Financial Data and Key Metrics Changes - In Q4 2023, net income was $12.9 million or $0.76 per diluted share, which included a tax item of $3.3 million that added $0.19 to EPS [13] - Net interest income decreased by $1.1 million or 3% to $32.7 million, with the margin down by nine basis points to $188 [13] - Non-interest income was $13.3 million, down by $1.9 million or 13%, comprising 29% of total revenues [15] Business Line Data and Key Metrics Changes - Wealth management revenues were $8.9 million, down by $67,000 or 1%, reflecting a decrease of $58 million or 1% in average AUA balances [15] - Mortgage banking revenues totaled $1.6 million, down by $554,000 or 26% [16] - Total loans increased by $37 million or 1% from September 30, and by $538 million or 11% from a year ago [19] Market Data and Key Metrics Changes - In-market deposits were down by $53 million or 1% from September 30, but up by $33 million or 1% from a year ago [20] - Average wholesale funding rose by $105 million, while average end market interest-bearing deposits increased by $21 million [14] Company Strategy and Development Direction - The company is focused on ensuring a durable balance sheet and preparing for a steadily improving external environment throughout 2024 [6] - Emphasis is placed on deposit growth, particularly in deposit-oriented segments of the economy, alongside technology investments to support these strategies [8] - The company plans to right-size its real estate footprint to unlock capital and reduce expenses [10] Management's Comments on Operating Environment and Future Outlook - Management noted that while there are signs of a stabilizing economy, short-term certainty about rates, inflation, and the credit cycle remains difficult [9] - The company expects to maintain its dividend despite a high payout ratio, indicating confidence in its capital position [31][32] Other Important Information - Total equity amounted to $473 million, up by $41 million from the end of Q3, including quarterly net income and an increase in AOCI due to fair value appreciation of AFS securities [21] - Non-accruing loans were 79 basis points, with past due loans at 20 basis points of total loans [22] Q&A Session Summary Question: Thoughts on expense growth in 2024 - Management indicated that normalized expenses for Q4 would be a good run rate going into 2024, estimating about $35 million per quarter [24][25] Question: Net interest margin outlook - The expected NIM for Q1 is between $180 to $185, with continued competitive pressure on deposits [25][27] Question: Details on the commercial real estate loan on non-accrual - The exposure is $11 million on a mixed-use property in Greater Boston, with an orderly liquidation process expected to resolve the situation [29][30] Question: Sustainability of the dividend payout ratio - Management believes the dividend is sustainable even if it temporarily exceeds a 100% payout ratio [31][32] Question: Full year loan growth for 2024 - Net loan growth is expected to be about 0%, with commercial growth offset by declines in residential and consumer loans [43][44] Question: Provision expense outlook - A slight build in provision expense is anticipated, estimating around $1 million per quarter [45]

Financial Performance - Net income for the three months ended September 30, 2023, was $11.2 million, a decrease of 40% compared to $18.7 million for the same period in 2022[198]. - Total revenues for the three months ended September 30, 2023, were $49.0 million, a decrease of 15% from $57.8 million in 2022[198]. - Net income for the nine months ended September 30, 2023, was $2.75 million, down 43% from $4.83 million in the same period of 2022[256]. Income and Expenses - Net interest income decreased by 20% to $33.8 million for the three months ended September 30, 2023, down from $42.0 million in 2022[198]. - Noninterest income declined by 4% to $15.2 million for the three months ended September 30, 2023, compared to $15.8 million in 2022[198]. - Noninterest expenses increased by 4% to $34.4 million for the three months ended September 30, 2023, compared to $33.1 million in 2022[198]. - Noninterest expenses decreased by $542,000, or 7%, for the three months ended September 30, 2023, largely due to lower salaries and employee benefits[258]. Credit Losses and Provisions - The provision for credit losses decreased by 38% to $500,000 for the three months ended September 30, 2023, from $800,000 in 2022[198]. - The provision for credit losses on loans was $900 thousand for the three months ended September 30, 2023, a 50% increase from $600 thousand in 2022, and $2.3 million for the nine months, compared to a negative provision in 2022[227]. - The provision for credit losses decreased by $300 thousand (38%) for the three months but increased by $4.1 million for the nine months ended September 30, 2023, compared to the same periods in 2022[254]. Asset and Loan Growth - Total loans increased to $5.49 billion in Q3 2023, up from $4.65 billion in Q3 2022, representing a growth of 17.9%[1]. - Total assets reached $7.12 billion in Q3 2023, compared to $6.22 billion in Q3 2022, marking an increase of 11.5%[1]. - Total deposits amounted to $5.4 billion at September 30, 2023, up by $396.6 million, or 8%, from December 31, 2022[337]. Interest Income and Margin - The net interest margin decreased to 1.97% in Q3 2023 from 2.82% in Q3 2022, a decline of 0.85 percentage points[1]. - The interest rate spread narrowed to 1.43% in Q3 2023 from 2.63% in Q3 2022, a decrease of 1.20 percentage points[1]. - Net interest income for the Commercial Banking segment decreased by $8.3 million (20%) for the three months and $10.3 million (9%) for the nine months ended September 30, 2023, compared to the same periods in 2022[253]. Equity and Dividends - Shareholders' equity decreased by $22.3 million, or 5%, as net income was offset by dividend declarations and a decrease in the accumulated other comprehensive loss (AOCL)[262]. - The