washington County. We believe
that being the largest commercial banking institution headquartered within this
market area provides a competitive advantage over other financial
institutions.
The
Bank’s remaining seven branch offices are located in Providence and Kent
Counties in Rhode Island and New London County in southeastern
Connecticut. In December 2008, Washington Trust relocated its
Washington Street branch office in Providence to a new branch office located in
the financial district of Providence. In 2009, the Bank plans to open
a de novo branch in Kent County (Warwick), subject to the approval of state
and federal regulators. The Warwick branch will bring the total
number of the Bank’s branch offices to eighteen. We continue to
expand our branch footprint and broaden our presence in Providence and Kent
Counties. Both the population and number of businesses in Providence
and Kent Counties far exceed those in Washington County.
Washington
Trust operates in a highly competitive wealth management services
marketplace. Key competitive factors include investment performance,
quality and level of service, and personal relationships. Principal
competitors in the wealth management services business are commercial banks and
trust companies, investment advisory firms, mutual fund companies, stock
brokerage firms, and other financial companies. Many of these
companies have greater resources than Washington Trust.
Employees
At
December 31, 2008, Washington Trust had 440 full-time and 43 part-time and
other employees. Washington Trust maintains a comprehensive employee
benefit program providing, among other benefits, group medical and dental
insurance, life insurance, disability insurance, a pension plan and a 401(k)
plan. Management considers relations with its employees to be
good. See Note 15 to the Consolidated Financial Statements for
additional information on certain employee benefit programs.
Supervision
and Regulation
The
business in which the Corporation is engaged is subject to extensive
supervision, regulation, and examination by various bank regulatory authorities
and other governmental agencies. State and federal banking laws have
as their principal objective either the maintenance of the safety and soundness
of financial institutions and the federal deposit
insurance
system or the protection of consumers, or classes of consumers, and depositors,
in particular, rather than the specific protection of shareholders of a bank or
its parent company.
Set
forth below is a brief description of certain laws and regulations that relate
to the regulation of Washington Trust. To the extent the following
material describes statutory or regulatory provisions, it is qualified in its
entirety by reference to the particular statute or regulation. A
change in applicable statutes, regulations or regulatory policy may have a
material effect on our business.
Regulation of the
Bancorp. As a registered bank holding company, the Bancorp is
subject to regulation under the Bank Holding Company Act of 1956, as amended
(the “BHCA”), and to inspection, examination and supervision by the Board of
Governors of the Federal Reserve System (the “FRB”), and the State of Rhode
Island, Department of Business Regulation, Division of Banking (the “Rhode
Island Division of Banking”).
The
FRB has the authority to issue orders to bank holding companies to cease and
desist from unsafe or unsound banking practices and violations of conditions
imposed by, or violations of agreements with, or commitments to, the
FRB. The FRB is also empowered to, among other things, assess civil
money penalties against companies or individuals who violate the BHCA or orders
or regulations thereunder, to order termination of non-banking activities of
non-banking subsidiaries of bank holding companies, and to order termination of
ownership and control of a non-banking subsidiary by a bank holding
company.
During
2005, the Bancorp elected financial holding company status pursuant to the
provisions of the Gramm-Leach-Bliley Act of 1999 (“GLBA”). As a
financial holding company, the Bancorp is authorized to engage in certain
financial activities in which a bank holding company may not
engage. “Financial activities” is broadly defined to include not only
banking, insurance and securities activities, but also merchant banking and
additional activities that the FRB, in consultation with the Secretary of the
Treasury, determines to be financial in nature, incidental to such financial
activities, or complementary activities that do not pose a substantial risk to
the safety and soundness of depository institutions or the financial system
generally. Currently, the Bancorp engages in broker-dealer activities
pursuant to this authority. If a financial holding company fails to
remain well capitalized and well managed, the company and its affiliates may not
commence any new activity that is authorized particularly for financial holding
companies. If a financial holding company remains out of compliance
for 180 days or such longer period as the FRB permits, the FRB may require the
financial holding company to divest either its insured depository institution or
all of its nonbanking subsidiaries engaged in activities not permissible for a
bank holding company. If a financial holding company fails to
maintain a “satisfactory” or better record of performance under the Community
Reinvestment Act, it will be prohibited, until the rating is raised to
satisfactory or better, from engaging in new activities, or acquiring companies
other than bank holding companies, banks or savings associations, except that
the Bancorp could engage in new activities, or acquire companies engaged in
activities that are closely related to banking under the BHCA. In
addition, if the FRB finds that the Bank is not well capitalized or well
managed, the Bancorp would be required to enter into an agreement with the FRB
to comply with all applicable capital and management requirements and which may
contain additional limitations or conditions. Until corrected, the
Bancorp would not be able to engage in any new activity or acquire companies
engaged in activities that are not closely related to banking under the BHCA
without prior FRB approval. If the Bancorp fails to correct any such
condition within a prescribed period, the FRB could order the Bancorp to divest
its banking subsidiary or, in the alternative, to cease engaging in activities
other than those closely related to banking under the BHCA.
Riegle-Neal Interstate
Banking and Branching Efficiency Act of 1994 (“Interstate
Act”). The Interstate Act permits adequately capitalized or
well-capitalized and adequately or well-managed bank holding companies, as
determined by the FRB, to acquire banks in any state subject to certain
concentration limits and other conditions. The Interstate Act also
generally authorizes the interstate merger of banks. In addition,
among other things, the Interstate Act permits banks to establish new branches
on an interstate basis provided that the law of the host state specifically
authorizes such action. Rhode Island and Connecticut, the two states
in which the Corporation conducts branch-banking operations, have adopted
legislation to "opt in" to interstate merger and branching provisions that
effectively eliminated state law barriers. However, as a bank holding
company, we are required to obtain prior FRB approval before acquiring more than
5% of a class of voting securities, or substantially all of the assets, of a
bank holding company, bank or savings association.
Control
Acquisitions. The Change in Bank Control Act prohibits a
person or a group of persons from acquiring “control” of a bank holding company,
such as the Bancorp, unless the FRB has been notified and has not objected to
the transaction. Under a rebuttable presumption established by the
FRB, the acquisition of 10% or more of a class of voting securities of a bank
holding company with a class of securities registered under Section 12 of the
Securities Exchange Act of 1934, as amended (the “Exchange Act”), would, under
the circumstances set forth in the presumption, constitute the acquisition of
control of the bank holding company. In addition, a company is
required to obtain the approval of the FRB under the BHCA before acquiring 25%
(5% in the case of an acquirer that is a bank holding company) or more of any
class of outstanding voting securities of a bank holding company, or otherwise
obtaining control or a “controlling influence” over that bank holding
company. In September 2008, the FRB released guidance on minority
investment in banks which relaxed the presumption of control for investments of
greater than 10% of a class of outstanding voting securities of a bank holding
company in certain instances discussed in the guidance.
Bank Holding Company
Dividends. The FRB and the Rhode Island Division of Banking
have authority to prohibit bank holding companies from paying dividends if such
payment is deemed to be an unsafe or unsound practice. The FRB has
indicated generally that it may be an unsafe or unsound practice for bank
holding companies to pay dividends unless the bank holding company’s net income
over the preceding year is sufficient to fund the dividends and the expected
rate of earnings retention is consistent with the organization’s capital needs,
asset quality and overall financial condition. Additionally, under
Rhode Island law, distributions of dividends cannot be made if a bank holding
company would not be able to pay its debts as they become due in the usual
course of business or the bank holding company’s total assets would be less than
the sum of its total liabilities. The Bancorp’s revenues consist
primarily of cash dividends paid to it by the Bank. As described
below, the FDIC and the Rhode Island Division of Banking may also regulate the
amount of dividends payable by the Bank. The inability of the Bank to
pay dividends may have an adverse effect on the Bancorp.
Regulation of the
Bank. The Bank is subject to the regulation, supervision and
examination by the FDIC, the Rhode Island Division of Banking and the State of
Connecticut, Department of Banking. The Bank is also subject to
various Rhode Island and Connecticut business and banking
regulations.
Regulation of the Registered
Investment Adviser and Broker-Dealer. WSC is a registered
broker-dealer and a member of the Financial Industry Regulatory Authority, Inc.
(“FINRA”) and is subject to extensive regulation, supervision, and examination
by the Securities and Exchange Commission (“SEC”), FINRA and the Commonwealth of
Massachusetts. Weston Financial is registered as an investment
advisor under the Investment Advisers Act of 1940, as amended (the “Investment
Advisers Act”), and is subject to extensive regulation, supervision, and
examination by the SEC and the Commonwealth of Massachusetts, including those
related to sales methods, trading practices, the use and safekeeping of
customers’ funds and securities, capital structure, record keeping and the
conduct of directors, officers and employees.
As
an investment advisor, Weston Financial is subject to the Investment Advisers
Act and any regulations promulgated thereunder, including fiduciary,
recordkeeping, operational and disclosure obligations. Each of the
mutual funds for which Weston Financial acts an advisor or subadvisor is
registered with the SEC under the Investment Company Act of 1940, as amended
(the “Investment Company Act”), and subject to requirements
thereunder. Shares of each mutual fund are registered with the SEC
under the Securities Act of 1933, as amended (the “Securities Act”), and are
qualified for sale (or exempt from such qualification) under the laws of each
state and the District of Columbia to the extent such shares are sold in any of
those jurisdictions. In addition, an advisor or subadvisor to a
registered investment company generally has obligations with respect to the
qualification of the registered investment company under the Internal Revenue
Code of 1986, as amended (the “Code”).
The
foregoing laws and regulations generally grant supervisory agencies and bodies
broad administrative powers, including the power to limit or restrict Weston
Financial from conducting its business in the event it fails to comply with such
laws and regulations. Possible sanctions that may be imposed in the
event of such noncompliance include the suspension of individual employees,
limitations on business activities for specified periods of time, revocation of
registration as an investment advisor, commodity trading advisor and/or other
registrations, and other censures and fines.
ERISA. The
Bank and Weston Financial are each also subject to the Employee Retirement
Income Security Act of 1974, as amended (“ERISA”), and related regulations, to
the extent it is a “fiduciary” under ERISA with respect to some of its
clients. ERISA and related provisions of the Code impose duties on
persons who are fiduciaries under ERISA, and prohibit certain transactions
involving the assets of each ERISA plan that is a client of the Bank or Weston
Financial, as applicable, as well as certain transactions by the fiduciaries
(and several other related parties) to such plans.
