Good morning, everyone, and welcome to the Washington Trust Bancorp Inc.’s Conference Call. My name is Jamie and I’ll be your operator today. [Operator Instructions] Today’s call is being recorded. And now, I would like to turn the conference call over to Elizabeth B. Eckel, Senior Vice President, Marketing and Investor Relations. Ms. Eckel, you may begin.

Thank you, Jamie, and thank you for joining us for today’s conference third quarter of 2013 conference call. Washington Trust trades on NASDAQ’s global flex market under the symbol WASH. Today’s conference call is being recorded in a webcast live. A replay of the call will be made available shortly after the conclusion of the call throughout the corporation’s website at washtrust.com in our Investor Relations section. Please note, the information provided during today’s call is accurate only as of this date and you should not rely on these statements after the conclusion of today’s call. With us this morning’s discussion with Joseph J. MarcAurele, Chairman, President, and Chief Executive Officer; and David V. DeVault, Vice Chair, Secretary, and Chief Financial Officer. I’m pleased to introduce Washington Trust’s Chairman, Joe MarcAurele.

Thanks, Beth. Well, good morning, everyone and thank you for joining us for today’s conference call. Yesterday, we announced our third quarter results. This morning, I’ll review the quarter’s highlights and then David will provide an overview of the financials. At the conclusion of the call, we’ll answer any questions you may have about our performance. Washington Trust earned a record $10 million or $0.59 per diluted share in the third quarter. This is the most Washington Trust has earned in one quarter since our founding 213 years ago. Return on average equity for the third quarter increased to 12.82%, while return on average assets improved to 1.9%. We are pleased with these return levels. Capital levels are -- also remain strong with a total risk based capital ratio of 13.44% at September 30th. This record performance reflects our continued success at managing the corporation during challenging economic times. Our management team remains focused on making the strategic decisions that will help us grow the company efficiently and effectively while continuing to generate a solid return for our shareholders. And during the quarter, we did in fact increase our dividend for the second time this year. Let me turn now to a review of operations. Wealth management assets under administration reached $4.6 billion at quarter’s end, another all-time high for the company. Wealth management revenues represent more than 40% of our non-interest income. Our total loans were down for the quarter, largely as a result of a residential portfolio transaction which David will discuss in more detail shortly. We saw some slowdown in mortgage origination production during the quarter as interest rates increased. However, the purchase market has rebounded particularly in Massachusetts and Connecticut where we have offices. The economies there have recovered somewhat faster than our home state of…

Thank you, Joe, good morning, everyone and thanks for joining us on our call today. I’ll review our third quarter 2013 operating results and financial position as described in our press release yesterday afternoon. Net income amounted to $10 million with diluted earnings per share of $0.59 for the third quarter. This compares to second quarter 2013 net income of $9 million or $0.54 and third quarter 2012 net income of $8.9 million or $0.54 per share. The third quarter net income and earnings per share results are record highs for the company. Highlights for the latest quarter include return on average equity of 12.82% and return on average assets of 1.29% for the latest quarter. We’re also up nicely from the second quarter. Deposits reached $2.5 billion at the end of the third quarter with excellent growth in money market and demand deposit accounts. Total deposits are up by 10% in the last 12 months. We conducted some balance sheet management transactions during the quarter, a $48.7 million package of residential mortgage loans was sold from portfolio, resulting in a gain of $977,000. This gain has been included in the gains and commissions on loan sales item in our income statement. All other amounts in that line item are associated with normal ongoing mortgage banking transactions. $24.5 million of federal home loan bank advances were prepaid resulting in debt prepayment penalties charged to earnings of $1.1 million. Both of these transactions were conducted in the latter half of September. Third quarter net interest income was $23.4 million, up $1 million on a linked quarter basis. The net interest margin in the latest quarter was 3.29% compared to 3.26% in the second quarter. Third quarter net interest income included $457,000 of commercial loan prepayment penalty fee income which contributed 6…

Thank you, David. Again, we’re pleased with our record third quarter performance and the healthy returns we’ve generated for our shareholders. Washington Trust continues to have a strong capital position and, we believe, an outstanding value proposition. We feel as though we’re well positioned for future growth. We’re looking forward to Ned Handy joining us next month and working with our management team on tackling those day to day operations to get us to the next level. Thank you for participating in this morning’s call. David and I will now answer any questions you may have.

[Operator Instructions] And our first question comes from Mark Fitzgibbon from Sandler O’Neill & Partners.

I was wondering first if you could start with the margin and share with us your thoughts for the outlook for the core margin. Are we likely to see a little bit more compression in coming quarters?

I think certainly with -- if rates remain unchanged, there will continue to be pressure on the margin. I think it would be gradual and it would -- there’s probably several more quarters of that in the current rate environment.

Okay. And then secondly, how are you thinking about the FTE tax rate going forward? Is it still pretty stable or any changes there?

It is pretty stable. We don’t see any changes in the taxable versus non-taxable income that would affect the effective rate at this time.

Okay. And holding all else equal as it relates to that pension expense, we should see expenses decline by, I guess, $376,000, $500 [ph] less the $124 [ph] that you had this quarter?

