Washington Trust Bancorp, Inc. (NASDAQ:WASH) Q2 2024 Earnings Conference Call July 23, 2024 8:30 AM ET Company Participants Elizabeth Eckel - EVP, Chief Marketing & Corporate Communications Officer Ned Handy - Chairman & CEO Ron Ohsberg - Senior EVP, CFO & Treasurer Mary Noons - President & COO Bill Wray - Senior EVP & CRO Conference Call Participants Mark Fitzgibbon - Piper Sandler Damon DelMonte - KBW Laurie Hunsicker - Seaport Research Operator Good morning, and welcome to Washington Trust Bancorp, Inc.' ...

Financial Performance - Second quarter 2024 net income was $10.8 million, or $0.63 per diluted share, compared to $10.9 million, or $0.64 per diluted share in the first quarter of 2024[2]. - Net income for the three months ended June 30, 2024, was $10,815, a decrease of 1.1% compared to $10,936 in the previous quarter[28]. - The net income for the six months ended June 30, 2024, was $21,751, a decrease of $2,317 from $24,068 in the previous year[59]. - Return on average equity was 9.43% for the three months ended June 30, 2024, compared to 9.33% in the previous quarter[30]. - Return on average tangible equity (Non-GAAP) was 11.04% for the three months ended June 30, 2024, compared to 11.32% in the same period last year[59]. Interest Income and Margin - The net interest margin decreased to 1.83% in the second quarter from 1.84% in the previous quarter, with net interest income at $31.6 million, down by $80 thousand, or 0.3%[4][5]. - Net interest income for the three months ended June 30, 2024, was $31,585, a slight decrease of 0.3% from $31,665 in the previous quarter[28]. - The net interest margin for the three months ended June 30, 2024, was 1.83%, down from 1.84% in the previous quarter[30]. - The average yield on taxable debt securities was 2.47%, down from 2.49% in the previous quarter[55]. - The interest rate spread decreased to 1.29%, down from 1.69% in the previous year, reflecting a decline of 0.40%[57]. Loans and Credit Quality - Total loans amounted to $5.6 billion, down by $56 million, or 1%, from the previous quarter, with commercial loans decreasing by 1% and residential real estate loans also decreasing by 1%[10][14]. - Total loans for the three months ended June 30, 2024, were $5,665,594 thousand, with net interest income (FTE) of $31,812 thousand[55]. - Nonaccrual loans were $30.5 million, or 0.54% of total loans, remaining stable compared to the previous quarter[13]. - The provision for credit losses was $500 thousand, down by $200 thousand from the previous quarter, with net charge-offs amounting to $27 thousand[16]. - Total past due loans increased to $11,880 thousand as of June 30, 2024, compared to $11,345 thousand at December 31, 2023, reflecting an increase of approximately 4.7%[48]. Deposits and Assets - Total deposits decreased to $5.0 billion, down from $5.3 billion at the end of the previous quarter, with in-market deposits at $4.6 billion, down by 1%[10][11]. - Total deposits decreased to $4,976,126 as of June 30, 2024, down 6.9% from $5,347,893 on March 31, 2024[26]. - Total assets as of June 30, 2024, were $7,184,360, a decrease of 0.9% from $7,249,124 on March 31, 2024[26]. - Total assets increased by $387,500, reaching $7,229,656 as of June 30, 2024, compared to $6,842,156 in the previous year[57]. - Total liabilities as of June 30, 2024, were $6,713,403, a decrease of 1.0% from $6,782,204 on March 31, 2024[26]. Equity and Capital Ratios - Total shareholders' equity increased to $471.0 million, up by $4.0 million, or 1%, from the previous quarter, with a total risk-based capital ratio of 11.81%[17][18]. - The Tier 1 risk-based capital ratio improved to 11.01% as of June 30, 2024, from 10.84% in the previous quarter[30]. - The allowance for credit losses on loans to nonaccrual loans ratio improved to 139.04% as of June 30, 2024, compared to 136.45% in the previous quarter[48]. Noninterest Income and Expenses - Noninterest income for the three months ended June 30, 2024, was $16,660, a decrease of 2.9% from $17,163 in the previous quarter[28]. - Total noninterest expense for the three months ended June 30, 2024, was $33,910, a decrease of 1.4% from $34,363 in the previous quarter[28]. - Cash dividends declared per share remained at $0.56 for the three months ended June 30, 2024[28]. Wealth Management and Mortgage Banking - Wealth management revenues increased by 4% to $9.7 million, while mortgage banking revenues rose by 10% to $2.8 million, reflecting higher realized gains[7]. - Total wealth management revenues reached $9,678,000 for the three months ended June 30, 2024, up from $9,338,000 in the previous quarter, representing a 3.6% increase[33]. - Total mortgage banking revenues increased to $2,761,000 for the three months ended June 30, 2024, compared to $2,506,000 in the previous quarter, marking a 10.1% increase[33].

