Washington Trust(US:WASH)2023-08-03 14:54Financial 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].