Insurance of Accounts and
FDIC Regulation. The
Bank pays deposit insurance premiums to the FDIC based on an assessment rate
established by the FDIC. In 2006, the FDIC enacted various rules to
implement the provisions of the Federal Deposit Insurance Reform Act of 2005
(the “FDIR Act”). Pursuant to the FDIR Act, in 2006 the FDIC merged
the Bank Insurance Fund with the Savings Association Insurance Fund to create a
newly named Deposit Insurance Fund (the “DIF”) that covers both banks and
savings associations. The FDIC also revised, effective
January 1, 2007, the risk-based premium system under which the FDIC
classifies institutions based on the factors described below and generally
assesses higher rates on those institutions that tend to pose greater risks to
the DIF. For most banks and savings associations, including the Bank,
FDIC rates depend upon a combination of CAMELS component ratings and financial
ratios. CAMELS ratings reflect the applicable bank regulatory
agency’s evaluation of the financial institution’s capital, asset quality,
management, earnings, liquidity and sensitivity to risk. For large
banks and savings associations that have long-term debt issuer ratings,
assessment rates will depend upon such ratings and CAMELS component
ratings. For institutions, such as the Bank, which are in the lowest
risk category, assessment rates vary initially from five to seven basis points
of deposits. Beginning January 1, 2009, the FDIC assessment
rates were raised seven basis points and vary initially from twelve to fourteen
basis points of deposits. Based on a final ruling approved by the
FDIC on February 27, 2009, further rate changes will take effect on
April 1, 2009, after which assessment rates will vary initially from twelve
to sixteen basis points of deposits with additional adjustments which could
result in total base assessment rates of seven to twenty-four basis points of
deposits. On February 27, 2009, the FDIC also issued an interim
rule that provides for a twenty basis point special assessment on June 30,
2009. The interim rule also provides that the FDIC may impose
additional assessments of up to ten basis points thereafter under certain
circumstances. The Federal Deposit Insurance Act (“FDIA”), as amended
by the FDIR Act, requires the FDIC to set a ratio of deposit insurance reserves
to estimated insured deposits, the designated reserve ratio (the “DRR”), for a
particular year within a range of 1.15% to 1.50%. For 2008, the FDIC
has set the initial DRR at 1.25%. Under the FDIR Act and the FDIC’s
revised premium assessment program, every FDIC-insured institution will pay some
level of deposit insurance assessments regardless of the level of the
DRR. In 2008, FDIC deposit insurance was temporarily increased from
$100,000 to $250,000 per depositor through December 31,
2009. The Bank’s FDIC deposit insurance costs totaled
$1.0 million in 2008. We cannot predict whether, as a result of
an adverse change in economic conditions or other reasons, the FDIC will be
required in the future to further increase deposit insurance assessments
levels.
Bank Holding Company Support
to Subsidiary Bank. Under FRB policy, a bank holding company
is expected to act as a source of financial and managerial strength to its
subsidiary bank and to commit resources to its support. This support
may be required at times when the bank holding company may not have the
resources to provide it. Similarly, under the cross-guarantee
provisions of the FDIA, the FDIC can hold any FDIC-insured depository
institution liable for any loss suffered or anticipated by the FDIC in
connection with (1) the “default” of a commonly controlled FDIC-insured
depository institution; or (2) any assistance provided by the FDIC to a commonly
controlled FDIC-insured depository institution “in danger of
default.” The Bank is a FDIC-insured depository
institution.
Regulatory Capital
Requirements. The FRB and the FDIC have issued substantially
similar risk-based and leverage capital guidelines applicable to United States
banking organizations. In addition, these regulatory agencies may
from time to time require that a banking organization maintain capital above the
minimum levels, whether because of its financial condition or actual or
anticipated growth.
The
FRB risk-based guidelines define a three-tier capital framework. Tier
1 capital includes common shareholders’ equity and qualifying preferred stock,
less goodwill and other adjustments. Tier 2 capital consists of
preferred stock not qualifying as Tier 1 capital, mandatory convertible debt,
limited amounts of subordinated debt, other qualifying term debt and the
allowance for loan losses up to 1.25% of risk-weighted assets. Tier 3
capital includes subordinated debt that is unsecured, fully paid, has an
original maturity of at least two years, is not redeemable before maturity
without prior approval by the FRB and includes a lock-in clause precluding
payment of either interest or principal if the payment would cause the issuing
bank’s risk-based capital ratio to fall or remain below the required
minimum.
The
sum of Tier 1 and Tier 2 capital less investments in unconsolidated subsidiaries
represents qualifying total capital. Risk-based capital ratios are
calculated by dividing Tier 1 and total capital by risk-weighted
assets. Assets and off-balance sheet exposures are assigned to one of
four categories of risk-weights, based primarily on relative credit
risk. The minimum Tier 1 capital ratio is 4% and the minimum total
risk-based capital is 8%. At December 31, 2008, the
Corporation’s net risk-weighted assets amounted to $1.9 billion, its Tier 1
capital ratio was 11.29% and its total risk-based capital ratio was
12.54%.
The
leverage ratio is determined by dividing Tier 1 capital by adjusted average
total assets. Although the stated minimum ratio is 100 to 200 basis
points above 3%, banking organizations must maintain a ratio of at least 5% to
be classified as “well-capitalized.” The Corporation’s leverage ratio
was 7.53% as of December 31, 2008.
The
Federal Deposit Insurance Corporation Improvement Act of 1991 (“FDICIA”), among
other things, identifies five capital categories for insured depository
institutions (well-capitalized, adequately capitalized, undercapitalized,
significantly undercapitalized and critically undercapitalized) and requires the
federal banking agencies (the “Agencies”) to implement systems for “prompt
corrective action” for insured depository institutions that do not meet minimum
capital requirements within such categories. FDICIA imposes
progressively more restrictive constraints on operations, management and capital
distributions, depending on the category in which an institution is
classified. Failure to meet the capital guidelines could also subject
a banking institution to capital raising requirements. An
“undercapitalized” bank must develop a capital restoration plan and its parent
holding company must guarantee that bank’s compliance with the
plan. The liability of the parent holding company under any such
guarantee is limited to the lesser of 5% of the bank’s assets at the time it
became “undercapitalized” or the amount needed to comply with the
plan. Furthermore, in the event of the bankruptcy of the parent
holding company, such guarantee would take priority over the parent’s general
unsecured creditors. In addition, FDICIA requires the Agencies to
prescribe certain non-capital standards for safety and soundness relating
generally to operations and management, asset quality and executive compensation
and permits regulatory action against a financial institution that does not meet
such standards.
The
Agencies have adopted substantially similar regulations that define the five
capital categories identified by FDICIA, using the total risk-based capital,
Tier 1 risk-based capital, and leverage capital ratios as the relevant capital
measures. Such regulations establish various degrees of corrective action to be
taken when an institution is considered undercapitalized. Under the
regulations, a bank generally shall be deemed to be:
|
§
|
“well-capitalized”
if it has a total risk based capital ratio of 10.0% or greater, has a
Tier 1 risk based capital ratio of 6.0% or more, has a leverage ratio
of 5.0% or greater and is not subject to any written agreement, order or
capital directive or prompt corrective action
directive;
|
|
§
|
“adequately
capitalized” if it has a total risk based capital ratio of 8.0% or
greater, a Tier 1 risk based capital ratio of 4.0% or more, and a
leverage ratio of 4.0% or greater (3.0% under certain circumstances) and
does not meet the definition of a “well-capitalized
bank;”
|
|
§
|
“undercapitalized”
if it has a total risk based capital ratio that is less than 8.0%, a
Tier 1 risk based capital ratio that is less than 4.0% or a leverage
ratio that is less than 4.0% (3.0% under certain
circumstances);
|
|
§
|
“significantly
undercapitalized” if it has a total risk based capital ratio that is less
than 6.0%, a Tier 1 risk based capital ratio that is less than 3.0%
or a leverage ratio that is less than 3.0%;
and
|
|
§
|
“critically
undercapitalized” if it has a ratio of tangible equity to total assets
that is equal to or less than 2.0%.
|
Regulators
also must take into consideration (1) concentrations of credit risk; (2)
interest rate risk (when the interest rate sensitivity of an institution’s
assets does not match the sensitivity of its liabilities or its off-balance
sheet position); and (3) risks from non-traditional activities, as well as an
institution’s ability to manage those risks, when determining the adequacy of an
institution’s capital. This evaluation will be made as a part of the
institution’s regular safety and soundness examination. In addition,
the Bancorp, and any bank with significant trading activity, must incorporate a
measure for market risk in their regulatory capital calculations. At
December 31, 2008, the Bank’s capital ratios placed it in the
well-capitalized category. Reference is made to Note 12 to the
Consolidated Financial Statements for additional discussion of the Corporation’s
regulatory capital requirements.
An
institution generally must file a written capital restoration plan which meets
specified requirements with an appropriate FDIC regional director within 45 days
of the date that the institution receives notice or is deemed to have notice
that it is undercapitalized, significantly undercapitalized or critically
undercapitalized. An institution that is required to submit a capital
restoration plan must concurrently submit a performance guaranty by each company
that controls the institution. A critically undercapitalized
institution generally is to be placed in conservatorship or receivership within
90 days unless the FDIC formally determines that forbearance from such action
would better protect the deposit insurance fund. Immediately upon
becoming undercapitalized, an institution becomes subject to the provisions of
Section 38 of the FDIA, including for example, (i) restricting the payment
of capital distributions and management fees, (ii) requiring that the FDIC
monitor the condition of the institution and its efforts to restore its capital,
(iii) requiring submission of a capital restoration plan, (iv) restricting
growth of the institution’s assets and (v) requiring prior approval of certain
expansion proposals.
