Washington Trust(US:WASH)2023-07-25 14:39Financial 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]