Corporation declared a quarterly dividend of 56 cents per share for the three months ended September 30, 2023, compared to 54 cents per share for the same period in 2022[355]. Market and Economic Conditions - The Federal Reserve increased its target range for the Fed Funds rate to 5.25% - 5.50% as of September 30, 2023, impacting deposit products[372]. - The Corporation's liquidity management strategy funded approximately 67% of total average assets with in-market deposits for the nine months ended September 30, 2023[345]. Nonperforming Assets and Credit Quality - Nonperforming assets increased to $34.3 million, representing 0.48% of total assets, compared to 0.19% at December 31, 2022[303]. - Total past due loans decreased by $1.8 million from the end of 2022, totaling $9.733 million as of September 30, 2023[313]. - The allowance for credit losses (ACL) on loans was $40.2 million, up by $2.2 million or 6% from December 31, 2022, with a reserve coverage ratio of 0.72%[326]. Wealth Management and Other Income - Wealth management revenues decreased by $577 thousand (6%) for the three months and $3.5 million (11%) for the nine months ended September 30, 2023, compared to the same periods in 2022, primarily due to a decline in asset-based revenues[234]. - The average balance of assets under administration (AUA) decreased by 6% for the three months and 13% for the nine months ended September 30, 2023, compared to the same periods in 2022[234].

Financial Data and Key Metrics Changes - The company reported a net income of $11.2 million or $0.65 per diluted share, which is approximately flat compared to $11.3 million or $0.66 per diluted share in the previous quarter [11] - Net interest income was $33.8 million, up by $251,000 or 1% from the preceding quarter, while the margin decreased by 6 basis points to 1.97% [19] - Noninterest income comprised 31% of total revenues, amounting to $15.2 million, an increase of $901,000 or 6% from Q2 [21] Business Line Data and Key Metrics Changes - Wealth management revenues were $8.9 million, down by $100,000 or 1%, primarily due to a decrease in transaction-based revenues [21] - Mortgage banking revenues totaled $2.1 million, up by $355,000 or 20%, with total originations reaching $240 million, an increase of $13 million [23] - Total loans increased by $230 million or 4% from June 30, with commercial real estate loans accounting for the majority of this growth [25] Market Data and Key Metrics Changes - In-market deposits rose by $35 million or 1% from June 30 and increased by $121 million or 3% year-over-year [25] - Average end market interest-bearing deposits increased by $77 million, while average wholesale funding rose by $83 million [19] - The company experienced a significant institutional deposit withdrawal of $100 million, which impacted overall deposit growth [62] Company Strategy and Development Direction - The company aims to build a sustainably relevant and consistently profitable regional financial services organization, focusing on deposit growth through technology investment, product development, and branch expansion [7] - A new branch is planned to open in early 2024 in the Olneyville section of Providence, with another branch in Smithfield, Rhode Island [14] - The company is committed to enhancing its digital presence to meet consumer demands for convenient banking services [16] Management's Comments on Operating Environment and Future Outlook - The management acknowledged the challenging economic environment, citing financial market volatility and geopolitical instability, but expressed confidence in the company's ability to navigate these challenges [10] - The company expects loan growth to slow, focusing on supporting existing customers with high-quality credit [9] - Management emphasized the importance of managing credit risk and overall balance sheet strength during this period [14] Other Important Information - Total equity amounted to $431 million at September 30, down by $28 million from the end of Q2, primarily due to a decline in the fair value of available-for-sale securities [27] - The allowance for credit losses totaled $40.2 million, providing coverage of 119% for nonperforming loans [29] Q&A Session Summary Question: Margin outlook and potential bottoming point - Management expects the margin to trend lower in Q4 towards approximately 1.9% but does not confirm it as a bottom due to ongoing funding pressures [32][33] Question: Cost management strategies amid margin pressure - The company plans to increase marketing expenses and charitable contributions, while exploring cost control measures [34][35] Question: Dividend sustainability amid earnings fluctuations - The dividend is capital-related, and as long as sufficient capital is available, the company is committed to maintaining it [36] Question: Loan growth expectations and capital ratios - Management anticipates very low single-digit growth moving forward, focusing on existing customers and accretive assets [37] Question: Nonperforming loans details - Two commercial real estate loans were placed on nonaccrual status, but both remain current and are being managed with forbearance discussions [42][44] Question: Credit quality and reserve adequacy - Management is comfortable with the current loan loss reserve level of 72 basis points, citing strong portfolio quality and conservative estimates [46][48] Question: Margin relief strategies through securities portfolio - The company is not reinvesting cash flows from the securities portfolio and is using it to pay down higher-cost borrowings [50] Question: Future expense levels and branch openings - The company expects expenses to remain in the mid-$34 million range, with higher costs anticipated in the first quarter due to new branches [53] Question: Charitable contributions and ongoing commitments - A significant contribution to the charitable foundation is planned for Q4, with expectations for it to be a recurring event [58][59] Question: Brokered deposits management - The company aims to manage brokered deposits to about 10% of total assets and is focused on increasing core deposit growth [62][63] Question: Buyback considerations - The company has no intention of initiating any stock buybacks at this time [70]