Core Viewpoint Washington Trust Bancorp, Inc. reported a stable second quarter performance for 2024, with net income slightly decreasing to $10.8 million from $10.9 million in the previous quarter. The company emphasized its focus on managing current economic conditions while investing in technology and marketing for future growth. Financial Performance - The net income for Q2 2024 was $10.8 million, or $0.63 per diluted share, compared to $10.9 million, or $0.64 per diluted share in Q1 2024 [1] - Returns on average equity and average assets were 9.43% and 0.60%, respectively, compared to 9.33% and 0.61% in the prior quarter [1] - The net interest margin was 1.83%, down from 1.84% in the preceding quarter [1][2] Income Breakdown - Net interest income for Q2 2024 was $31.6 million, a decrease of $80 thousand, or 0.3%, from Q1 2024 [2] - Noninterest income totaled $16.7 million, down by $503 thousand, or 3%, from Q1 2024, but excluding specific items, it increased by 4% [3] - Wealth management revenues increased by 4% to $9.7 million, while mortgage banking revenues rose by 10% to $2.8 million [3] Expense Management - Total noninterest expense decreased by 1% to $33.9 million, with a notable reduction in salaries and employee benefits expense [4] - Salaries and employee benefits amounted to $21.3 million, down by $515 thousand, or 2% [4] Tax and Capital - Income tax expense was $3.0 million, up by $191 thousand from the previous quarter, with an effective tax rate of 21.8% [5] - Total shareholders' equity increased to $471.0 million, up by $4.0 million, or 1%, from the previous quarter [8] Asset Quality - Nonaccrual loans were $30.5 million, or 0.54% of total loans, remaining stable compared to the previous quarter [8] - The allowance for credit losses on loans was $42.4 million, or 0.75% of total loans, slightly up from $41.9 million [8] Deposits and Loans - Total loans amounted to $5.6 billion, down by 1% from the previous quarter [6] - Total deposits were $5.0 billion, a decrease from $5.3 billion at the end of the previous quarter [7] Conference Call Washington Trust will host a conference call on July 23, 2024, to discuss its second quarter results and outlook [1]

Core Insights - Analysts predict that Washington Trust Bancorp (WASH) will report quarterly earnings of $0.49 per share, reflecting a year-over-year decline of 25.8% [2] - Total noninterest income is expected to reach $15.15 million, up from $14.33 million a year ago [1] - Net Interest Income is projected at $30.93 million, down from $33.50 million in the previous year [5] - The consensus estimate for the Efficiency Ratio is 74.8%, compared to 69% a year ago [8] - Revenues are anticipated to be $46.06 million, a decrease of 3.7% from the same quarter last year [2] - Washington Trust shares have increased by 25.6% over the past month, outperforming the Zacks S&P 500 composite, which rose by 2.1% [5] Earnings Estimates and Revisions - The consensus EPS estimate for the quarter has remained unchanged over the past 30 days, indicating a reassessment by covering analysts [6] - Changes in earnings estimates are crucial for predicting investor reactions and short-term stock performance [3][7] Market Position - Washington Trust Bancorp holds a Zacks Rank 3 (Hold), suggesting it is expected to closely follow overall market performance in the near term [5]

Company Performance - Washington Trust Bancorp (WASH) shares increased by 6.5% in the last trading session, closing at $28.21, with notable trading volume exceeding typical levels [4] - The company is expected to report quarterly earnings of $0.49 per share, reflecting a year-over-year decline of 25.8%, with revenues projected at $46.06 million, down 3.7% from the previous year [5] Market Context - The Federal Reserve's focus on unemployment and cooling inflation has led market participants to anticipate interest rate cuts as early as the September FOMC meeting, positively impacting banks like Washington Trust Bancorp [1] - As interest rates decrease, banks' funding costs are expected to decline, contributing to a bullish sentiment among investors in the banking sector, which has driven WASH's stock price higher [1] Earnings Estimates - The consensus EPS estimate for Washington Trust has remained unchanged over the last 30 days, indicating stability in earnings expectations [6] - Trends in earnings estimate revisions are closely correlated with near-term stock price movements, suggesting that monitoring these trends is crucial for assessing future stock performance [2]