The
Agencies issued a final rule entitled “Risk-Based Capital Standards: Advanced
Capital Adequacy Framework - Basel II” (“Basel II”), which became effective
on April 1, 2008 and “core banks” (“core banks” are the approximately 20
largest U.S. bank holding companies) were required to adopt a board-approved
plan to implement Basel II by October 1,
2008. Basel II will result in significant changes to the risk
based capital standards for "core banks” subject to Basel II and other
banks that elect to use such rules to calculate their risk-based capital
requirements. In connection with Basel II, the Agencies
published a joint notice of proposed rulemaking entitled "Risk-Based Capital
Guidelines; Capital Adequacy Guidelines: Standardized Framework" on
July 29, 2008 (the "Standardized Approach Proposal"). The
Standardized Approach Proposal, if adopted by the Agencies, would provide all
non-core banks with an optional framework, based upon the standardized approach
under the international Basel II Accord, for calculating their risk-based
capital requirements. The Bank does not currently expect to calculate
their capital ratios under Basel II or in accordance with the Standardized
Approach Proposal. Accordingly, the
Corporation is not yet in a position to determine the effect of such rules on
its risk capital requirements.
Transactions with
Affiliates. Under Sections 23A and 23B of the Federal
Reserve Act and Regulation W thereunder, there are various legal restrictions on
the extent to which a bank holding company and its nonbank subsidiaries may
borrow, obtain credit from or otherwise engage in “covered transactions” with
its FDIC-insured depository institution subsidiaries. Such borrowings
and other covered transactions by an insured depository institution subsidiary
(and its subsidiaries) with its nondepository institution affiliates are limited
to the following amounts:
|
§
|
In
the case of one such affiliate, the aggregate amount of covered
transactions of the insured depository institution and its subsidiaries
cannot exceed 10% of the capital stock and surplus of the insured
depository institution.
|
|
§
|
In
the case of all affiliates, the aggregate amount of covered transactions
of the insured depository institution and its subsidiaries cannot exceed
20% of the capital stock and surplus of the insured depository
institution.
|
“Covered
transactions” are defined by statute for these purposes to include a loan or
extension of credit to an affiliate, a purchase of or investment in securities
issued by an affiliate, a purchase of assets from an affiliate unless exempted
by the FRB, the acceptance of securities issued by an affiliate as collateral
for a loan or extension of credit to any person or company, or the issuance of a
guarantee, acceptance, or letter of credit on behalf of an
affiliate. Covered transactions are also subject to certain
collateral security requirements. Further, a bank holding company and
its subsidiaries are prohibited from engaging in certain tying arrangements in
connection with any extension of credit, lease or sale of property of any kind,
or furnishing of any service.
Limitations on Bank
Dividends. The Bancorp’s revenues consist primarily of cash
dividends paid to it by the Bank. The FDIC has the authority to use
its enforcement powers to prohibit a bank from paying dividends if, in its
opinion, the payment of dividends would constitute an unsafe or unsound
practice. Federal law also prohibits the payment of dividends by a
bank that will result in the bank failing to meet its applicable capital
requirements on a pro forma basis. Payment of dividends by a bank is
also restricted pursuant to various state regulatory
limitations. Reference is made to Note 12 to the Consolidated
Financial Statements for additional discussion of the Corporation’s ability to
pay dividends.
Customer Information Security.
The Agencies have adopted final guidelines for establishing standards for
safeguarding nonpublic personal information about customers. These
guidelines implement provisions of GLBA, which establishes a comprehensive
framework to permit affiliations among commercial banks, insurance companies,
securities firms, and other financial service providers by revising and
expanding the BHCA framework. Specifically, the Information Security
Guidelines established by the GLBA require each financial institution, under the
supervision and ongoing oversight of its Board of Directors or an appropriate
committee thereof, to develop, implement and maintain a comprehensive written
information security program designed to ensure the security and confidentiality
of customer information, to protect against any anticipated threats or hazards
to the security or integrity of such information, and protect against
unauthorized access to or use of such information that could result in
substantial harm or inconvenience to any customer. The federal
banking regulators have issued guidance for banks on response programs for
unauthorized access to customer information. This guidance, among
other things, requires notice to be sent to customers whose “sensitive
information” has been compromised if unauthorized use of this information is
“reasonably possible”. A majority of states have enacted legislation
concerning breaches of data security and Congress is considering federal
legislation that would require consumer notice of data security
breaches.
Privacy. The
GLBA requires financial institutions to implement policies and procedures
regarding the disclosure of nonpublic personal information about consumers to
nonaffiliated third parties. In general, the statute requires the
financial institution to explain to consumers its policies and procedures
regarding the disclosure of such nonpublic personal information, and, except as
otherwise required by law, the financial institution is prohibited from
disclosing such information except as provided in its policies and
procedures.
USA Patriot Act of
2001 (the “Patriot Act”). The Patriot Act, designed to deny
terrorists and others the ability to obtain anonymous access to the United
States financial system, has significant implications for depository
institutions, broker-dealers, mutual funds, insurance companies and businesses
of other types involved in the transfer of money. The Patriot Act,
together with the implementing regulations of various federal regulatory
agencies, has caused financial institutions, including banks, to adopt and
implement additional, or amend existing, policies and procedures with respect
to, among other things, anti-money laundering compliance, suspicious activity
and currency transaction reporting, customer identity verification and customer
risk analysis. The statute and its underlying regulations also permit
information sharing for counter-terrorist purposes between federal law
enforcement agencies and financial institutions, as well as among financial
institutions, subject to certain conditions, and require the FRB (and other
federal banking agencies) to evaluate the effectiveness of an applicant and a
target institution in combating money laundering activities when considering
applications filed under Section 3 of the BHCA or the Bank Merger
Act. In 2006, final regulations under the Patriot Act were issued
requiring financial institutions, including the Bank, to take additional steps
to monitor their correspondent banking and private banking relationships as well
as their relationships with “shell Banks.” Management believes that
the Corporation is in compliance with all the requirements prescribed by the
Patriot Act and all applicable final implementing regulations.
The Community Reinvestment
Act (the “CRA”). The CRA requires lenders to identify the
communities served by the institution’s offices and other deposit taking
facilities and to make loans and investments and provide services that meet the
credit needs of these communities. Regulatory agencies examine each
of the banks and rate such institutions’ compliance with CRA as “Outstanding”,
“Satisfactory”, “Needs to Improve” or “Substantial
Noncompliance”. Failure of an institution to receive at least a
“Satisfactory” rating could inhibit an institution or its holding company from
undertaking certain activities, including engaging in activities newly permitted
as a financial holding company under GLBA and acquisitions of other financial
institutions. The FRB must take into account the record of
performance of banks in meeting the credit needs of the entire community served,
including low and moderate income neighborhoods. The Bank has
achieved a rating of “Satisfactory” on its most recent examination dated
November 2006. Rhode Island and Connecticut also have enacted
substantially similar community reinvestment requirements.
Regulation
R. The FRB approved Regulation R implementing the bank broker
push out provisions under Title II of the GLBA. GLBA provided 11
exceptions from the definition of “broker” in Section 3(a)(4) of the Exchange
Act that permit banks not registered as broker-dealers with the SEC to effect
securities transactions under certain conditions. Regulation R
implements certain of these exceptions. In 2007, the SEC also
approved Regulation R. The Bank began complying with Regulation R on
the first day of the bank’s fiscal quarter starting after September 30,
2008. The FRB and SEC have stated that they will jointly issue any
interpretations or no-action
letters/guidance regarding Regulation R and consult with
each other and the appropriate federal banking agency with respect to formal
enforcement actions pursuant to Regulation R.
Regulatory Enforcement
Authority. The enforcement powers available to the Agencies
include, among other things, the ability to assess civil money penalties, to
issue cease and desist or removal orders and to initiate injunctive actions
against banking organizations and institution-affiliated parties, as
defined. In general, these enforcement actions may be initiated for
violations of law and regulations and unsafe or unsound
practices. Other actions or inactions may provide the basis for
enforcement action, including misleading or untimely reports filed with
regulatory authorities. Under certain circumstances, federal and
state law requires public disclosure and reports of certain criminal offenses
and also final enforcement actions by the Agencies.
Identity Theft Red
Flags. The Agencies jointly issued final rules and guidelines
in 2007 implementing Section 114 (“Section 114”) of the Fair and Accurate Credit
Transactions Act of 2003 (“FACT Act”) and final rules implementing Section 315
(“Section 315”) of the FACT Act. Section 114 requires each financial
institution or creditor to develop and implement a written Identity Theft
Prevention Program (the “Program”) to detect, prevent, and mitigate identity
theft in connection with the opening of certain accounts or certain existing
accounts. Section 114 also requires credit and debit card issuers to
assess the validity of notifications of changes of address under certain
circumstances. The Agencies issued joint rules under Section 315 that
provide guidance regarding reasonable policies and procedures that a user of
consumer reports must employ when a consumer reporting agency sends the user a
notice of address discrepancy. The final rules and guidelines became
effective January 1, 2008 with a mandatory compliance deadline for the Bank
of November 1, 2008.
Fair Credit Reporting
Affiliate Marketing Regulations. In 2007, the Agencies
published final rules to implement the affiliate marketing provisions in Section
214 of the FACT Act, which amends the Fair Credit Reporting Act. The
final rules generally prohibit a person from using information received from an
affiliate to make a solicitation for marketing purposes to a consumer, unless
the consumer is given notice and a reasonable opportunity and a reasonable and
simple method to opt out of the making of such solicitations. These
rules became effective January 1, 2008 with a mandatory compliance deadline
for the Bank of October 1, 2008.
The Sarbanes-Oxley Act of
2002, as amended (“Sarbanes-Oxley”). Sarbanes-Oxley
implemented a broad range of corporate governance and accounting measures for
public companies (including publicly-held bank holding companies such as
Bancorp) designed to promote honesty and transparency in corporate
America. Sarbanes-Oxley’s principal provisions, many of which have
been interpreted through regulations released in 2003, provide for and include,
among other things, (1) requirements for audit committees, including
independence and financial expertise; (2) certification of financial statements
by the principal executive officer and principal financial officer of the
reporting company; (3) standards for auditors and regulation of audits; (4)
disclosure and reporting requirements for the reporting company and directors
and executive officers; and (5) a range of civil and criminal penalties for
fraud and other violations of securities laws.
