NASDAQ:WASH Washington Trust Bancorp Q2 2024 Earnings Report $28.54 -0.08 (-0.28%) As of 01:01 PM Eastern This is a fair market value price provided by Polygon.io. Learn more. Earnings HistoryForecast Washington Trust Bancorp EPS ResultsActual EPS$0.63Consensus EPS $0.49Beat/MissBeat by +$0.14One Year Ago EPS$0.66Washington Trust Bancorp Revenue ResultsActual Revenue$102.66 millionExpected Revenue$46.06 millionBeat/MissBeat by +$56.60 millionYoY Revenue GrowthN/AWashington Trust Bancorp Announcement DetailsQuarterQ2 2024Date7/22/2024TimeAfter Market ClosesConference Call DateTuesday, July 23, 2024Conference Call Time8:30AM ETConference Call ResourcesConference Call AudioConference Call TranscriptSlide DeckPress Release (8-K)Quarterly Report (10-Q)Earnings HistoryCompany ProfileSlide DeckFull Screen Slide DeckPowered by Washington Trust Bancorp Q2 2024 Earnings Call TranscriptProvided by QuartrJuly 23, 2024 ShareLink copied to clipboard.There are 9 speakers on the call. Operator00:00:00Good morning, and welcome to Washington Trust Bancorp Inc. Conference Call. Operator00:00:04My name is Lydia, and I'll be your operator today. As a reminder, today's call is being recorded. I'd now like to turn the call over to Elizabeth Eckel, Executive Vice President, Chief Marketing and Corporate Communications Officer. Please go ahead. Speaker 100:00:30Thank you, Lydia. Good morning, and welcome to Washington Trust Bancorp Bank's conference call for the Q2 of 2024. Joining us this morning are members of Washington Trust's executive team Ned Handy, Chairman and Chief Executive Officer Mary News, President and Chief Operating Officer Ron Osberg, Senior Executive Vice President, Chief Financial Officer and Treasurer and Bill Ray, Senior Executive Vice President and Chief Risk Officer. Please note that today's presentation may contain forward looking statements and our actual results could differ materially from what is discussed on today's call. Our complete Safe Harbor statement is contained in our earnings release, which was issued yesterday, as well as other documents that are filed with the SEC. Speaker 100:01:14All of these materials and other public filings are available on our Investor Relations website atirwashtrust.com. Washington Trust trades on NASDAQ under the symbol WASH. I'm now pleased to introduce today's host, Washington Trust Chairman and Chief Executive Officer, Ned Handy. Ned? Speaker 200:01:33Thank you, Beth. Good morning and thank you for joining our Q2 conference call. We appreciate your time and interest in Washington Trust. I'll provide brief comments and then Ron Osberg will offer more detail regarding our Q2 performance. After our prepared remarks, Mary Nunes and Bill Ray will join us for the Q and A session. Speaker 200:01:51We continue to prioritize building balance sheet strength, managing credit, controlling expenses and positioning to be opportunistic for earnings growth as the economy and interest rates allow. Capital ratios improved somewhat in the quarter as we deemphasized asset growth and stabilized earnings in the quarter. Credit remains strong and expenses are down quarter over quarter. We've introduced new deposit growth oriented tools to enhance our customers' experience in online account opening, bank switching and to reward our customers for referrals. We look forward to opening a new branch in the Olneyville section of Providence next month. Speaker 200:02:28Other than this branch, we have no other planned branch expansion at this time. In recent years, we shifted much of our operations to the cloud, allowing us to make a strategic decision to sell our operations center and consolidate team members into existing offices. We continue to review every owned or leased space for optimization of our occupancy efficiency. With continued pressure on the margin, our fee based businesses wealth and mortgage performed well and generated higher revenues in the quarter. Again, continued expense discipline and our diversified revenue base contributed to this quarter's results. Speaker 200:03:03I'll now turn the call over to Ron for some more detail on the quarter and then we'll be glad to address any questions. Ron? Speaker 300:03:09Yes. Thanks, Ned, and good morning, everyone. 2nd quarter net income was $10,800,000 or $0.63 per share. Net interest income was $31,600,000 and the margin was $183,000,000 Average earning assets increased by $7,000,000 and had a yield of $4.97 up by 4 basis points. On the funding side, average in market interest bearing deposits increased by $36,000,000 and average wholesale funding decreased by $25,000,000 The rate on interest bearing liabilities increased by 5 basis points to 3.68. Speaker 300:03:41Prepayment fee income was $46,000 in the 2nd quarter and $20,000 in the 1st quarter neither with any impact to the margin. Non interest income comprised 35 percent of revenue and amounted to $16,700,000 down by $503,000 or 3 percent from Q1. Included in the Q2 was a $988,000 gain on the sale of our operations center, while the Q1 included $2,100,000 in settlement income. Excluding these items, non interest income was up by $609,000 or 4%. Wealth Management revenues were $9,700,000 up by $340,000 or 4%. Speaker 300:04:20This included an increase of $190,000 in seasonal transaction based revenues, largely tax servicing, as well as an increase of $150,000 in asset based revenues, which correlated to an increase of 1% in average AUA balances. Mortgage banking revenues totaled $2,800,000 up by $255,000 or 10%. Realized gains were $2,200,000 up by 39%. Turning to expenses, non interest expenses were down $453,000 or 1 percent from Q1. Salaries expense decreased by $515,000 or 2%, reflecting lower staffing levels and payroll tax expense, partially offset by higher mortgage commissions. Speaker 300:05:11In the Q2, the effective tax rate was 21.8%. We estimate our full year 2024 effective tax rate will be 21.2%. Turning to the balance sheet, total loans were down by $56,000,000 or 1% from March 31. In the 2nd quarter, total commercial loans decreased by $22,000,000 or 1% and residential loans decreased by $27,000,000 also 1%. In market deposits, which exclude wholesale broker time deposits, were seasonally down by $37,000,000 from March 31. Speaker 300:05:46Wholesale