Good morning and welcome to Washington Trust Bancorp Inc.'s Conference Call. My name is Melissa. I will be your operator today. [Operator Instructions] Today's call is being recorded. And now, I will turn the call over to Elizabeth B. Eckel, Senior Vice President, Marketing and Investor Relations. Ms. Eckel?

Thank you, Melissa and good morning everyone. Washington Trust Bancorp Inc.’s third quarter of 2015 conference call will be hosted this morning by Joseph MarcAurele, Washington Trust Chairman and Chief Executive Officer; Ned Handy, President and Chief Operating Officer; and David Devault, Vice Chair, Secretary and Chief Financial Officer. We’d like to remind you that this morning’s presentation may include forward-looking statements and actual results could differ materially from these statements. Our complete safe harbor statement, including a discussion of related factors appears as part of our earnings press release as well as within our most recent SEC reports on Forms 10-K and our 10-Q fillings. All these materials are furnished to the SEC and are available on our Investor Relations website at washtrustbancorp.com. As a reminder WASH Trust trades on NASDAQ/OMX market under the symbol WASH. I'm now pleased to turn the call over to Washington Trust's Chairman and Chief Executive Officer , Joseph MarcAurele.

Thank you, Beth and good morning. Today, David and I will review Washington Trust third quarter results which were issued in a press release yesterday afternoon. After our prepared remarks, Ned Handy will join us to answer any questions you may have about the third quarter or the remainder of the year. Washington Trust earned $10.2 million or $0.60 per diluted share for the third quarter of 2015. These results were below the levels we reported in the second quarter, primarily resulting from conditions affecting revenues in several business lines that we’ll discuss in more detail later on. That said, our third quarter performance ratios remained healthy, with return on average equity and return on average assets at 11.13% and 1.11% respectively. Our results for the most recent quarter reflect our continued efforts to compete and grow in a challenging environment. During the quarter, we completed the acquisition of Halsey Associates, a New Haven, Connecticut-based registered investment adviser. We had solid deposit growth in the quarter and recently released FDIC statistics indicate further Rhode Island market share growth for Washington Trust. While loan growth was affected by strong competition and other factors, asset quality remained very satisfactory. David will discuss our financials in greater detail. First I’d like to provide some highlights from the quarter. Our wealth management division is the key line of business and we continue to make strategic investments in this area for future growth. As I mentioned earlier, one of the highlights of the quarter was our acquisition of Halsey Associates on August 1. At the time of closing, Halsey had approximately 840 million in assets under administration, increasing Washington Trust’s wealth management assets to approximately $6 billion. During August and September however, the equity markets declined noticeably. While the market has rebounded somewhat, there are…

Thank you, Joe. Good morning, everyone and thanks for joining us on our call this morning. I’ll review our third quarter 2015 operating results and financial position, as described in our press release yesterday afternoon. Net income amounted to $10.2 million or $0.60 per diluted share for the third quarter. That compares to second quarter net income of $11.5 million or $0.68 per diluted share. Included in the operating results for the third quarter were acquisition related expenses which equated to $0.03 per diluted share. Excluding that item, the linked quarter decline in earnings reflects some conditions affecting revenues in mortgage banking, commercial banking and wealth management and I’ll comment on those matters during this call. On a year to date basis, earnings and earnings per share are up to 10% over the same period a year ago. Our year to date return on equity is 12.17% and the return on assets is 1.20% for the same period. Comparable returns on equity and assets for the nine months ended in 2014 were 11.6% and 1.21% respectively. Joe mentioned the Halsey acquisition that was completed during the quarter on August 1. The cost to acquire Halsey was $10 million, including $1.7 million in cash, $5.4 million in the form of Washington Trust common stock and a $2.9 million liability for the estimated present value of future earn-outs to be paid. As of the acquisition date, Halsey's assets under administration were approximately $840 million and the acquisition resulted in the recognition of intangible assets of about $6.6 million and goodwill of $6.7 million. There were acquisition related expenses in the quarter, $504,000 and there were $433,000 of acquisition related expenses in the second quarter. Again, on an after-tax basis, the acquisition cost resulted in a charge to diluted earnings per share of…

Thank you, David. The third quarter obviously is evidence that Washington Trust is not immune to the challenges of this operating environment. To a certain extent, we do believe it is unusual to have a simultaneously disappointing revenue results in more than one or two business lines. That has not been our experience over a long period of time. We continue to strongly believe in the soundness and diversity of our business model, which has fairly consistently benefited from this kind of diversity. Washington Trust remains a strong, well-capitalized institution. We have a strong foundation. We’re committed to growing the corporation to enhance the value to our shareholders. We’ve embarked on significant growth initiatives including acquisitions, de novo branching and investments in technology and we believe we’ll benefit from these initiatives going forward. This concludes our prepared remarks. At this point, David, Ned and I are open to answer any questions you may have. Thank you.