Core Insights - Washington Trust has been recognized as one of America's Best-In-State Banks for 2024 by Forbes, marking the fourth consecutive year the bank has received this accolade [1][4]. Company Overview - Founded in 1800, Washington Trust is the oldest community bank in the United States and the largest state-chartered bank headquartered in Rhode Island [3]. - The bank offers a comprehensive range of financial services, including commercial banking, mortgage banking, personal banking, and wealth management, across Rhode Island, Connecticut, and Massachusetts [3]. - Washington Trust is a member of the FDIC and operates as a subsidiary of Washington Trust Bancorp, Inc., which is publicly traded on NASDAQ under the ticker symbol WASH [3]. Recognition and Awards - The Forbes list is based on an independent survey conducted in partnership with Statista Inc., which evaluated customer satisfaction, willingness to recommend, and various service criteria [2]. - Washington Trust achieved the highest combined score in Rhode Island, reflecting its commitment to meeting the financial needs of the local community [4][5].

WESTERLY, R.I., July 9, 2024 /PRNewswire/ -- Washington Trust Bancorp, Inc. (NASDAQ: WASH), the publicly-owned holding company of The Washington Trust Company, will release second quarter 2024 earnings and host a conference call with the Corporation's executives as follows: Webcast: Washington Trust Bancorp's website, https://ir.washtrust.com ABOUT WASHINGTON TRUST BANCORP, INC. SOURCE Washington Trust Bancorp, Inc. Earnings Release: Monday, July 22, 2024, After Market Closes Conference Call: Tuesday, July ...

Financial Performance - Net income for Q1 2024 was $10.9 million, a decrease of 15% from $12.8 million in Q1 2023[172] - Total revenues decreased by 3% to $48.8 million in Q1 2024 compared to $50.5 million in Q1 2023[172] - Diluted earnings per share for Q1 2024 were $0.64, compared to $0.74 in Q1 2023[172] - Net income for the Commercial Banking segment decreased by $4.660 million, or 38%, to $7.598 million for the three months ended March 31, 2024, compared to $12.258 million in the same period of 2023[214] Income and Expenses - Net interest income fell to $31.7 million in Q1 2024, down 15% from $37.2 million in Q1 2023[172] - Noninterest income increased by 29% to $17.2 million in Q1 2024, driven by a $2.1 million litigation settlement and higher mortgage banking revenues[173] - Noninterest expenses rose to $34.4 million in Q1 2024, an increase of 2% from $33.6 million in Q1 2023, primarily due to higher FDIC deposit insurance costs[173] - The provision for credit losses decreased to $700,000 in Q1 2024, down 13% from $800,000 in Q1 2023[172] Asset and Loan Growth - Total average loan balances increased by $527.6 million, or 10%, in Q1 2024 compared to Q1 2023, primarily due to growth in commercial real estate and residential real estate loans[186] - Total assets increased by $487.8 million, reaching $7.23 billion as of March 31, 2024, compared to $6.74 billion a year earlier[180] - Total loans increased by $37.5 million, or 1%, with the growth primarily in commercial loans[223] Interest Income and Margins - Total interest income increased by $16.5 million, or 24%, in Q1 2024 compared to Q1 2023, driven by higher yields on loans[191] - The net interest margin (NIM) decreased to 1.84% in Q1 2024 from 2.33% in Q1 2023, impacted by higher funding costs despite increased market interest rates[184] - Net interest income as a percentage of total revenues declined to 65% in Q1 2024 from 74% in Q1 2023[172] Deposits and Funding - Total deposits amounted to $5.3 billion at March 31, 2024, essentially unchanged from December 31, 2023, with in-market deposits down by $19.9 million[304] - Wholesale brokered time deposits increased by $19.7 million, or 3%, from December 31, 2023, as higher levels were utilized to fund balance sheet growth[305] - FHLB advances totaled $1.2 billion at March 31, 2024, up by $50 