Financial Performance - Net income for the three months ended June 30, 2023, was $11.3 million, a decrease of 44% compared to $20.0 million for the same period in 2022[189]. - Net interest income decreased by 11% to $33.5 million for the three months ended June 30, 2023, compared to $37.5 million in 2022[189]. - Noninterest income declined by 10% to $14.3 million for the three months ended June 30, 2023, compared to $15.9 million in 2022[189]. - Noninterest expenses rose by 6% to $33.0 million for the three months ended June 30, 2023, compared to $31.1 million in 2022[189]. - Return on average assets decreased to 0.65% for the three months ended June 30, 2023, down from 1.37% in 2022[189]. - Return on average equity fell to 9.67% for the three months ended June 30, 2023, compared to 16.11% in 2022[189]. Credit Losses and Provisions - Provision for credit losses increased by 123% to $700,000 for the three months ended June 30, 2023, compared to a provision reversal of $3.0 million in 2022[189]. - Increased provisioning for credit losses was driven by higher loan growth and a negative economic outlook, despite continued strength in asset and credit quality[190]. - Provision for credit losses on loans was $600 thousand for the three months ended June 30, 2023, a 120% increase from a negative provision of $2.9 million in 2022[219]. - The allowance for credit losses (ACL) on loans was $39.3 million at June 30, 2023, an increase of $1.3 million, or 3%, from December 31, 2022[317]. - The ACL as a percentage of total loans was 0.73% at June 30, 2023, compared to 0.74% at December 31, 2022[317]. Asset and Loan Growth - Total assets increased to $6.94 billion in Q2 2023, compared to $5.84 billion in Q2 2022, representing a growth of 18.77%[194]. - Total loans reached $5.30 billion in Q2 2023, up from $4.35 billion in Q2 2022, marking an increase of 21.73%[194]. - Total loans amounted to $5.4 billion at June 30, 2023, reflecting an increase of $271.0 million, or 5%, from the end of 2022[261]. - Commercial real estate loans increased to $1.93 billion in Q2 2023, up from $1.62 billion in Q2 2022, reflecting a growth of 19.06%[194]. - The total balance of consumer loans reached $319.5 million, up by $18.1 million, or 6%, from December 31, 2022, driven by increases in home equity lines and loans[289]. Interest Income and Rates - The average yield on total interest-earning assets rose to 4.53% in Q2 2023, compared to 3.03% in Q2 2022, an increase of 1.50 percentage points[194]. - The interest rate spread decreased to 1.51% in Q2 2023 from 2.61% in Q2 2022, a decline of 1.10 percentage points[194]. - The average yield on commercial loans was 6.17% in Q2 2023, up from 3.95% in Q2 2022, an increase of 2.22 percentage points[194]. - The average rate paid on in-market interest-bearing deposits increased to 2.27% and 1.97% for the three and six months ended June 30, 2023, compared to 0.38% and 0.35% in 2022[211]. - The net interest margin decreased to 2.03% in Q2 2023 from 2.71% in Q2 2022, a decline of 0.68 percentage points[194]. Wealth Management and Noninterest Income - The decline in noninterest income was attributed to lower mortgage banking revenues and a decrease in wealth management asset-based revenues due to client asset outflows[190]. - Wealth management revenues decreased by $1.0 million (10%) for the three months and $2.9 million (14%) for the six months ended June 30, 2023, compared to the same periods in 2022, primarily due to a decline in asset-based revenues[225]. - Noninterest income for the Wealth Management Services segment decreased by $1.1 million, or 10%, for the three months ended June 30, 2023, primarily due to a decrease in asset-based revenues[246]. - Cumulative client asset withdrawals associated with the departure of four advisors amounted to $660 million, impacting wealth management revenues by approximately $951 thousand for the three months and $1.9 million for the six months ended June 30, 2023[226]. Deposits and Funding - Total deposits reached $5.3 billion as of June 30, 2023, an increase of $295.5 million, or 6%, from December 31, 2022[328]. - Wholesale brokered deposits rose by $243.3 million, or 68%, from December 31, 2022, to support balance sheet growth[329]. - In-market deposits increased by $52.2 million, or 1%, from December 31, 2022, with a composition of approximately 59% retail and 41% commercial[330]. - Uninsured deposits totaled $1.369 billion, representing 26% of total deposits as of June 30, 2023, down from 30% at December 31, 2022[331]. Capital and Shareholder Equity - Total shareholders' equity was $459.2 million at June 30, 2023, up by $5.5 million from December 31, 2022, driven by net income of $24.1 million[345]. - The total risk-based capital ratio was 11.81% at June 30, 2023, down from 12.37% at December 31, 2022, indicating a "well capitalized" status[347]. - Shareholders' equity increased by $5.5 million, or 1%, reflecting net income and increases in the fair value of available for sale debt securities[252]. Market and Economic Conditions - The Federal Reserve increased the target range for the Fed Funds rate to 5.00% - 5.25% as of June 30, 2023, leading to higher rates on existing deposit products[361]. - The cumulative impact of higher cost deposit categories and wholesale funds suggests a potential decline in net interest income in Year 2 compared to an unchanged rate scenario[359]. - The ALCO anticipates that deposit rate changes will lag behind other market interest rates in both timing and magnitude[356]. - The termination of an interest rate swap contract on March 31, 2023, impacted the sensitivity to interest rate changes, affecting the balance sheet composition[355].