Securities
and Exchange Commission Availability of Filings
Under
Sections 13 and 15(d) of the Exchange Act, periodic and current reports must be
filed or furnished with the SEC. You may read and copy any reports,
statements or other information filed by Washington Trust with the SEC at its
public reference room at 100 F Street, N.E., Washington, D.C.
20549. Please call the SEC at 1-800-SEC-0330 for further information
on the public reference rooms. Washington Trust’s filings are also
available to the public from commercial document retrieval services and at the
website maintained by the SEC at http://www.sec.gov. In addition,
Washington Trust makes available free of charge on the Investor Relations
section of its website (www.washtrust.com) its annual report on Form 10-K, its
quarterly reports on Form 10-Q, current reports on Form 8-K, and exhibits and
amendments to those reports as soon as reasonably practicable after it
electronically files such material with, or furnishes it to, the
SEC. Information on the Washington Trust website is not incorporated
by reference into this Annual Report on Form 10-K.
In
addition to the other information contained or incorporated by reference in this
Annual Report on Form 10-K, you should consider the following factors relating
to the business of the Corporation.
Interest
Rate Volatility May Reduce Our Profitability
Our
consolidated results of operations depend, to a large extent, on the level of
net interest income, which is the difference between interest income from
interest-earning assets, such as loans and investments, and interest expense on
interest-bearing liabilities, such as deposits and borrowings. If
interest rate fluctuations cause the cost of interest-bearing liabilities
to increase faster than the yield on interest-earning assets, then our net
interest income will decrease. If the cost of interest-bearing
liabilities declines faster than the yield on interest-earning assets, then our
net interest income will increase.
We
measure our interest rate risk using simulation analyses with
particular emphasis on measuring changes in net income and net economic value in
different interest-rate environments. The simulation analyses
incorporate assumptions about balance sheet changes, such as asset and liability
growth, loan and deposit pricing and changes due to the mix and maturity of such
assets and liabilities. Other key assumptions relate to the behavior
of interest rates and spreads, prepayments of loans and the run-off of
deposits. These assumptions are inherently uncertain and, as a
result, the simulation analyses cannot precisely estimate the impact that higher
or lower rate environments will have on net income. Actual results
will differ from simulated results due to timing, magnitude and frequency of
interest rate changes, changes in cash flow patterns and market conditions, as
well as changes in management’s strategies.
While
various monitors of interest-rate risk are employed, we are unable to predict
future fluctuations in interest rates or the specific impact
thereof. The market values of most of our financial assets are
sensitive to fluctuations in market interest rates. Fixed-rate
investments, mortgage-backed securities and mortgage loans typically decline in
value as interest rates rise. Prepayments on mortgage-backed
securities may adversely affect the value of such securities and the interest
income generated by them.
Changes
in interest rates can also affect the amount of loans that we originate, as well
as the value of loans and other interest-earning assets and our ability to
realize gains on the sale of such assets and liabilities. Prevailing
interest rates also affect the extent to which our borrowers prepay their loans.
When interest rates increase, borrowers are less likely to prepay their loans,
and when interest rates decrease, borrowers are more likely to prepay
loans. Funds generated by prepayments might be reinvested at a less
favorable interest rate. Prepayments may adversely affect the value
of mortgage loans, the levels of such assets that are retained in our portfolio,
net interest income, loan servicing income and capitalized servicing
rights.
Increases
in interest rates might cause depositors to shift funds from accounts that have
a comparatively lower cost, such as regular savings accounts, to accounts with a
higher cost, such as certificates of deposit. If the cost of interest-bearing
deposits increases at a rate greater than the yields on interest-earning assets
increase, our net interest income will be negatively
affected. Changes in the asset and liability mix may also affect our
net interest income.
Our
principal sources of funding are deposits and borrowings. As a
general matter, deposits are a lower cost source of funds than borrowings
because interest rates paid for deposits are typically less than interest rates
charged for borrowings. If, as a result of general economic
conditions, market interest rates, competitive pressures or otherwise, the level
of our deposits were to decline relative to the total sources of funds, we may
have to rely more heavily on higher cost borrowings in the future.
For
additional discussion on interest rate risk, see disclosures in Item 7
under the caption "Asset / Liability Management and Interest Rate
Risk."
The Market Value of Wealth
Management Assets under Administration May Be Negatively Affected by Changes in
Economic and Market Conditions
Revenues
from wealth management services represented 27% of our total revenues for
2008. A substantial portion of these fees are dependent on the market
value of wealth management assets under administration, which are primarily
marketable securities. Changes in domestic and foreign economic
conditions, volatility in financial markets, and general trends in business and
finance, all of which are beyond our control, could adversely impact the market
value of these assets and the fee revenues derived from the management of these
assets.
We May Not Be Able to
Attract and Retain Wealth Management Clients at Current
Levels
Due
to strong competition, our wealth management division may not be able to attract
and retain clients at current levels. Competition is strong because
there are numerous well-established and successful investment management and
wealth advisory firms including commercial banks and trust companies, investment
advisory firms, mutual fund companies, stock brokerage firms, and other
financial companies. Many of our competitors have greater resources
than we have.
Our
ability to successfully attract and retain wealth management clients is
dependent upon our ability to compete with competitors’ investment products,
level of investment performance, client services and marketing and distribution
capabilities. If we are not successful, our results of operations and
financial condition may be negatively impacted.
Wealth
management revenues are primarily derived from investment management (including
mutual funds), trust fees and financial planning services. Most of
our investment management clients may withdraw funds from accounts under
management generally at their sole discretion. Financial planning
contracts must typically be renewed on an annual basis and are terminable upon
relatively short notice. The financial performance of our wealth
management business is a significant factor in our overall results of operations
and financial condition.
Our Allowance for Loan
Losses May Not Be Adequate to Cover Actual Loan Losses
We
make various assumptions and judgments about the collectibility of our loan
portfolio and provide an allowance for potential losses based on a number of
factors. If our assumptions are wrong, our allowance for loan losses
may not be sufficient to cover our losses, which would have an adverse effect on
our operating results, and may also cause us to increase the allowance in the
future. Material additions to our allowance would materially decrease
our net income. In addition to general real estate and economic
factors, the following factors could affect our ability to collect our loans and
require us to increase the allowance in the future:
|
·
|
Regional
credit concentration - We are exposed to real estate and economic factors
in southern New England, because a significant portion of our loan
portfolio is concentrated among borrowers in this
market. Further, because a substantial portion of our loan
portfolio is secured by real estate in this area, including residential
mortgages, most consumer loans, commercial mortgages and other commercial
loans, the value of our collateral is also subject to regional real estate
market conditions and other factors that might affect the value of real
estate, including natural
disasters.
|
|
·
|
Industry
concentration - A portion of our loan portfolio consists of loans to the
hospitality, tourism and recreation industries. Loans to
companies in these industries may have a somewhat higher risk of loss than
some other industries because these businesses are seasonal, with a
substantial portion of commerce concentrated in the summer
season. Accordingly, the ability of borrowers to meet their
repayment terms is more dependent on economic, climate and other
conditions and may be subject to a higher degree of volatility from year
to year.
|
|
·
|
Volatility
in the financial markets associated with subprime mortgages, including
adverse impacts on credit quality and liquidity within the financial
markets, have been associated with a general decline in the real estate
and housing market along with significant mortgage loan related losses
reported by many other financial institutions. Global and
domestic economic conditions have been adversely affected by these
factors. No assurance can be given that these conditions will
not result in an increase in delinquencies with a negative impact on our
loan loss experience, necessitating an increase in our allowance for loan
losses.
|
|
·
|
Federal
and state regulators periodically review our allowance for loan losses and
may require us to increase our provision for loan losses or recognize
additional charge-offs. Any increase in our allowance for loan
losses or loan charge-offs required by these regulatory agencies could
have a material adverse effect on our results of operations and financial
condition.
|
For
a more detailed discussion on the allowance for loan losses, see additional
information disclosed in Item 7 under the caption “Application of Critical
Accounting Policies and Estimates.”
We Have Credit Risk Inherent
in Our Securities Portfolio
We
maintain a diversified securities portfolio, which includes mortgage-backed
securities issued by U.S. government and government sponsored agencies,
obligations of the U.S. Treasury and government-sponsored agencies, securities
issued by state and political subdivisions, trust preferred debt securities
primarily issued by financial service companies, and corporate debt
securities. We also invest in capital securities, which include
common and perpetual preferred stocks. We seek to limit credit losses
in our securities portfolios by generally purchasing only highly-rated
securities.
The
current economic environment and recent volatility of financial markets increase
the difficulty of assessing investment securities impairment and the same
influences tend to increase the risk of potential impairment of these
assets. During the year ended December 31, 2008, we recorded
charges for other-than-temporary impairment of securities of
$5.9 million. We believe we have adequately reviewed our
investment securities for impairment and that our investment securities are
carried at fair value. However, over time, the economic and market
environment may provide additional insight regarding the fair value of certain
securities, which could change our judgment regarding
impairment. This could result in realized losses relating to
other-than-temporary declines being charged against future
income. Given the current market conditions and the significant
judgments involved, there is continuing risk that further declines in fair value
may occur and additional material other-than-temporary impairments may be
charged to income in future periods, resulting in realized losses.
We May Not Be Able to
Compete Effectively Against Larger Financial Institutions in Our Increasingly
Competitive Industry
The
financial services industry in our market has experienced both significant
concentration and deregulation. This means that we compete with
larger bank and non-bank financial institutions for loans and deposits in the
communities we serve, and we may face even greater competition in the future due
to legislative, regulatory and technological changes and continued
consolidation. Many of our competitors have significantly greater
resources and lending limits than we have. Banks and other financial
services firms can merge under the umbrella of a financial holding company,
which can offer virtually any type of financial service. In addition,
technology has lowered barriers to entry and made it possible for non-banks to
offer products and services traditionally provided by banks, such as automated
transfer and automatic payment systems. Many competitors have fewer
regulatory constraints and may have lower cost structures than we
do. Additionally, due to their size, many competitors may be able to
achieve economies of scale and, as a result, may offer a broader range of
products and services as well as better pricing for those products and services
than we can. Our long-term success depends on the ability of the Bank
to compete successfully with other financial institutions in the Bank’s service
areas.