million, or 4%, from the end of 2023, indicating increased reliance on wholesale funding[309] Credit Quality - Total nonperforming assets decreased to $31.4 million, down from $45.3 million at December 31, 2023, reflecting a reduction in nonaccrual loans[270] - Nonperforming loans to total loans ratio improved to 0.54% as of March 31, 2024, compared to 0.79% at December 31, 2023[270] - The allowance for credit losses (ACL) on loans increased by $848 thousand, or 2%, to $41.9 million at March 31, 2024, with a reserve coverage ratio of 0.74%[294] Shareholder Equity and Dividends - Total shareholders' equity decreased by $5.8 million to $466.9 million at March 31, 2024, with net income of $10.9 million offset by $9.7 million in dividends[321] - The Corporation declared a quarterly dividend of 56 cents per share for the three months ended March 31, 2024, unchanged from the same period in 2023[322] Regulatory and Compliance - The total risk-based capital ratio is 11.62% at March 31, 2024, slightly up from 11.58% at December 31, 2023, indicating the Corporation is "well capitalized"[323] - There have been no material changes in the Corporation's internal controls over financial reporting during the quarter ended March 31, 2024[348] - Management believes that ongoing legal proceedings will not materially affect the Corporation's consolidated financial position or results of operations[349]

Financial Performance - Washington Trust reported Q1 2024 net income of $10.9 million, or $0.64 per diluted share, down from $12.9 million, or $0.76 per diluted share in Q4 2023[2] - Net income for Q1 2024 was $10,936 thousand, a decrease of 15.54% from $12,947 thousand in Q4 2023[29] - Earnings per common share for Q1 2024 was $0.64, down from $0.76 in the previous quarter, a decline of 15.79%[29] - Return on average equity decreased to 9.33% from 11.77% in the previous quarter, indicating a decline in profitability[31] - Return on average tangible equity (Non-GAAP) was 10.89% for the three months ended March 31, 2024, down from 13.93% in the previous quarter[61] Income and Revenue - Noninterest income increased by $3.9 million, or 29%, to $17.2 million in Q1 2024, driven by a $2.1 million litigation settlement[5] - Total interest and dividend income for Q1 2024 was $85,256 thousand, an increase of 1.56% compared to $83,946 thousand in Q4 2023[29] - Net interest income after provision for credit losses was $30,965 thousand, down from $31,454 thousand in the previous quarter, a decrease of 1.55%[29] - Total wealth management revenues increased to $9,338 thousand from $8,881 thousand in the previous quarter, driven by higher asset-based revenues[35] - Total mortgage banking revenues rose to $2,506 thousand from $1,554 thousand in the previous quarter, reflecting increased realized gains on loan sales[35] Loans and Assets - Total loans reached $5.7 billion, an increase of $38 million, or 1%, from the end of the previous quarter[11] - Net loans reached $5,643,327 thousand, a slight increase from $5,606,649 thousand in the previous quarter, reflecting a growth of 0.65%[27] - Total loans increased to $5,685,232 thousand from $5,647,706 thousand in the previous quarter, with commercial real estate loans rising to $2,158,518 thousand[39] - Total assets increased to $7,249,124 thousand as of March 31, 2024, up from $7,202,847 thousand at December 31, 2023, representing a growth of 0.65%[27] - Total assets increased to $7,231,835 thousand as of March 31, 2024, up from $7,191,575 thousand at December 31, 2023, reflecting a change of $40,260 thousand[59] Deposits and Funding - In-market deposits decreased by $20 million, or 0.4%, to $4.7 billion, with approximately 61% being retail and 39% commercial[12] - Total deposits remained stable at $5,347,893 thousand, a marginal decrease from $5,348,160 thousand in the previous quarter[27] - Total deposits for Washington Trust Bancorp as of March 31, 2024, were $5,347,893, a slight decrease from $5,348,160 on December 31, 2023[47] - Noninterest-bearing demand deposits decreased to $648,929 as of March 31, 2024, down from $693,746 at the end of 2023, representing a decline of approximately 6.3%[47] Credit Quality - Nonaccrual loans decreased to $30.7 million, or 0.54% of total loans, down from $44.6 million, or 0.79% at the end of Q4 2023[15] - The provision for credit losses was $700 thousand, down by $500 thousand from the previous quarter, with net charge-offs amounting to $52 thousand[18] - The allowance for credit losses on loans was $41,905 thousand, slightly increased from $41,057 thousand in the previous quarter[27] - Nonperforming assets to total assets improved to 0.43% as of March 31, 2024, down from 0.63% at the end of 2023, reflecting enhanced asset quality[52] - The total past due loans decreased to $10,039 as of March 31, 2024, compared to $11,345 at the end of 2023, showing improved loan performance[52] Expenses and Efficiency - Total noninterest expense rose to $34,363 thousand, compared to $32,587 thousand in the previous quarter, an increase of 5.43%[29] - Efficiency ratio improved slightly to 70.4% from 70.9% in the previous quarter, suggesting better cost management[31] Capital and Equity - Total shareholders' equity was $466.9 million, down by $5.8 million, or 1%, from December 31, 2023, with a total risk-based capital ratio of 11.62%[19] - Shareholders' equity increased to $471,096 thousand as of March 31, 2024, compared to $436,059 thousand at December 31, 2023, reflecting a change of $35,037 thousand[61] - The Tier 1 risk-based capital ratio slightly decreased to 10.84% from 10.86%, indicating a stable capital position[31] Interest Rates and Margins - The net interest margin decreased to 1.84% in Q1 2024, down from 1.88% in the previous quarter, reflecting continued margin pressure from higher funding costs[4] - Net interest margin declined to 1.84% from 1.88% in the previous quarter, reflecting a decrease in interest income[31] - The interest rate spread narrowed to 1.30% for the three months ended March 31, 2024, compared to 1.32% in the previous quarter[59]

Financial Performance - Net income for 2023 was $48.2 million, a decrease of 33% from $71.7 million in 2022[212]. - Net interest income fell to $137.1 million in 2023, down 12% from $156.0 million in 2022[219]. - Noninterest income decreased by 10% to $56.1 million, primarily due to lower wealth management and mortgage banking revenues[212]. - Total revenues for 2023 were $193.2 million, down 12% from $218.6 million in 2022[212]. - Diluted earnings per share decreased to $2.82 in 2023 from $4.11 in 2022[212]. - Return on average assets dropped to 0.69% in 2023 from 1.17% in 2022[212]. - Noninterest expenses rose by 4% to $133.6 million, driven by higher FDIC deposit insurance costs[213]. - The provision for credit losses increased by 346% to $3.2 million, reflecting loan growth and changes in asset quality[212]. - The interest rate spread decreased to 1.52% in 2023 from 2.50% in 2022[216]. - Net interest margin declined to 2.05% in 2023, down from 2.69% in 2022[216]. Asset and Loan Portfolio - As of December 31, 2023, Washington Trust had total assets of $7.2 billion, total deposits of $5.3 billion, and total shareholders' equity of $472.7 million[22]. - The total loan portfolio amounted to $5.6 billion, representing 78% of total assets, with commercial loans making up 48% of total loans[23][25]. - Commercial real estate (CRE) loans accounted for 78% of the commercial loan portfolio and 37% of the total loan portfolio[26]. - The residential real estate loan portfolio represented 46% of total loans, with loans originated for sale to the secondary market providing funds for additional lending[29]. - Consumer loans constituted 6% of total loans, with home equity lines and loans representing 94% of the consumer portfolio[31]. Wealth Management - Wealth management assets under administration (AUA) totaled $6.6 billion, with wealth management revenues representing 18% of total revenues[40]. - Economic downturns may reduce demand for fee-based services and affect assets under administration (AUA) in wealth management[127]. - Revenues from mortgage banking are dependent on origination volume, which can be influenced by interest rates and housing market conditions[128]. - Market volatility can lead to reduced AUA, adversely affecting wealth management revenues[129]. Regulatory Compliance - The Bank is subject to various regulations from the FDIC, RI Division of Banking, and Connecticut Department of Banking[70]. - The