Financial Data and Key Metrics Changes - The company reported a net income of $11.3 million or $0.66 per diluted share, a decrease from $12.8 million or $0.74 per diluted share in the prior quarter [6] - Total loans grew by 3% and in-market deposits increased by 1% during the quarter, with total assets surpassing $7 billion for the first time [6][7] - Net interest income was $33.5 million, down by $3.7 million or 10% from the preceding quarter, with a net interest margin of 2.03%, down by 30 basis points [13] Business Line Data and Key Metrics Changes - Wealth assets under administration reached $6.4 billion, up by 3%, driven by market appreciation despite normalized asset outflows [9][15] - Mortgage banking revenues totaled $1.8 million, up by 41%, with mortgage loans sold totaling $65 million, an increase of $35 million [16] - Non-interest income comprised 30% of total revenues, amounting to $14.3 million, up by 8% from Q1, reflecting increases in both wealth management and mortgage banking revenues [14] Market Data and Key Metrics Changes - The commercial real estate loan portfolio remains in sound condition, with office loans at 14% of overall CRE, exhibiting a 1.5 weighted average debt service coverage ratio [10] - The company reported that 74% of dollars in the commercial real estate portfolio are suburban properties, while 95% of the dollars are Class A or Class B properties [10] Company Strategy and Development Direction - The company is focused on enhancing digital offerings to improve customer experience while maintaining a prudent lending approach [11] - Management emphasized the importance of serving traditionally underserved communities and developing proprietary programs to assist them [12] - The company aims to be a catalyst for equitable improvement across its marketplace, maintaining a commitment to its employees, customers, and shareholders [12] Management's Comments on Operating Environment and Future Outlook - Management acknowledged challenges from severe interest rate increases and a lasting inverted yield curve but expressed confidence in maintaining and strengthening the customer franchise [7] - The company expects net interest margin for Q3 to be around 2%, with some compression anticipated in Q4 [21][24] - Management remains optimistic about loan growth, particularly in the commercial sector, while being selective in lending practices [27] Other Important Information - Total equity amounted to $459 million at June 30, down by $6 million from the end of the first quarter, but the company remains well capitalized [19] - Non-accruing loans were 19 basis points and past due loans were 12 basis points, both improving compared to the first quarter [19] Q&A Session Summary Question: Outlook on net interest margin for Q3 and Q4 - Management expects the margin for Q3 to be close to 2% with some compression anticipated in Q4 [21][24] Question: Operating expenses outlook - Management indicated that Q3 expenses will be somewhat higher due to accrual reversals and increased advertising [22][31] Question: Capital ratios and growth - Management stated they are comfortable with current capital levels and conduct quarterly stress testing [24] Question: Dividend payout ratio - Management has no plans to cut the dividend despite a higher payout ratio, believing it is not a permanent state [25] Question: Loan growth outlook for the second half of the year - Management expressed optimism about loan growth, particularly in the commercial sector, while being cautious about pricing and structures [27][29]

Financial Performance - Net income for Q1 2023 was $12.8 million, a decrease of 22% from $16.5 million in Q1 2022[177] - Net interest income increased by 6% to $37.2 million in Q1 2023, up from $35.1 million in Q1 2022[177] - Noninterest income decreased by 23% to $13.3 million in Q1 2023, down from $17.2 million in Q1 2022[177] - Diluted earnings per share decreased to $0.74 in Q1 2023 from $0.94 in Q1 2022[177] - Return on average assets fell to 0.77% in Q1 2023 from 1.14% in Q1 2022[177] Credit Losses and Provisions - Provision for credit losses rose significantly to $800,000 in Q1 2023, compared to $100,000 in Q1 2022, reflecting higher loan growth[177] - The provision for credit losses was $800 thousand for the three months ended March 31, 2023, compared to $100 thousand for the same period in 2022, reflecting a negative economic outlook and loan growth[205] - The allowance for credit losses (ACL) on loans was $38.8 million, or 0.74% of total loans, consistent with the previous quarter[208] - Net charge-offs totaled $47 thousand for the three months ended March 31, 2023, compared to net recoveries of $148 thousand for the same period in 2022[207] - The allowance for credit losses (ACL) on loans amounted to $38.8 million at March 31, 2023, up by $753 thousand, or 2%, from December 31, 2022[301] Income and Revenue Sources - Noninterest income decreased by 23% to $13,283 thousand for the three months ended March 31, 2023, primarily due to a decline in wealth management and mortgage banking revenues[209] - Wealth management revenues decreased by 18% to $8,663 thousand, with asset-based revenues down by 17% due to a 19% decrease in average assets under administration (AUA)[210] - Mortgage banking revenues fell by 64% to $1,245 thousand, with loans sold to the secondary market dropping by 77% to $29,328 thousand[216] Expenses - Noninterest expenses increased by 8% to $33.6 million in Q1 2023, up from $31.2 million in Q1 2022[177] - Total noninterest expense increased by 8% to $33,564 thousand, driven by higher salaries and employee benefits, outsourced services, and FDIC deposit insurance costs[219] Asset and Loan Growth - Total assets grew to $6.74 billion in Q1 2023, an increase of $879.3 million from $5.86 billion in Q1 2022[190] - Total average loan balances increased by $875.7 million year-over-year, with a yield of 4.73% in Q1 2023 compared to 3.25% in Q1 2022[193] - Total loans rose by $117.8 million, or 2%, to $5.23 billion as of March 31, 2023, with growth in both residential real estate and commercial portfolios[249] - Residential real estate loans rose to $2.4 billion, an increase of $80.3 million or 3% from December 31, 2022, with 46% of total loans represented by this category[264] Deposits and Liquidity - Total deposits amounted to $5.3 billion at March 31, 2023, up by $249.6 million, or 5%, from December 31, 2022[310] - Wholesale brokered deposits increased by $250.4 million, or 70%, from December 31, 2022, as higher levels were utilized to fund balance sheet growth[311] - Uninsured deposits decreased to $1.39 billion, representing 26% of total deposits as of March 31, 2023, down from 30% at December 31, 2022[313] - Total contingent liquidity increased to $1,596,286 thousand as of March 31, 2023, up from $1,387,247 thousand at December 31, 2022, representing a 15.1% increase[320] Capital and Shareholder Information - Total shareholders' equity reached $465.0 million at March 31, 2023, an increase of $11.3 million from December 31, 2022, driven by net income of $12.8 million[327] - The Corporation declared a quarterly dividend of $0.56 per share for the three months ended March 31, 2023, compared to $0.54 per share for the same period in 2022[328] - The total risk-based capital ratio was 12.01% at March 31, 2023, down from 12.37% at December 31, 2022, indicating a slight decrease in capital adequacy[329] Interest Rate Sensitivity and Market Conditions - The Corporation's net interest income simulations showed a positive exposure of 5.73% in the 300 basis point rate increase scenario for the first 12 months as of March 31, 2023[337] - The potential outflow of deposit balances to non-bank alternatives is a concern in a rising rate environment, influenced by customer behavior and market conditions[343] - The sensitivity of savings deposits to interest rate fluctuations is a significant factor in income simulation results, which may differ from estimates[343] Branch Expansion and Market Strategy - The company opened a new full-service branch in Barrington, Rhode Island, and plans to open additional branches in Providence and Smithfield later in 2023[162] - The company continues to focus on leveraging its regional brand to build market share and enhance customer service through both in-person and digital banking solutions[162]

Financial Data and Key Metrics Changes - First quarter net income was $12.8 million or $0.74 per diluted share, down from $16.6 million or $0.95 per diluted share in the prior quarter [9][14] - Net interest income decreased by $4.1 million or 10% from the preceding quarter to $37.2 million, with a net interest margin of 2.33%, down by 32 basis points [14] - Average earning assets increased by $251 million, with the yield on earning assets at 4.30%, up by 36 basis points [15] Business Line Data and Key Metrics Changes - Wealth Management revenues were $8.7 million, up by $39,000, while average AUA balances decreased by $84 million or 1% [17] - Mortgage banking revenues totaled $1.2 million, up by $142,000 or 13%, with total originations at $138 million, down by $130 million or 49% from the fourth quarter [19] - Total loans grew by $118 million or 2% from December 31, with commercial loans increasing by $33 million or 1% and residential loans by $80 million or 3% [21] Market Data and Key Metrics Changes - In-market deposits were essentially flat, down by $66 million or 1% from a year ago [21] - Uninsured deposits were estimated at $1.4 billion or 26% of total deposits, with 6% fully collateralized [22] - The average deposit size was $37,000, with $1.6 billion in contingent liquidity [22] Company Strategy and Development Direction - The company plans to continue opening new branches in Rhode Island to enhance deposit gathering, with recent openings in Barrington and upcoming branches in Olneyville and Smithfield [11][12] - The focus remains on maintaining a strong capital base and disciplined credit culture to navigate current economic challenges [39] - The company is investing in technology to improve customer experience while being cautious about spending [28] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the impact of steep interest rate increases and deposit competition on performance, but expressed confidence in the company's ability to weather the current environment [8][39] - The outlook for net interest margin suggests potential further compression, with expectations for the second quarter in