Economic
Conditions
National
and local economic conditions have an impact on the banking and financial
services industry, including those of the Corporation. The
Corporation’s operating results depend to a large extent on providing products
and services to customers in our local market area. Unemployment
rates, real estate values, demographic changes, property tax rates, and local
and state governments have an impact on local and regional economic
conditions. An increase in unemployment, a decrease in real estate
values, an increase in property tax rates, or decrease in population could
weaken the local economies in which the Corporation operates. Weak
economic conditions could lead to credit quality concerns related to repayment
ability and collateral protection. These conditions could also affect
the Corporation’s ability to retain or grow deposits.
Current Levels of Market
Volatility Are Unprecedented.
The
capital and credit markets have been experiencing volatility and disruption for
more than 12 months, recently reaching unprecedented levels. In some
cases, the markets have produced downward pressure on stock prices and credit
availability for certain issuers without regard to those issuers’ underlying
financial strength. If current levels of market disruption and
volatility continue or worsen, there can be no assurance that we will not
experience an adverse effect, which may be material, on our ability to access
capital and on our business, financial condition and results of
operations.
Operational
Risk
The
Corporation is subject to certain operational risks, including, but not limited
to, data processing system failures and errors, customer or employee fraud and
catastrophic failures resulting from terrorist acts or natural disasters. The
Corporation depends upon data processing, software, communication, and
information exchange on a variety of computing platforms and networks and over
the Internet. Despite instituted safeguards, the Corporation cannot
be certain that all of its systems are entirely free from vulnerability to
attack or other technological difficulties or failures. If information security
is breached or other technology difficulties or failures occur, information may
be lost or misappropriated, services and operations may be interrupted and the
Corporation could be exposed to claims from customers. While the Corporation
maintains a system of internal controls and procedures, any of these results
could have a material adverse effect on the Corporation's business, financial
condition, results of operations or liquidity.
Technological Development
and Changes
The
financial services industry is subject to rapid technological changes with
frequent introductions of new technology driven products and services. In
addition to improving the Corporation's ability to serve customers, the
effective use of technology increases efficiencies and helps to maintain or
reduce expenses. The Corporation's ability to keep pace with technological
changes affecting the financial industry and to introduce new products and
services based on this new technology will be important to the Corporation's
continued success.
Changes in Legislation
and/or Regulation and Accounting Principles, Policies and
Guidelines
Changes
in legislation and/or regulation governing financial holding companies and their
subsidiaries could affect our operations. The Corporation is subject
to extensive federal and state laws and regulations and is subject to
supervision, regulation and examination by various federal and state bank
regulatory agencies. The restrictions imposed by such laws and
regulations limit the manner in which the Corporation may conduct business.
There can be no assurance that any modification of these laws and regulations,
or new legislation that may be enacted in the future, will not make compliance
more difficult or expensive, or otherwise adversely affect the operations of the
Corporation. See the section entitled "Supervision and Regulation" in
Item 1 of this Annual Report on Form 10-K.
The
Corporation is subject to tax laws and regulations promulgated by the United
States government and the states in which we operate. Changes to
these laws and regulations or the interpretation of such laws and regulations by
taxing authorities could impact future tax expense and the value of deferred tax
assets.
Changes
in GAAP applicable to the Corporation could have a material impact on the
Corporation’s reported results of operations.
None.
GUIDE
3 Statistical Disclosures
The
information required by Securities Act Guide 3 “Statistical Disclosure by Bank
Holding Companies” is located on the pages noted below.
|
|
|
Page
|
|
I.
|
Distribution
of Assets, Liabilities and Stockholder Equity;
Interest
Rates and Interest Differentials
|
31-32
|
|
II.
|
Investment
Portfolio
|
40-41,
82
|
|
III.
|
Loan
Portfolio
|
44-48,
83
|
|
IV.
|
Summary
of Loan Loss Experience
|
50-51,
85
|
|
V.
|
Deposits
|
31,
90
|
|
VI.
|
Return
on Equity and Assets
|
21
|
|
VII.
|
Short-Term
Borrowings
|
91
|
The
Corporation conducts its business from seventeen offices, including its
headquarters located at 23 Broad Street, Westerly, Rhode Island and offices
located within Washington, Providence and Kent Counties in Rhode Island and New
London County in southeastern Connecticut. In addition, Washington
Trust has a commercial lending office located in the financial district of
Providence and provides wealth management services from its main office and
offices located in Providence and Narragansett, Rhode Island and Wellesley,
Massachusetts. The Bank also has two
operations
facilities located in Westerly, Rhode Island. At December 31,
2008, nine of the Corporation’s facilities were owned, twelve were leased and
one branch office was owned on leased land. Lease expiration dates
range from five months to fourteen years with renewal options on certain leases
of two to fifteen years. All of the Corporation’s properties are
considered to be in good condition and adequate for the purpose for which they
are used.
In
addition to the locations mentioned above, the Bank has three owned offsite-ATMs
in leased spaces. The terms of two of these leases are negotiated
annually. The lease term for the third offsite-ATM expires in three
years with no renewal option.
The
Bank also operates ATMs that are branded with the Bank’s logo under contracts
with a third party vendor located in retail stores and other locations in Rhode
Island, southeastern Connecticut and southeastern Massachusetts.
For
additional information regarding premises and equipment and lease obligations
see Note 7 to the Consolidated Financial Statements.
The
Corporation is involved in various claims and legal proceedings arising out of
the ordinary course of business. Management is of the opinion, based
on its review with counsel of the development of such matters to date, that the
ultimate disposition of such other matters will not materially affect the
consolidated financial position or results of operations of the
Corporation.
No
matters were submitted to a vote of security holders during the fourth quarter
of the fiscal year ended December 31, 2008.
The
following is a list of all executive officers of the Bancorp and the Bank with
their titles, ages, and years of service, followed by certain biographical
information as of December 31, 2008.
|
|
|
|
Years
of
|
|
Name
|
Title
|
Age
|
Service
|
|
John
C. Warren
|
Chairman
and Chief Executive Officer of the Bancorp and the Bank
|
63
|
13
|
|
|
|
|
|
|
John
F. Treanor
|
President
and Chief Operating Officer of the Bancorp and the Bank
|
61
|
10
|
|
|
|
|
|
|
Galan
G. Daukas
|
Executive
Vice President of Wealth Management of the Bancorp and the
Bank
|
45
|
3
|
|
|
|
|
|
|
David
V. Devault
|
Executive
Vice President, Chief Financial Officer and Secretary of the
Bancorp
|
54
|
22
|
|
|
and
the Bank
|
|
|
|
|
|
|
|
|
Mark
K. W. Gim
|
Executive
Vice President and Treasurer of the Bancorp and the Bank
|
42
|
15
|
|
|
|
|
|
|
Stephen
M. Bessette
|
Executive
Vice President – Retail Lending of the Bank
|
61
|
12
|
|
|
|
|
|
|
B.
Michael Rauh, Jr.
|
Executive
Vice President –Sales, Service and Delivery of the Bank
|
49
|
17
|
|
|
|
|
|
|
James
M. Vesey
|
Executive
Vice President and Chief Credit Officer of the Bank
|
61
|
10
|
|
|
|
|
|
|
Dennis
L. Algiere
|
Senior
Vice President – Chief Compliance Officer and Director of
|
48
|
14
|
|
|
Community
Affairs of the Bank
|
|
|
|
|
|
|
|
|
Vernon
F. Bliven
|
Senior
Vice President – Human Resources of the Bank
|
59
|
36
|
|
|
|
|
|
|
Elizabeth
B. Eckel
|
Senior
Vice President – Marketing of the Bank
|
48
|
17
|
|
|
|
|
|
|
William
D. Gibson
|
Senior
Vice President – Risk Management of the Bank
|
62
|
10
|
|
|
|
|
|
|
Barbara
J. Perino, CPA
|
Senior
Vice President – Operations and Technology of the Bank
|
47
|
20
|
John
C. Warren joined the Bancorp and the Bank in 1996 as President and Chief
Operating Officer. In 1997, he was elected President and Chief
Executive Officer of the Bancorp and the Bank. In 1999, he was
elected Chairman and Chief Executive Officer of the Bancorp and the
Bank.
John
F. Treanor joined the Bancorp and the Bank in 1999 as President and Chief
Operating Officer.
Galan
G. Daukas joined the Bancorp and the Bank in 2005 as Executive Vice President of
Wealth Management. Prior to joining Washington Trust, he held the
position of Chief Operating Officer of The Managers Funds, LLC from 2002 to
2005.
David
V. Devault joined the Bank in 1986 as Controller. He was promoted to
Vice President and Chief Financial Officer of the Bancorp and the Bank in 1987
and to Senior Vice President and Chief Financial Officer of the Bancorp and the
Bank in 1990. In 1997, he was also elected Treasurer of the Bancorp
and the Bank. He was named Executive Vice President, Treasurer and
Chief Financial Officer of the Bancorp and the Bank in 1998. He was
appointed to the position of Secretary of the Bank in 2002 and Secretary of the
Bancorp in 2005. In 2008, his title was changed to Executive Vice
President, Chief Financial Officer and Secretary of the Bancorp and the
Bank.
Mark
K. W. Gim joined the Bank in 1993 as Financial Planning Officer. He
was promoted to Assistant Vice President – Financial Planning of the Bank in
1995, and to Vice President – Financial Planning of the Bank in
1996. In 2000, he was promoted to Senior Vice President – Financial
Planning and Asset/Liability Management of the Bank. He was named
Executive Vice President and Treasurer of the Bancorp and the Bank in
2008.
Stephen
M. Bessette joined the Bank in 1997 as Senior Vice President – Retail
Lending. He was named Executive Vice President – Retail Lending in
2005.
B.
Michael Rauh, Jr. joined the Bank in 1991 as Vice President - Marketing and was
promoted in 1993 to Senior Vice President - Retail Banking. He was
named Senior Vice President – Corporate Sales, Planning & Delivery in
2003. In 2005, he was appointed Executive Vice President – Corporate
Sales, Planning and Delivery. In 2007, his title was changed to
Executive Vice President, Sales, Service & Delivery.
James
M. Vesey joined the Bank in 1998 as Senior Vice President – Commercial
Lending. In 2000, he was named Senior Vice President and Chief Credit
Officer. In 2007, he was appointed Executive Vice President and Chief
Credit Officer.