Bank must maintain a "satisfactory" CRA rating to engage in certain activities and acquisitions[79]. - The Bancorp is required to maintain a minimum common equity Tier 1 capital to risk-weighted assets ratio of 4.5%, a minimum Tier 1 capital to risk-weighted assets ratio of 6.0%, and a minimum total capital to risk-weighted assets ratio of 8.0%[84]. - The Bank is considered "well capitalized" if it has a total capital to risk-weighted assets ratio of 10.0% or greater and a Tier 1 capital to risk-weighted assets ratio of 8.0% or greater[85]. - The Bancorp's ability to pay dividends is restricted if it does not maintain the required capital conservation buffer, which is more than 2.5% of total risk-weighted assets[84][91]. - The Bank is required to obtain prior approval from the RI Division of Banking and the FDIC for acquisitions or establishing new branches[75]. - The FDIC may adjust deposit insurance assessment rates at any time based on the institution's financial health[73]. - The company is subject to regulatory compliance under the Advisers Act, which imposes fiduciary duties and anti-fraud provisions[100]. Risk Management - The company has implemented a comprehensive cybersecurity risk management program to protect critical systems and information, although future incidents cannot be ruled out[164]. - The Audit Committee oversees the cybersecurity program and receives regular reports on the status of control environments and cybersecurity incidents[174]. - Washington Trust's cybersecurity policies are regularly assessed by external auditors, including annual cyber audits against the NIST Cybersecurity Framework[172]. - The company maintains a comprehensive Enterprise Risk Management (ERM) program to identify, measure, monitor, and control material risks[198]. - The Board of Directors has overall responsibility for risk oversight, with the Audit Committee specifically overseeing cybersecurity risks[173]. Market and Economic Conditions - The company faces potential adverse effects on its financial condition due to inflationary pressures, which remained elevated in 2023 and may continue into 2024[108]. - The company may experience increased loan delinquencies and defaults due to economic downturns, particularly in southern New England where it primarily operates[106]. - The company’s net interest income is highly sensitive to fluctuations in interest rates, which can impact earnings and financial condition[110]. - The company may incur losses if security interests granted for loans are not enforceable, which could arise from drafting or recording errors[118]. Competition and Market Position - Washington Trust operates in a highly competitive market, facing challenges from larger institutions and non-bank financial services[49]. - The company faces competition from both financial and non-financial services firms, necessitating strategic planning and innovation to maintain market position[139][140]. - The loss of key personnel could materially impact business operations and client relationships, affecting revenue generation[141]. Capital and Dividends - The Bancorp relies on dividends from the Bank for its revenues, which are subject to the claims of the Bank's creditors[122]. - The ability to pay dividends may be restricted by the Federal Reserve and FDIC if deemed unsafe, potentially affecting the market price of common stock[123]. - The company has recorded consecutive quarterly dividends for over 100 years, with future dividends dependent on the Bank's earnings and financial condition[187]. Branch Operations - Washington Trust opened a new full-service branch in Barrington, Rhode Island in April 2023 and plans to open another branch in Olneyville, Providence in mid-2024[197]. - As of December 31, 2023, Washington Trust operates 10 branch offices in southern Rhode Island, 15 in the greater Providence area, and one in southeastern Connecticut[178]. Legal and Compliance Risks - The company faces significant legal risks from regulatory investigations and private actions, which could result in financial liability and reputational damage[162]. - The company is subject to extensive federal and state regulations that could limit its activities and have a material adverse effect on operations[154].