the $200 million to $210 million range [25][33] - Management emphasized a focus on existing customer relationships and careful capital deployment in lending [35] Other Important Information - Non-interest income comprised 26% of total revenues in the first quarter, amounting to $13.3 million, down by 4% from the previous quarter [16] - The allowance for credit losses totaled $38.8 million or 74 basis points of total loans, with non-accruing loans at 27 basis points [24] Q&A Session Summary Question: Outlook for the margin - Management expects additional margin compression, with the second quarter projected in the $200 million to $210 million range [25] Question: Cost-cutting opportunities - Management indicated no large cost-cutting initiatives are planned, as they run efficiently and are investing in new branches [26] Question: Expansion outside Rhode Island - Management stated the need to focus on deposit gathering in Rhode Island before considering expansion into Massachusetts or Connecticut due to brand recognition and marketing costs [29][30] Question: Buyback plans - Management confirmed no plans for additional buybacks at this time [31]

Financial Overview - As of December 31, 2022, Washington Trust had total assets of $6.7 billion, total deposits of $5.0 billion, and total shareholders' equity of $453.7 million[21]. - The total loan portfolio amounted to $5.1 billion, representing 77% of total assets, with commercial loans making up 49% of total loans[22][24]. - The residential real estate loan portfolio represented 45% of total loans, with a portion sold to the secondary market for additional funding[28]. - Wealth management assets under administration (AUA) totaled $6.0 billion, contributing 18% to total revenues as of December 31, 2022[39]. - For the year ended December 31, 2022, net interest income increased by 10% to $155.99 million, while noninterest income decreased by 28% to $62.60 million, resulting in total revenues of $218.59 million, down 4% from 2021[201][202]. - Net income for 2022 was $71.68 million, a decrease of 7% from $76.87 million in 2021, with diluted earnings per share at $4.11, down from $4.39[201][202]. - The return on average assets was 1.17% in 2022, down from 1.32% in 2021, while the return on average equity increased to 14.49% from 14.03%[201]. - Washington Trust's net interest income as a percentage of total revenues rose to 71% in 2022, compared to 62% in 2021, indicating a stronger reliance on interest income[201]. Loan Portfolio Composition - Commercial real estate (CRE) loans accounted for 74% of the commercial loan portfolio and 36% of the total loan portfolio[25]. - The consumer loan portfolio represented 6% of total loans, with home equity loans and lines of credit making up 95% of this segment[30]. - The Bank's loan portfolio includes commercial loans, which represented 49% of the total loan portfolio as of December 31, 2022, indicating a higher risk of nonpayment compared to residential mortgage loans[115]. Capital and Regulatory Compliance - The Bancorp is required to maintain a minimum common equity Tier 1 capital to risk-weighted assets ratio of 4.5%[83]. - The minimum Tier 1 capital to risk-weighted assets ratio is set at 6.0% and the total capital to risk-weighted assets ratio at 8.0%[83]. - The capital conservation buffer for adequately capitalized institutions is more than 2.5% of total risk-weighted assets[83]. - The Bancorp is considered "well capitalized" under the Federal Reserve's definition, maintaining a total risk-based capital ratio of 10.0% or greater[86]. - The Bancorp's ability to pay dividends is restricted if it does not maintain the required capital conservation buffer[89]. - The FDIC can prohibit a bank from paying dividends if it deems such payment unsafe or unsound[90]. - The Bank's capital adequacy is assessed based on the relationship between its capital and the degree of risk associated with its operations[80]. Risk Management and Economic Factors - The Bank's earnings and financial condition are largely dependent on net interest income, which is affected by fluctuations in interest rates, impacting both interest income and expense[106]. - Inflationary pressures are expected to remain elevated throughout 2023, potentially deteriorating the ability of business customers to repay loans, adversely affecting the Bank's financial condition[105]. - The Bank's ability to assess the creditworthiness of customers may be impaired by economic conditions, potentially leading to increased delinquencies and default rates[107]. - The Bank's membership in the Federal Home Loan Bank (FHLB) is crucial for accessing funding, and any deterioration in the FHLB's performance could adversely affect the Bank's liquidity[114]. - Environmental liabilities associated with lending activities could result in significant losses if properties acquired through foreclosure are found to have contamination issues[118]. - The Allowance for Credit Losses (ACL) on loans may not be sufficient to cover actual loan losses, and any increase in the ACL will negatively impact net income and capital[120]. Operational Developments - Washington Trust plans to expand its branch network with new locations in Barrington, Providence, and Smithfield, Rhode