Dennis
L. Algiere joined the Bank in 1995 as Compliance Officer. He was
named Vice President – Compliance in 1996 and was promoted to Senior Vice
President – Compliance and Community Affairs in 2001. He was named
Senior Vice President – Chief Compliance Officer and Director of Community
Affairs in 2003.
Vernon
F. Bliven joined the Bank in 1972 and was named Assistant Vice President in
1980, Vice President in 1986 and Senior Vice President – Human Resources in
1993.
Elizabeth
B. Eckel joined the Bank in 1991 as Director of Advertising and Public
Relations. In 1995, she was named Vice President – Marketing. She was
promoted to Senior Vice President – Marketing in 2000.
William
D. Gibson joined the Bank in 1999 as Senior Vice President – Credit
Administration. In 2007, he was named Senior Vice President – Risk
Management.
Barbara
J. Perino joined the Bank in 1988 as Financial Accounting
Officer. She was named Controller in 1989 and Vice President -
Controller in 1992. In 1998, she was promoted to Senior Vice
President – Operations and Technology.
|
ITEM
5.
|
Market
for the Registrant’s Common Stock, Related Stockholder Matters and Issuer
Purchases of Equity Securities
|
Washington
Trust’s common stock trades on the NASDAQ Global SelectÒ Market under the symbol
WASH.
The
quarterly common stock price ranges and dividends paid per share for the years
ended December 31, 2008 and 2007 are presented in the following
table. The stock prices are based on the high and low sales prices
during the respective quarter.
|
2008
Quarters
|
|
|
1
|
|
|
|
2
|
|
|
|
3
|
|
|
|
4
|
|
|
Stock
prices:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
High
|
|
$ |
26.50 |
|
|
$ |
26.49 |
|
|
$ |
33.34 |
|
|
$ |
27.30 |
|
|
Low
|
|
|
21.84 |
|
|
|
19.70 |
|
|
|
18.43 |
|
|
|
16.33 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
dividend declared per share
|
|
$ |
0.20 |
|
|
$ |
0.21 |
|
|
$ |
0.21 |
|
|
$ |
0.21 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
Quarters
|
|
|
1
|
|
|
|
2
|
|
|
|
3
|
|
|
|
4
|
|
|
Stock
prices:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
High
|
|
$ |
28.98 |
|
|
$ |
27.69 |
|
|
$ |
28.42 |
|
|
$ |
28.65 |
|
|
Low
|
|
|
25.32 |
|
|
|
23.90 |
|
|
|
22.87 |
|
|
|
23.49 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
dividend declared per share
|
|
$ |
0.20 |
|
|
$ |
0.20 |
|
|
$ |
0.20 |
|
|
$ |
0.20 |
|
The
Bancorp will continue to review future common stock dividends based on
profitability, financial resources and economic conditions. The
Bancorp (including the Bank prior to 1984) has recorded consecutive quarterly
dividends for over 100 years.
The
Bancorp’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 Bancorp is included in
Note 12 to the Consolidated Financial Statements.
At
February 25, 2009 there were 1,999 holders of record of the Bancorp’s
common stock.
See
additional disclosures on Equity Compensation Plan Information in Part III, Item
12 “Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters.”
The
following table provides information as of and for the quarter ended
December 31, 2008 regarding shares of common stock of the Corporation that
were repurchased under the Amended and Restated Nonqualified Deferred
Compensation Plan (“Deferred Compensation Plan”), the 2006 Stock Repurchase
Plan, the Bancorp’s 1997 Equity Incentive Plan, as amended (the “1997 Plan”),
and the Bancorp’s 2003 Stock Incentive Plan, as amended (the “2003
Plan”).
|
|
|
Total
number of shares purchased
|
|
|
Average
price paid per share
|
|
|
Total
number of shares purchased as part of publicly announced
plan(s)
|
|
|
Maximum
number of shares that may yet be purchased under the
plan(s)
|
|
|
Deferred
Compensation Plan (1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at beginning of period
|
|
|
|
|
|
|
|
|
|
|
|
N/A |
|
|
10/1/2008
to 10/31/2008
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
N/A |
|
|
11/1/2008
to 11/30/2008
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
N/A |
|
|
12/1/2008
to 12/31/2008
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
N/A |
|
|
Total
Deferred Compensation Plan
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
N/A |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
Stock Repurchase Plan (2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at beginning of period
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
214,600 |
|
|
10/1/2008
to 10/31/2008
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
214,600 |
|
|
11/1/2008
to 11/30/2008
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
214,600 |
|
|
12/1/2008
to 12/31/2008
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
214,600 |
|
|
Total
2006 Stock Repurchase Plan
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
214,600 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at beginning of period
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
N/A |
|
|
10/1/2008
to 10/31/2008
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
N/A |
|
|
11/1/2008
to 11/30/2008
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
N/A |
|
|
12/1/2008
to 12/31/2008
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
N/A |
|
|
Total
Other
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
N/A |
|
|
Total
Purchases of Equity Securities
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
(1)
|
The
Deferred Compensation Plan allows directors and officers to defer a
portion of their compensation. The deferred compensation is
contributed to a rabbi trust that invests the assets of the trust into
selected mutual funds as well as shares of the Bancorp’s common
stock. The plan authorizes Bancorp to acquire shares of
Bancorp’s common stock to satisfy its obligation under this
plan. All shares are purchased in the open
market. As of October 15, 2007, the Bancorp’s common stock
was no longer available as a new benchmark investment under the
plan. Further, directors and officers who currently have
selected Bancorp’s common stock as a benchmark investment (the “Bancorp
Stock Fund”) will be allowed to transfer from that fund during a
transition period that will run through March 14,
2009. After March 14, 2009, directors and officers will
not be allowed to make transfers from the Bancorp Stock Fund and any
distributions will be made in whole shares of Bancorp’s common stock to
the extent of the benchmark investment election in the Bancorp Stock
Fund.
|
|
(2)
|
The
2006 Stock Repurchase Plan was established in December 2006. A
maximum of 400,000 shares were authorized under the plan. The
Bancorp plans to hold the repurchased shares as treasury stock for general
corporate purposes.
|
|
(3)
|
Pursuant
to the Corporation’s share-based compensation plans, employees may deliver
back shares of stock previously issued in payment of the exercise price of
stock options. While required to be reported in this table,
such transactions are not reported as share repurchases in the
Corporation’s Consolidated Financial Statements. The
share-based compensation plans (the 1997 Plan and the 2003 Plan) have
expiration dates of April 29, 2017 and February 20, 2023,
respectively.
|
The
selected consolidated financial data set forth below does not purport to be
complete and should be read in conjunction with, and is qualified in its
entirety by, the more detailed information including the Consolidated Financial
Statements and related Notes, and the section entitled “Management’s Discussion
and Analysis of Financial Condition and Results of Operations,” appearing
elsewhere in this Annual Report on Form 10-K.
|
Selected
Financial Data
|
|
(Dollars
in thousands, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At
or for the years ended December 31,