That would be a good way to look at it, yes. I’m glad you mentioned it that way. That is the way to look at it if you’re comparing to the third quarter. Now, next year will depend on what the discount rate is or a major impact on that would be the discount rate at December 31, 2013. So, I’m not saying you can extrapolate that rate into 2014 dollar for dollar.

Okay. And then the commercial real estate loan growth was a bit softer than what we’ve seen in recent quarters. I wondered if you could share with us why that was and also share with us the size of the commercial real estate pipeline today.

Mark, this is Joe. I would say that it was somewhat of a natural summertime slowdown. The current commercial real estate pipeline -- actually, the total commercial pipeline stands at about $138 million. And we did have some pay downs in commercial real estate in the third quarter that affected the outstandings there. But we feel as though momentum is back up and we will have reasonable closings in the fourth quarter that will put us back on track for the kind of 2% to 3% of quarterly commercial growth that we’ve experienced over really a long period of time up until this quarter.

Okay, great. And then lastly, your TCE ratio is now about 50 basis points above where it’s been running previously due to that pension adjustment. Do you have a target in mind for that? Is it closer to 8%? And is there a plan to leverage that extra 50 basis points of capital?

Well, the benefit of that pension change did result in that increase that you’ve just described. It gives us additional flexibility for supporting future growth and it’s probably somewhat richer than it needs to be. And that will be something we’ll take into consideration in our capital planning. I should point out that that had no effect on regulatory capital ratios that pension adjustment, either positive or negative, has always been excluded from regulatory capital measurements.

And our next question comes from Damon DelMonte from KBW.

Question for you on loan growth. Where throughout your company [ph] are you seeing the greatest opportunity right now?

Our greatest opportunity has been really in 2 areas. One is the non-profit C&I side in Rhode Island. And we’ve done a good job expanding our commercial real estate efforts in both Connecticut and the greater Boston market. Those on the increase [ph] side, those are the most active areas.

Okay. And so I guess that ties back to your comment on the pipeline looking better than what you saw on the third quarter heading into the fourth quarter. So, those are the markets that you’re getting the best looks right now?

Yes.

Okay. And then with respect to the deposit growth this quarter, was there some seasonal influence or was there something else going on that caused the growth to be so favorable?

I would say, Damon, that it’s a combination. Some of it was seasonal influence. But I think we said on previous calls that we have invested over time in our cash management capabilities and hired people to concentrate on what I would characterize as somewhat larger deposit opportunities, particularly commercial deposit opportunities that have BDA [ph] attached to them. So it’s a combination of the 2 of those situations.

Okay. That’s helpful. And then I guess my last question is dealing with expenses. I guess to kind of circle back on Mark’s question, David, about the pension adjustment, so is that a one-time event in the fourth quarter, or do we take out the 376 on a run rate basis going forward?

The 2 things that contributed to it, the structural change in the plan benefit, that’s going to continue. The benefit resulting from the higher discount rate which went up from December 31, 2012 to September 19th re-measurement date, that will continue if the discount rates stays where it is. So both of them, I would view as probably continuing, certainly, the structural changes continuing. The discount rate was I think at its lowest point at the end of 2012 and I don’t predict what will happen with rates, but it is higher today, and it may remain higher.

Okay. Okay, that’s helpful. And then I guess the other component of your comp expense that was down this quarter, you highlighted in your release with the mortgage banking side of the business, how should we think about that going forward? With a general refi market in somewhat purchase market slowing down, I mean should we see a ramp up in expenses? Or you think what we have this quarter is a good run rate?

The characteristics of the third quarter mortgage banking results were -- it was stronger at the beginning of the quarter because of the demand that had been expressed in the second quarter translating into closings in the third quarter. The run rate that we saw or I would say in the second half of the third quarter, is continuing today, so we may see stable to somewhat lower mortgage banking results in the fourth quarter. It’s a little bit too early to tell right now, and we’re seeing some positive signs in the pipeline. So that’s probably the best that we can say at this point. There is volatility in that line of business.

Okay. And then I guess lastly on mortgage banking, I’m sorry if you included this and I missed it, but do you have a gain on sale as a percent for the third quarter versus the second quarter?

Yes, I do. The gains on the volume of loans sold, 2.54% in the third quarter. Now that’s the gains in commissions on loan sales divided by the volume of loans sold or brokered. That was down about 9 basis points in the second quarter.

And our next question comes from Taylor Brodarick from Guggenheim Securities.

Most of my questions have been answered, but just one question on wealth management. Was any of the growth driven by -- was a significant amount driven by adding new clients? Or is it just a function of higher values for the portfolios you manage?

The majority of that growth is market appreciation. There was some volatility in the equity markets during the quarter, but it was at end of quarter, it was up over the end of the second quarter.

[Operator Instructions] And at this time, I’m showing no additional questions. I’d like to turn the conference call back over for any closing remarks.

This is Joe. I really appreciate everyone’s attention today. We feel good obviously about the quarter. We also have to recognize that we continue to operate under a strained economic environment. We will continue to pay attention obviously to growth initiatives and at the same time, we understand that we’re going to have to work hard to control expenses going forward. So thank you very much. Appreciate your interest at our company and we will be back to you again next quarter.

Ladies and gentlemen, that does conclude today’s conference call. We do thank you for attending, you may now disconnect your telephone lines.