Island, subject to regulatory approvals[45]. - The company opened a new commercial lending office in New Haven, Connecticut, in July 2022, enhancing its service offerings[165]. - As of December 31, 2022, Washington Trust operates 10 branch offices in southern Rhode Island, 14 in the greater Providence area, and 1 in southeastern Connecticut, with plans to open 3 new branches in northern Rhode Island in 2023[164][186]. Market and Competitive Environment - The company faces intense competition from both financial and non-financial services firms, including traditional banks and fintech companies, which may impact its long-term success[143]. - Economic downturns could adversely affect demand for fee-based services and the level of assets under administration (AUA) in wealth management[130]. - Revenues from mortgage banking activities are highly dependent on mortgage origination volume, which can be affected by interest rates and housing market conditions[131]. - Market volatility can lead to reduced asset values, negatively impacting the level of AUA and wealth management revenues[132]. Cybersecurity and Compliance Risks - The company faces increasing cybersecurity risks, which could disrupt operations and damage customer confidence[134]. - The Bank's compliance with anti-money laundering regulations is essential, as noncompliance could lead to serious legal and reputational consequences[96]. - The company is subject to extensive federal and state regulations, which could limit its activities and adversely affect operations[155]. - Legal risks from regulatory investigations and private actions could result in significant expenses and financial liability for the company[161]. Employee and Community Engagement - The Bank had 651 full-time equivalent employees, emphasizing the importance of customer service and employee development[51]. - The Bank achieved a "satisfactory" rating on its most recent Community Reinvestment Act examination dated July 29, 2019[78]. - The Bank has a formalized strategy guiding its diversity, equity, and inclusion efforts, focusing on four pillars[56].

Financial Performance - Washington Trust reported a net income of $16.6 million or $0.95 per diluted share for Q4 2022, with total loans growing by 5% in the quarter and 20% for the full year, reaching a record high balance at year-end [10][15][22] - Net interest income was $41.3 million, down 2% from the previous quarter, with a net interest margin of 2.65%, a decrease of 17 basis points [15][10] - Non-interest income was $13.8 million, down 13% from Q3, with wealth management revenues at $8.6 million, a decrease of 9% [18][11] Business Line Performance - Wealth management revenues were impacted by lower assets under administration, which decreased by 8% to $6 billion, reflecting net client asset outflows of $673 million [18][11] - Mortgage banking revenues totaled $1.1 million, down 46%, with total mortgage originations at $268 million, down 11% [19][20] - Total commercial loans increased by 3%, while residential loans grew by 8% from the previous quarter [22] Market Data - Average earning assets increased by $294 million, with the yield on earning assets rising by 45 basis points to 3.94% [16] - Average in-market deposits increased by $34 million or 1% compared to the previous quarter [23] - Non-accruing loans were 0.25% and past due loans were 0.23% of total loans, indicating strong asset quality [24] Company Strategy and Industry Competition - The company is focused on long-term growth while being protective of credit and capital, with a strategic diversity, equity, and inclusion plan approved by the Board [13][14] - The current economic environment is challenging due to inflation and interest rate unpredictability, but the company remains committed to investing in talent and technology [14] - Market competition has compressed sales yield, particularly in mortgage banking, affecting overall revenues [20] Management Comments on Operating Environment and Future Outlook - Management expressed optimism about loan growth, with a strong commercial pipeline and expectations for mid-single-digit growth in 2023 [58] - The company is cautious about the economic environment, acknowledging potential risks but also identifying opportunities for high-quality commercial relationships [36][37] - Management noted that while funding sources have become more expensive, they are focused on maintaining a balance between loan growth and deposit gathering [34][35] Other Important Information - The company contributed $600,000 to its charitable foundation in Q4, reflecting its commitment to community support [12] - Mark Gim will retire as President and COO in April, with Mary Noons set to take over, marking a significant leadership transition [8][9] Q&A Session Question: Thoughts on using brokered CDs and margin guidance - Management indicated that brokered CDs are viewed as fungible funding sources and expect a range of $250 million to $255 million in the first quarter [26][27] Question: Expense growth outlook for 2023 - Guidance for Q1 indicates a 2% to 2.5% increase in expenses, with new branches expected to impact costs later in the year [28][29][31] Question: Loan deposit ratio and capital ratios - Management believes the loan deposit ratio will not limit growth in the near term, focusing on deposit gathering to support loan growth [33][34] Question: Wealth management client withdrawals - Management acknowledged the difficulty in predicting further client withdrawals but noted that they are closer to the end of the runoff [41][42] Question: Margin outlook and loan production yields - Management expects margins to stabilize, with commercial loans yielding about 5.66% and mortgages at 4.84% [49][50]