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
Financial
Results:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
income
|
|
$ |
140,662 |
|
|
$ |
136,434 |
|
|
$ |
131,134 |
|
|
$ |
115,693 |
|
|
$ |
96,853 |
|
|
Interest
expense
|
|
|
75,149 |
|
|
|
76,490 |
|
|
|
69,660 |
|
|
|
55,037 |
|
|
|
42,412 |
|
|
Net
interest income
|
|
|
65,513 |
|
|
|
59,944 |
|
|
|
61,474 |
|
|
|
60,656 |
|
|
|
54,441 |
|
|
Provision
for loan losses
|
|
|
4,800 |
|
|
|
1,900 |
|
|
|
1,200 |
|
|
|
1,200 |
|
|
|
610 |
|
|
Net
interest income after provision for loan losses
|
|
|
60,713 |
|
|
|
58,044 |
|
|
|
60,274 |
|
|
|
59,456 |
|
|
|
53,831 |
|
|
Noninterest
income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
realized gains on securities
|
|
|
2,224 |
|
|
|
455 |
|
|
|
443 |
|
|
|
389 |
|
|
|
248 |
|
|
Losses
on write-downs of investments to fair value
|
|
|
(5,937 |
) |
|
|
– |
|
|
|
– |
|
|
|
(32 |
) |
|
|
– |
|
|
Other
noninterest income
|
|
|
44,233 |
|
|
|
45,054 |
|
|
|
41,740 |
|
|
|
30,589 |
|
|
|
26,657 |
|
|
Total
noninterest income
|
|
|
40,520 |
|
|
|
45,509 |
|
|
|
42,183 |
|
|
|
30,946 |
|
|
|
26,905 |
|
|
Noninterest
expense
|
|
|
71,742 |
|
|
|
68,906 |
|
|
|
65,335 |
|
|
|
56,393 |
|
|
|
50,373 |
|
|
Income
before income taxes
|
|
|
29,491 |
|
|
|
34,647 |
|
|
|
37,122 |
|
|
|
34,009 |
|
|
|
30,363 |
|
|
Income
tax expense
|
|
|
7,319 |
|
|
|
10,847 |
|
|
|
12,091 |
|
|
|
10,985 |
|
|
|
9,534 |
|
|
Net
income
|
|
$ |
22,172 |
|
|
$ |
23,800 |
|
|
$ |
25,031 |
|
|
$ |
23,024 |
|
|
$ |
20,829 |
|
|
Per
share information ($):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
1.59 |
|
|
|
1.78 |
|
|
|
1.86 |
|
|
|
1.73 |
|
|
|
1.57 |
|
|
Diluted
|
|
|
1.57 |
|
|
|
1.75 |
|
|
|
1.82 |
|
|
|
1.69 |
|
|
|
1.54 |
|
|
Cash
dividends declared (1)
|
|
|
0.83 |
|
|
|
0.80 |
|
|
|
0.76 |
|
|
|
0.72 |
|
|
|
0.68 |
|
|
Book
value
|
|
|
14.75 |
|
|
|
13.97 |
|
|
|
12.89 |
|
|
|
11.86 |
|
|
|
11.44 |
|
|
Tangible
book value
|
|
|
10.47 |
|
|
|
9.33 |
|
|
|
8.61 |
|
|
|
7.79 |
|
|
|
9.64 |
|
|
Market
value - closing stock price
|
|
|
19.75 |
|
|
|
25.23 |
|
|
|
27.89 |
|
|
|
26.18 |
|
|
|
29.31 |
|
|
Performance
Ratios (%):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Return
on average assets
|
|
|
0.82 |
|
|
|
0.99 |
|
|
|
1.04 |
|
|
|
0.98 |
|
|
|
0.97 |
|
|
Return
on average shareholders’ equity
|
|
|
11.12 |
|
|
|
13.48 |
|
|
|
14.99 |
|
|
|
14.80 |
|
|
|
14.40 |
|
|
Average
equity to average total assets
|
|
|
7.35 |
|
|
|
7.33 |
|
|
|
6.93 |
|
|
|
6.62 |
|
|
|
6.73 |
|
|
Dividend
payout ratio (2)
|
|
|
52.87 |
|
|
|
45.71 |
|
|
|
41.76 |
|
|
|
42.60 |
|
|
|
44.16 |
|
|
Asset
Quality Ratios (%):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
past due loans to total loans
|
|
|
0.96 |
|
|
|
0.45 |
|
|
|
0.49 |
|
|
|
0.27 |
|
|
|
0.43 |
|
|
Nonperforming
loans to total loans
|
|
|
0.42 |
|
|
|
0.27 |
|
|
|
0.19 |
|
|
|
0.17 |
|
|
|
0.38 |
|
|
Nonperforming
assets to total assets
|
|
|
0.30 |
|
|
|
0.17 |
|
|
|
0.11 |
|
|
|
0.10 |
|
|
|
0.21 |
|
|
Allowance
for loan losses to nonaccrual loans
|
|
|
305.07 |
|
|
|
471.12 |
|
|
|
693.87 |
|
|
|
742.25 |
|
|
|
354.49 |
|
|
Allowance
for loan losses to total loans
|
|
|
1.29 |
|
|
|
1.29 |
|
|
|
1.29 |
|
|
|
1.28 |
|
|
|
1.34 |
|
|
Net
charge-offs (recoveries) to average loans
|
|
|
0.08 |
|
|
|
0.03 |
|
|
|
0.02 |
|
|
|
(0.01 |
) |
|
|
(0.02 |
) |
|
Capital
Ratios (%):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tier
1 leverage capital ratio
|
|
|
7.53 |
|
|
|
6.09 |
|
|
|
6.01 |
|
|
|
5.45 |
|
|
|
5.35 |
|
|
Tier
1 risk-based capital ratio
|
|
|
11.29 |
|
|
|
9.10 |
|
|
|
9.57 |
|
|
|
9.06 |
|
|
|
9.15 |
|
|
Total
risk-based capital ratio
|
|
|
12.54 |
|
|
|
10.39 |
|
|
|
10.96 |
|
|
|
10.51 |
|
|
|
10.72 |
|
|
Tangible
equity to tangible assets
|
|
|
5.76 |
|
|
|
5.03 |
|
|
|
4.94 |
|
|
|
4.43 |
|
|
|
5.60 |
|
____________
|
(1)
|
Represents
historical per share dividends declared by the
Bancorp.
|
|
(2)
|
Represents
the ratio of historical per share dividends declared by the Bancorp to
diluted earnings per share.
|
|
Selected
Financial Data
|
|
(Dollars
in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December
31,
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$ |
58,190 |
|
|
$ |
41,112 |
|
|
$ |
71,909 |
|
|
$ |
66,163 |
|
|
$ |
52,081 |
|
|
Total
securities
|
|
|
866,219 |
|
|
|
751,778 |
|
|
|
703,851 |
|
|
|
783,941 |
|
|
|
890,058 |
|
|
FHLB
stock
|
|
|
42,008 |
|
|
|
31,725 |
|
|
|
28,727 |
|
|
|
34,966 |
|
|
|
34,373 |
|
|
Loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
and other
|
|
|
880,313 |
|
|
|
680,266 |
|
|
|
587,397 |
|
|
|
554,734 |
|
|
|
507,711 |
|
|
Residential
real estate
|
|
|
642,052 |
|
|
|
599,671 |
|
|
|
588,671 |
|
|
|
582,708 |
|
|
|
513,695 |
|
|
Consumer
|
|
|
316,789 |
|
|
|
293,715 |
|
|
|
283,918 |
|
|
|
264,466 |
|
|
|
228,270 |
|
|
Total
loans
|
|
|
1,839,154 |
|
|
|
1,573,652 |
|
|
|
1,459,986 |
|
|
|
1,401,908 |
|
|
|
1,249,676 |
|
|
Less
allowance for loan losses
|
|
|
23,725 |
|
|
|
20,277 |
|
|
|
18,894 |
|
|
|
17,918 |
|
|
|
16,771 |
|
|
Net
loans
|
|
|
1,815,429 |
|
|
|
1,553,375 |
|
|
|
1,441,092 |
|
|
|
1,383,990 |
|
|
|
1,232,905 |
|
|
Investment
in bank-owned life insurance
|
|
|
43,163 |
|
|
|
41,363 |
|
|
|
39,770 |
|
|
|
30,360 |
|
|
|
29,249 |
|
|
Goodwill
and other intangibles
|
|
|
68,266 |
|
|
|
61,912 |
|
|
|
57,374 |
|
|
|
54,372 |
|
|
|
23,900 |
|
|
Other
assets
|
|
|
72,191 |
|
|
|
58,675 |
|
|
|
56,442 |
|
|
|
48,211 |
|
|
|
45,254 |
|
|
Total
assets
|
|
$ |
2,965,466 |
|
|
$ |
2,539,940 |
|
|
$ |
2,399,165 |
|
|
$ |
2,402,003 |
|
|
$ |
2,307,820 |
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Demand
deposits
|
|
$ |
172,771 |
|
|
$ |
175,542 |
|
|
$ |
186,533 |
|
|
$ |
196,102 |
|
|
$ |
189,588 |
|
|
NOW
accounts
|
|
|
171,306 |
|
|
|
164,944 |
|
|
|
175,479 |
|
|
|
178,677 |
|
|
|
174,727 |
|
|
Money
market accounts
|
|
|
305,879 |
|
|
|
321,600 |
|
|
|
286,998 |
|
|
|
223,255 |
|
|
|
196,775 |
|
|
Savings
accounts
|
|
|
173,485 |
|
|
|
176,278 |
|
|
|
205,998 |
|
|
|
212,499 |
|
|
|
251,920 |
|
|
Time
deposits
|
|
|
967,427 |
|
|
|
807,841 |
|
|
|
822,989 |
|
|
|
828,725 |
|
|
|
644,875 |
|
|
Total
deposits
|
|
|
1,790,868 |
|
|
|
1,646,205 |
|
|
|
1,677,997 |
|
|
|
1,639,258 |
|
|
|
1,457,885 |
|
|
FHLB
advances
|
|
|
829,626 |
|
|
|
616,417 |
|
|
|
474,561 |
|
|
|
545,323 |
|
|
|
672,748 |
|
|
Junior
subordinated debentures
|
|
|
32,991 |
|
|
|
22,681 |
|
|
|
22,681 |
|
|
|
22,681 |
|
|
|
– |
|
|
Other
borrowings
|
|
|
26,743 |
|
|
|
32,560 |
|
|
|
14,684 |
|
|
|
9,774 |
|
|
|
3,417 |
|
|
Other
liabilities
|
|
|
50,127 |
|
|
|
35,564 |
|
|
|
36,186 |
|
|
|
26,521 |
|
|
|
21,918 |
|
|
Shareholders'
equity
|
|
|
235,111 |
|
|
|
186,513 |
|
|
|
173,056 |
|
|
|
158,446 |
|
|
|
151,852 |
|
|
Total
liabilities and shareholders’ equity
|
|
$ |
2,965,466 |
|
|
$ |
2,539,940 |
|
|
$ |
2,399,165 |
|
|
$ |
2,402,003 |
|
|
$ |
2,307,820 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset
Quality:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonaccrual
loans
|
|
$ |
7,777 |
|
|
$ |
4,304 |
|
|
$ |
2,723 |
|
|
$ |
2,414 |
|
|
$ |
4,731 |
|
|
Nonaccrual
investment securities
|
|
|
633 |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
Other
real estate owned, net
|
|
|
392 |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
4 |
|
|
Total
nonperforming assets
|
|
$ |
8,802 |
|
|
$ |
4,304 |
|
|
$ |
2,723 |
|
|
$ |
2,414 |
|
|
$ |
4,735 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wealth
Management Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market
value of assets under administration
|
|
$ |
3,147,649 |
|
|
$ |
4,014,352 |
|
|
$ |
3,609,180 |
|
|
$ |
3,215,763 |
|