[Operator Instructions] Thank you. Our first question comes from the line of Mark Fitzgibbon with Sandler O'Neill. Please proceed with your question.

Good morning. David, it sounded like you were pretty upbeat on the net interest margin outlook given what sounds like a strong commercial pipeline. Do you think you can sort of hold the margin somewhat close to its current level or are we likely to see a little more slippage?

That optimism was geared more towards net interest income dollars than the margin itself. Structurally, we would continue to expect some continued slippage in the margin if rates stay where they are right now.

Okay. And then secondly, I wondered if you could, I know you said the pipelines, both commercial and mortgage, were healthy. Could you share with us the size of those pipelines and maybe what the average rate looks like on the commercial pipe?

Mark, it’s Ned. Good morning. Yes, the pipelines are both strong in both areas. The gross pipeline in the commercial bank is over $200 million. We expect to have another strong fourth quarter as we did last year on the commercial side both in CRE and C&I. Obviously the third quarter was affected by a higher than normal level of payouts in the CRE book, which we should expect will continue somewhat. Rates are down. Cap rates are low. Prices being paid are very high and our more sophisticated customers are taking advantage of that. So we expect that to continue, but the growth in the fourth quarter should get us well back on track. The Resi pipeline is still in the $140 million range. Strong enough to suggest we’ll have a strong fourth quarter. Applications continue to be on track in the higher end of normal and so we have reason to believe that the fourth quarter will be strong.

And Ned, I noticed a lot of the press releases you guys put out about deals that you’ve done have been on loans in Connecticut. What would you guesstimate your commercial loans book this past quarter came from Connecticut?

I would have to take a guess with that. It’s probably -- it’s below 20% of the book. It’s a new market to us. We are active there mostly on the C&I -- excuse me on the CRE side, but it would be fewer deals in Connecticut than in obviously the home market Rhode Island and we've been particularly active in the general greater Boston market. You’ve heard us talk about the downtown Boston market and we are not doing a whole lot there, but the surrounding markets are very strong and so we are active there.

And then the last question I had is on Halsey. I wondered if you could just share with us your thought on what percentage of the assets you expect to retain there. And I know it’s early, but how the integration is going.

Mark, I would say that we -- This is Joe. We would feel as though that book of business is very sticky. We don’t anticipate any significant loss of clients. The down draft in the assets under administration at both Halsey and at Rhode Island and even Western Wealth Management businesses were really almost totally attributable to market conditions, particularly in August and September. But lost clients has been pretty limited.

Thank you.

Thank you. [Operator Instructions]. Our next question comes from the line of Travis Lan with KBW. Please proceed with your question.

Yeah, thanks. Good morning everyone. Ned, I just wondered, so it looks like year to date you’re on pace for kind of mid-single digit loan growth, but as you’ve kind of mentioned, each of the last two years you’ve seen fourth quarter growth of 5% and 7%. Do you expect this fourth quarter to kind of get back to those levels or is it a little bit tempered based on level of competition?

No, I think we’ll get back on track in the sort of the high single digits. And we've got a very robust current pipeline and the next 90 days should be venturesome and full of activity. So I think we’ll get back on track.

Got it. And Joe, you’ve mentioned obviously the competition across the lending environment, but how does that vary within your own markets and is there a specific geography maybe that’s more challenging than others right now?

I would say that it’s across every market, particularly the greater Boston market where there are more players and on the commercial real estate side, the pricing competition in particular is vicious. And one of the things that we have seen is that as these premier properties at incredibly low cap rates have changed hands, that the long term financing available, either through REITs or institutions, has really changed the landscape there. From our perspective, we believe that the better developers, we like to think a lot of them were our customers, see the value that can be derived from a sale, and quite frankly are probably intelligently pulling the trigger on those sales. Unfortunately as we were paid out on some of the things this quarter, these things were beyond the pre-payment penalty phase, so it affected us from the perspective of the types of pre-payment penalties that we at times had enjoyed in previous quarters.

Got it, okay. That’s helpful. And David, just last one on the balance sheet. Securities portfolio has come down to 10% of assets. Is that a reasonable level going forward or would you expect some reinvestment there?

It really can’t drift below that to any measurable extent, Travis. So we are reluctantly reloading in the securities portfolio where necessary for liquidity and deposit collateralization management purposes. I say reluctantly because obviously yields are just not very attractive without taking on any significant amount of interest rate risk or mismatch and we are not doing that.