Financial Performance - Net interest income for the three months ended September 30, 2022, was $42.0 million, an increase of 17% compared to $36.1 million in the same period of 2021[204] - Noninterest income decreased by 23% to $15.8 million for the three months ended September 30, 2022, down from $20.5 million in the same period of 2021[204] - Total revenues for the three months ended September 30, 2022, were $57.8 million, a slight increase of 2% from $56.6 million in the same period of 2021[204] - Net income for the three months ended September 30, 2022, was $18.7 million, compared to $18.8 million for the same period in 2021, reflecting a decrease of 1%[204] - Noninterest income for the three and nine months ended September 30, 2022, totaled $15.8 million and $48.8 million, reflecting decreases of 23% and 27% compared to the same periods in 2021[240] Credit Losses and Provisions - The provision for credit losses for the three months ended September 30, 2022, was $800,000, compared to no provision in the same period of 2021, indicating a 100% increase[204] - The Corporation recorded a provision for credit losses of $800 thousand for the three months ended September 30, 2022, compared to no provision for the same period in 2021[260] - The allowance for credit losses (ACL) on loans was $36.9 million, or 0.76% of total loans, at September 30, 2022, down from $39.1 million, or 0.91% of total loans, at December 31, 2021[238] - Net charge-offs totaled $54 thousand for the three months ended September 30, 2022, compared to $168 thousand for the same period in 2021[237] Asset and Loan Growth - Total loans increased by $371.8 million to $4.65 billion, with a net interest margin of 3.87% for the three months ended September 30, 2022, compared to 3.33% in the same period of 2021[215] - Total assets increased by $297.0 million to $6.22 billion as of September 30, 2022, compared to $5.92 billion in 2021[215] - Total loans increased by $575.9 million, or 13%, to $4.8 billion at September 30, 2022, driven by growth in the residential real estate portfolio[281] - The residential real estate loan portfolio reached $2.1 billion, up by $417.1 million, or 24%, from December 31, 2021, representing 44% of total loans[300] Noninterest Expenses - The company experienced modest increases in noninterest expenses, but overall noninterest expenses declined year-to-date in 2022 due to reductions in specific expense categories[206] - Noninterest expense for the nine months ended September 30, 2022, decreased by $4.9 million (5%) compared to the same period in 2021, with salaries and employee benefits down by $2.8 million (4%)[251] Wealth Management - Wealth management revenues represented 62% of total noninterest income for the nine months ended September 30, 2022, compared to 46% for the same period in 2021[241] - Wealth management revenues decreased by $930 thousand (9%) for the three months and $656 thousand (2%) for the nine months ended September 30, 2022, compared to the same periods in 2021, primarily due to declines in asset-based revenues[242] - Average assets under administration (AUA) decreased by approximately 11% for the three months and 2% for the nine months ended September 30, 2022, compared to the same periods in 2021, with AUA at $6.3 billion as of September 30, 2022[244] Deposits and Funding - Total deposits reached $5.1 billion as of September 30, 2022, an increase of $89.8 million, or 2%, from December 31, 2021[357] - In-market deposits increased by $161.9 million, or 4%, while wholesale brokered deposits decreased by $72.1 million, or 14%[356] - FHLB advances totaled $700.0 million, up by $555.0 million, or 383%, from the end of 2021, indicating increased reliance on wholesale funding[358] Shareholders' Equity - Shareholders' equity decreased by $67.6 million to $487.2 million as of September 30, 2022, compared to $554.8 million in 2021[215] - Total shareholders' equity decreased to $432.3 million, down by $132.5 million from December 31, 2021, primarily due to a $151.8 million decline in the AOCL component[370] Capital Ratios - The total risk-based capital ratio was 12.65% at September 30, 2022, down from 14.01% at December 31, 2021, indicating a decline in capital adequacy[374] - The ratio of total equity to total assets was 6.75% at September 30, 2022, compared to 9.65% at December 31, 2021[373] Tax and Deferred Assets - Effective income tax rate for the nine months ended September 30, 2022, was 21.5%, a decrease from 21.9% in the same period of 2021, reflecting increased benefits from federal tax credits[256] - Net deferred tax assets increased to $62.1 million at September 30, 2022, compared to $14.0 million at December 31, 2021, primarily due to declines in fair value of securities[257]