|
$ |
1,821,718 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selected
Quarterly Financial Data
|
|
(Dollars
and shares in thousands, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
Q1
|
|
|
|
Q2
|
|
|
|
Q3
|
|
|
|
Q4
|
|
|
Year
|
|
|
Interest
income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
and fees on loans
|
|
$ |
24,970 |
|
|
$ |
24,406 |
|
|
$ |
25,520 |
|
|
$ |
26,043 |
|
|
$ |
100,939 |
|
|
Income
on securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Taxable
|
|
|
8,416 |
|
|
|
8,302 |
|
|
|
8,504 |
|
|
|
9,160 |
|
|
|
34,382 |
|
|
Nontaxable
|
|
|
780 |
|
|
|
786 |
|
|
|
778 |
|
|
|
781 |
|
|
|
3,125 |
|
|
Dividends
on corporate stock and FHLB stock
|
|
|
620 |
|
|
|
489 |
|
|
|
407 |
|
|
|
366 |
|
|
|
1,882 |
|
|
Other
interest income
|
|
|
140 |
|
|
|
50 |
|
|
|
128 |
|
|
|
16 |
|
|
|
334 |
|
|
Total
interest income
|
|
|
34,926 |
|
|
|
34,033 |
|
|
|
35,337 |
|
|
|
36,366 |
|
|
|
140,662 |
|
|
Interest
expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
11,899 |
|
|
|
9,248 |
|
|
|
9,884 |
|
|
|
10,164 |
|
|
|
41,195 |
|
|
FHLB
advances
|
|
|
7,299 |
|
|
|
7,794 |
|
|
|
8,011 |
|
|
|
7,790 |
|
|
|
30,894 |
|
|
Junior
subordinated debentures
|
|
|
338 |
|
|
|
509 |
|
|
|
524 |
|
|
|
508 |
|
|
|
1,879 |
|
|
Other
interest expense
|
|
|
314 |
|
|
|
275 |
|
|
|
274 |
|
|
|
318 |
|
|
|
1,181 |
|
|
Total
interest expense
|
|
|
19,850 |
|
|
|
17,826 |
|
|
|
18,693 |
|
|
|
18,780 |
|
|
|
75,149 |
|
|
Net
interest income
|
|
|
15,076 |
|
|
|
16,207 |
|
|
|
16,644 |
|
|
|
17,586 |
|
|
|
65,513 |
|
|
Provision
for loan losses
|
|
|
450 |
|
|
|
1,400 |
|
|
|
1,100 |
|
|
|
1,850 |
|
|
|
4,800 |
|
|
Net
interest income after provision for loan losses
|
|
|
14,626 |
|
|
|
14,807 |
|
|
|
15,544 |
|
|
|
15,736 |
|
|
|
60,713 |
|
|
Noninterest
income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wealth
management services:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trust
and investment advisory fees
|
|
|
5,342 |
|
|
|
5,321 |
|
|
|
5,238 |
|
|
|
4,415 |
|
|
|
20,316 |
|
|
Mutual
fund fees
|
|
|
1,341 |
|
|
|
1,445 |
|
|
|
1,383 |
|
|
|
1,036 |
|
|
|
5,205 |
|
|
Financial
planning, commissions and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
other
service fees
|
|
|
575 |
|
|
|
884 |
|
|
|
570 |
|
|
|
723 |
|
|
|
2,752 |
|
|
Wealth
management services
|
|
|
7,258 |
|
|
|
7,650 |
|
|
|
7,191 |
|
|
|
6,174 |
|
|
|
28,273 |
|
|
Service
charges on deposit accounts
|
|
|
1,160 |
|
|
|
1,208 |
|
|
|
1,215 |
|
|
|
1,198 |
|
|
|
4,781 |
|
|
Merchant
processing fees
|
|
|
1,272 |
|
|
|
1,914 |
|
|
|
2,221 |
|
|
|
1,493 |
|
|
|
6,900 |
|
|
Income
from bank-owned life insurance
|
|
|
447 |
|
|
|
453 |
|
|
|
452 |
|
|
|
448 |
|
|
|
1,800 |
|
|
Net
gains on loan sales and commissions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
on
loans originated for others
|
|
|
491 |
|
|
|
433 |
|
|
|
239 |
|
|
|
233 |
|
|
|
1,396 |
|
|
Net
realized gains on securities
|
|
|
813 |
|
|
|
1,096 |
|
|
|
– |
|
|
|
315 |
|
|
|
2,224 |
|
|
Losses
on write-downs of investments to fair value
|
|
|
(858 |
) |
|
|
(1,149 |
) |
|
|
(982 |
) |
|
|
(2,948 |
) |
|
|
(5,937 |
) |
|
Net
unrealized gains (losses) on interest rate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
swap
contracts
|
|
|
119 |
|
|
|
26 |
|
|
|
(24 |
) |
|
|
(663 |
) |
|
|
(542 |
) |
|
Other
income
|
|
|
342 |
|
|
|
528 |
|
|
|
278 |
|
|
|
477 |
|
|
|
1,625 |
|
|
Total
noninterest income
|
|
|
11,044 |
|
|
|
12,159 |
|
|
|
10,590 |
|
|
|
6,727 |
|
|
|
40,520 |
|
|
Noninterest
expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries
and employee benefits
|
|
|
10,343 |
|
|
|
10,411 |
|
|
|
10,580 |
|
|
|
9,703 |
|
|
|
41,037 |
|
|
Net
occupancy
|
|
|
1,138 |
|
|
|
1,064 |
|
|
|
1,123 |
|
|
|
1,211 |
|
|
|
4,536 |
|
|
Equipment
|
|
|
944 |
|
|
|
977 |
|
|
|
956 |
|
|
|
961 |
|
|
|
3,838 |
|
|
Merchant
processing costs
|
|
|
1,068 |
|
|
|
1,598 |
|
|
|
1,857 |
|
|
|
1,246 |
|
|
|
5,769 |
|
|
Outsourced
services
|
|
|
636 |
|
|
|
742 |
|
|
|
700 |
|
|
|
781 |
|
|
|
2,859 |
|
|
Advertising
and promotion
|
|
|
386 |
|
|
|
467 |
|
|
|
376 |
|
|
|
500 |
|
|
|
1,729 |
|
|
Legal,
audit and professional fees
|
|
|
543 |
|
|
|
430 |
|
|
|
626 |
|
|
|
726 |
|
|
|
2,325 |
|
|
Amortization
of intangibles
|
|
|
326 |
|
|
|
326 |
|
|
|
320 |
|
|
|
309 |
|
|
|
1,281 |
|
|
Other
expenses
|
|
|
1,758 |
|
|
|
2,039 |
|
|
|
1,933 |
|
|
|
2,638 |
|
|
|
8,368 |
|
|
Total
noninterest expense
|
|
|
17,142 |
|
|
|
18,054 |
|
|
|
18,471 |
|
|
|
18,075 |
|
|
|
71,742 |
|
|
Income
before income taxes
|
|
|
8,528 |
|
|
|
8,912 |
|
|
|
7,663 |
|
|
|
4,388 |
|
|
|
29,491 |
|
|
Income
tax expense
|
|
|
2,712 |
|
|
|
2,817 |
|
|
|
1,623 |
|
|
|
167 |
|
|
|
7,319 |
|
|
Net
income
|
|
$ |
5,816 |
|
|
$ |
6,095 |
|
|
$ |
6,040 |
|
|
$ |
4,221 |
|
|
$ |
22,172 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average shares outstanding - basic
|
|
|
13,358.1 |
|
|
|
13,381.1 |
|
|
|
13,409.5 |
|
|
|
15,765.4 |
|
|
|
13,981.9 |
|
|
Weighted
average shares outstanding - diluted
|
|
|
13,560.6 |
|
|
|
13,566.7 |
|
|
|
13,588.3 |
|
|
|
15,871.6 |
|
|
|
14,146.3 |
|
|
Per
share information:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
earnings per share
|
|
$ |
0.44 |
|
|
$ |
0.45 |
|
|
$ |
0.45 |
|
|
$ |
0.27 |
|
|
$ |
1.59 |
|
|
Diluted
earnings per share
|
|
$ |
0.43 |
|
|
$ |
0.45 |
|
|
$ |
0.44 |
|
|
$ |
0.27 |
|
|
$ |
1.57 |
|
|
Cash
dividends declared per share
|
|
$ |
0.20 |
|
|
$ |
0.21 |
|
|
$ |
0.21 |
|
|
$ |
0.21 |
|
|
$ |
0.83 |
|
|
Selected
Quarterly Financial Data
|
|
(Dollars
and shares in thousands, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
Q1
|
|
|
|
Q2
|
|
|
|
Q3
|
|
|
|
Q4
|
|
|
Year
|
|
|
Interest
income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
and fees on loans
|
|
$ |
23,934 |
|
|
$ |
24,414 |
|
|
$ |
25,032 |
|
|
$ |
25,340 |
|
|
$ |
98,720 |
|
|
Income
on securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Taxable
|
|
|
7,792 |
|
|
|
7,839 |
|
|
|
7,565 |
|
|
|
7,967 |
|
|
|
31,163 |
|
|
Nontaxable
|
|
|
668 |
|
|
|
759 |
|
|
|
781 |
|
|
|
775 |
|
|
|
2,983 |
|
|
Dividends
on corporate stock and FHLB stock
|
|
|
718 |
|
|
|
685 |
|
|
|
669 |
|
|
|
665 |
|
|
|
2,737 |
|
|
Other
interest income
|
|
|
191 |
|
|
|
184 |
|
|
|
275 |
|
|
|
181 |
|
|
|
831 |
|
|
Total
interest income
|
|
|
33,303 |
|
|
|
33,881 |
|
|
|
34,322 |
|
|
|
34,928 |
|
|
|
136,434 |
|
|
Interest
expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
12,977 |
|
|
|
13,215 |
|
|
|
13,140 |
|
|
|
13,090 |
|
|
|
52,422 |
|
|
FHLB
advances
|
|
|
4,968 |
|
|
|
5,112 |
|
|
|
5,243 |
|
|
|
6,318 |
|
|
|
21,641 |
|
|
Junior
subordinated debentures
|
|
|
338 |
|
|
|
338 |
|
|
|
338 |
|
|
|
338 |
|
|
|
1,352 |
|
|
Other
interest expense
|
|
|
150 |
|
|
|
289 |
|
|
|
291 |
|
|
|
345 |
|
|
|
1,075 |
|
|
Total
interest expense
|
|
|
18,433 |
|
|
|
18,954 |
|
|
|
19,012 |
|
|
|
20,091 |
|
|
|
76,490 |
|
|
Net
interest income
|
|
|
14,870 |
|
|
|
14,927 |
|
|
|
15,310 |
|
|
|
14,837 |
|
|
|
59,944 |
|
|
Provision
for loan losses
|
|
|
300 |
|
|
|
300 |
|
|
|
300 |
|
|
|
1,000 |
|
|
|
1,900 |
|
|
Net
interest income after provision for loan losses
|
|
|
14,570 |
|
|
|
14,627 |
|
|
|
15,010 |
|
|
|
13,837 |
|
|
|
58,044 |
|
|
Noninterest
income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wealth
management services:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trust
and investment advisory fees
|
|
|
5,038 |
|
|
|
5,252 |
|
|
|
5,336 |
|
|
|
5,498 |
|
|
|
21,124 |
|
|
Mutual
fund fees
|
|
|
1,262 |
|
|
|
1,352 |
|
|
|
1,386 |
|
|
|
1,430 |
|
|
|
5,430 |
|
|
Financial
planning, commissions and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
other
service fees
|
|
|