Got it, okay. That’s helpful. And then just on the fee side, obviously David you gave some good color there. But just maybe I wanted to verify I guess the outlook or the potential for rebound kind of in mortgage banking and on the swap side. So I know obviously the residential pipeline it sounds like it’s fairly strong, but just how that may impact the mortgage banking line going forward.

Mortgage banking we would expect would continue to be a significant contributor to our profitability. A larger portion of the mortgage pipeline is sale directed rather than portfolio, directed than in our previous history. So that is helpful to that line item. And then we are -- Some reductions in yield in the quarter that we think we can rebound from on the sales. Overall I’m relatively optimistic about mortgage banking. The same thing would be true with derivative income. Certainly if we have an increase in commercial loan activity that generates all things being equal of swap transaction income and we’ll just have to see where that goes.

Got it, okay. Then the last two just on the expense side, so if you annualize all of the expenses, it looks like it’s about $2.7 million for kind of an annualized basis. Is that appropriate or are there any delayed expenses or timing issues that brings that higher?

That’s a pretty good way to look at it. We might do some things with I don’t know, spending or maybe office space or something like that that would have a modest change, but that’s a good way to look at it.

Okay, good. And then just Joe had mentioned some wealth management technology investments. Are those in the existing run rate or are those additional investments to be made?

Those are for the most part prospective, but I would point out that we continuously reinvest in technology in a lot of different business lines over time and there is things that reach the end of their useful life and the depreciation drops off. I think we are being very thoughtful about how we manage investment spending.

Great. Thank you guys very much.

Thank you. Our next question comes from the line of Laurie Hunsicke with Compass Point. Please proceed with your question.

Good morning gentlemen. Can you help us think about your construction book? Obviously that was huge growth linked quarter. It’s a low denominator, but at this point your $122 million book is 4% of loans. How are you thinking about where that goes?

Again, it is a fairly small balance as part of the total portfolio and a lot of things came together in the quarter and there were quite a bit of additional advances on things that had been booked or closed in previous quarters, which largely explains that increase.

Laurie, it’s Ned. We are certainly not overweight in construction. We fund about 4ish million a month in existing construction loans and some of those are early stage and I’d say as many are later stage and coming to fruition. What we are finding is, those deals as they get towards completion, are finding buyers upon completion. Some even, one prior to completion. So we are not holding on to them for very long once they're completed. But it’s not -- Our strategy includes doing some more construction, but it’s certainly not an intent to be overweight on it and we've got diversity across property type. We've got diversity across markets. Some of it is in the Greater New Haven area. Some of it is in Boston. Some of it is here in Rhode Island. So I don’t think it’s a concern in terms of being overweight at all and I think our diversity is -- I think we are being prudent about it. We get a little bit better pricing in construction, but interestingly not a whole lot better. So it’s not like it’s a rate player or a yield player for us. It’s just part of our business.

Got it and then can you just remind us, what is your average size construction loan?

That’s a hard question to answer. I mean, it’s --

Yeah, I’d say Laurie it’s probably in the teens. Probably $15 million, $20 million. It depends on the individual deal.

That would be the high end of the range.

I would say importantly, it’s probably no different than the average size of our other new originations in the CRE space. It’s not like we are doing extra-large construction loans. We are pretty careful about individual deal size and total hold levels.

Okay and then just one last question. Geographically, if we look at you, you started the year with about an $80 million book and so now you’re $122 million. Do you know roughly what percentage of that growth has been in Boston? Or maybe asking another way just more generally, what percentage of your total book is in Boston or the Boston market?

Well, I don’t think I have that. I mean total CRE, including construction is nearly all Rhode Island, Connecticut and Massachusetts. There is a fair amount in Boston, but it is spread over the three states.

I would say I don’t think we have a concentration in the Boston marketplace. We've been pretty careful about particular parts of that market for a while now. And I’d say we are focusing more on the outer suburbs to the extent that we are doing deals in Massachusetts and we've got a pretty good focus in the greater New Haven market and obviously we are active in Rhode Island.

Great and certainly your credit there has been pristine. You have zero non-accruals in that book. Okay, just one last [crosstalk]. Just one last quick question, just from a timing perspective as I'm modelling expenses. The branch, the Eastern Providence branch in Rhode Island, approximately when is that going to open? What month, just approximate?

Probably Laurie, January or February.

January or February. Okay. And that again should run with an initial drag of about $500,000 or so per year?

That’s a good estimate.

Okay, perfect. Thank you, gentlemen.

Thank you. This concludes our question-and-answer session. I would like to turn the conference back over to Joseph MarcAurele for any concluding remarks.

Thank you very much. We appreciate everyone’s participation today and obviously we look forward to talking to you again on our next earning call to close out the year. So thank you very much.

Thank you. This concludes today’s teleconference. You may disconnect your lines. Thank you for your participation.