Washington Trust(US:WASH)2023-01-26 16:01Financial 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]