Washington Trust(WASH) - 2022 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Washington Trust reported a net income of $20 million or $1.14 per diluted share for Q2 2022, an increase from $16.5 million or $0.94 per diluted share in the previous quarter [6][18] - Net interest income rose to $37.5 million, up by $2.4 million or 7% from the preceding quarter, with a net interest margin of $2.71, an increase of 14 basis points [18][19] - Noninterest income comprised 30% of total revenues, amounting to $15.9 million, down by $1.3 million or 8% [20] Business Line Data and Key Metrics Changes - Total loans increased by 5% in the quarter, primarily driven by strong growth in the residential portfolio, with residential loans up by $188 million or 11% [8][27] - Wealth management revenues decreased to $10.1 million, down by $465,000 or 4%, attributed to a decline in asset-based revenues [20][21] - Mortgage banking revenues fell to $2.1 million, down by $1.4 million or 41%, while overall loan origination activity was strong at $350 million, up by $79 million or 29% [22][23] Market Data and Key Metrics Changes - The average balance of assets under administration (AUA) decreased by $490 million or 7%, totaling $6.7 billion, down by $843 million or 11% from the previous quarter [21] - The commercial loan pipeline remained strong, near historic highs, with expectations of mid-single-digit growth for the full year despite some pressure from payoffs [9][60] Company Strategy and Development Direction - The company plans to open a new branch in Cumberland, Rhode Island, and a commercial lending office in New Haven, Connecticut, to enhance relationship building between business units [15] - Investments in technology and process improvements are aimed at enhancing customer and employee experiences, supporting a hybrid work environment [13][14] Management's Comments on Operating Environment and Future Outlook - Management acknowledged challenges from inflationary pressures and consumer spending, but noted strong labor markets and pent-up consumer demand could provide a cushion against recession [16][17] - The company expects continued margin expansion, projecting a margin of $2.75 to $2.80 for Q3 2022 [52] Other Important Information - The allowance for credit losses on loans totaled $36.3 million, representing 81 basis points of total loans, with a provision for credit losses of negative $3 million in Q2 [32] - The company repurchased 175,000 shares at an average price of $48.93, totaling $8.6 million under its stock repurchase program [30] Q&A Session Summary Question: Capital adequacy and unrealized losses - Management views unrealized losses on investment securities as transitory and believes capital is adequate to support growth [38][41] Question: Stock buyback rationale - The company focuses on shareholder return and considers share repurchases a prudent method to return capital, especially given the discount to trading prices [44][46] Question: Provision for credit losses - Future provisions will depend on loan growth and economic outlook, with expectations of mid-single-digit growth [47][48] Question: Margin outlook - Management anticipates continued margin expansion, with core margins projected to increase [57][52] Question: Staffing at new office - The New Haven office will have a mix of local hires and existing staff from Rhode Island, aiming for five or six commercial lenders [64] Question: Mortgage banking income outlook - The company expects some improvement in mortgage banking income in Q3, with a strong pipeline and a shift towards portfolio loans [73][72] Question: Credit quality and reserves - Management believes current reserve levels are appropriate based on credit risk assessments, with no specific target ratio [80][81]