broker deposits were down by $355,000,000 and Federal Home Loan Bank borrowings were up by $310,000,000 from March 31, reflecting a shift in wholesale funding mix based on pricing. Our loan to deposit ratio increased in the quarter due to the reduction in broker deposits. We have since replenished broker deposits in the 3rd quarter. Turning to asset quality, these metrics remain solid. Non accruing loans were 54 basis points and past due loans were 21 basis points as a percentage of total loans. Speaker 300:06:22The allowance totaled 42,400,000 or 75 basis points of total loans and provided NPL coverage of 139 percent. We had net charge offs of $27,000 in the 2nd quarter and $79,000 year to date. And at this point, I will turn the call back to Ned. Speaker 200:06:40Thank you, Ron. I know you're all busy this morning, so we will go right ahead and turn it to questions. So, Lydia, if you can open the lines. Operator00:06:51Thank Our Our first question today comes from Mark Fitzgibbon with Piper Sandler. Please go ahead. Your line is open. Speaker 400:07:07Hey, guys. Good morning. Good morning, Matt. Good morning, Ned. It looks like you replaced $300,000,000 or so of broker deposits with FHLB advances. Speaker 400:07:18And I know, Ron, you had said that you replaced those subsequently. But what was the rough difference in rate between the broker deposits and the FHLB advances? Speaker 300:07:29Yes. And Mark, it could be 10 basis points, 15 basis points. I mean, we look at those as pretty much interchangeable sources of funding. So whichever is cheaper is where we tend to go. Speaker 400:07:43The loan to deposit ratio because of that move in is starting to creep up a little bit, I think it was 113%. How high are you willing to let that go? Speaker 300:07:54Yes, it's back down to 107 right now after we added those deposits back. So listen, we don't want that ratio to be any higher than it is now, to be honest. I mean, we're trying to bring deposits in just like everyone Speaker 200:08:11else. And we deemphasized asset growth, Mark. I think you saw loans down in the quarter. We are we'd love to be at 100% or below, but that's the challenge as it is for a lot of folks and deposit growth continues to be our number one priority and we're focused on that both in our cash management area and obviously in the retail side of the bank. So I think where we are now is we're comfortable with it, but we'd like to maintain or reduce. Speaker 300:08:45Okay. Speaker 400:08:46And then you had again a bit of an outflow in the wealth management business. I think it was $163,000,000 Any more departures of relationship people in the wealth management business recently? Speaker 500:09:02Hi, Mark. This is Mary Noon, and I'll take that question. We did have departures of 2 advisers and we had an unfortunate unexpected death of one of our advisors. The departures were unrelated. 1 was in the Q1, 1 was in the 2nd quarter. Speaker 500:09:26So there's no trend on that. This was in the Rhode Island offices where there are team based approach. So we've had minimal outflow attributed to that. We really just had we've looked very deeply into the outflow composition and we're not seeing any trends on this. It just was some client deaths that resulted in the estates being closed out and some other client expenses at higher levels than we've seen. Speaker 500:09:59But we're keeping a very close eye on that. Speaker 600:10:04Okay. Speaker 400:10:06And then Ron, I wondered if you could share with us some thoughts on sort of the outlook for the NIM, assuming maybe one Fed cut in September and also outlook for expenses in the Q3? Speaker 300:10:19Yes. So I'm only going to go out 1 quarter on the NIM and we think NIM in Q3 will be pretty much in line with Q2. I don't think at this point anyone really knows what the Fed is going to do and when they do start to reduce rates. As you know, we have a large commercial loan book of 1 month sulfur. So out of the gate, we'll probably see that interest income come down a little bit as we let our funding start to reprice. Speaker 300:11:00So I think it could be a little choppy for a couple of quarters depending on how many rate cuts come through and the timing of those. Overall, lower rates are beneficial to us. Most of our funding is short term. Most of that maturity funding is short term and we have a lot of money markets that can be repriced down as well. So not giving any Q4 guidance yet, but we think Q3 will be in line with Q2. Speaker 400:11:26Okay, great. And then lastly, and I know you built capital a little bit this quarter, but what are your thoughts on sort of the current capital position? Would you contemplate raising some capital given the more challenging environment? Do you have a target for the CET1 or some other capital ratio? Speaker 300:11:48Yes. I mean, we're if you look back, we've had sequential improvements in our regulatory capital ratios now for 3 or 4 quarters. We've slowed down the asset growth as Ned mentioned. We're going to continue on that trajectory expecting to improve capital on a linked quarter basis from this point forward. Yes, we'd like to see I mean, I would personally like to see us get our total risk based capital up to about 12%. Speaker 300:12:18It's going to take a little bit of time to get there. Speaker 600:12:24Thank you. Speaker 300:12:28Mark, you asked about expenses. So we're expecting Q3 to be about $35,000,000 mortgage commissions will be a little higher, advertising will be a little higher in the quarter and then we expect expenses to come down a bit in the 4th quarter. Operator00:12:50Thank you. Our next question is from Damon DelMonte with KBW. Please go ahead. Your line is open. Speaker 600:12:58Hey, good morning, everyone. Hope everybody is doing well and thanks for taking my questions here. Just to follow-up on the expenses. You mentioned earlier that you and we saw this quarter with the realized gain on the sale of the operation center. Are you expecting any material cost savings related to that? Speaker 600:13:17And how does that figure into the outlook? Speaker 300:13:21Yes, that's already incorporated and I'm thinking off the top of my head. I think it's about $200,000 to $300,000 of expenses annually, but that's already baked in. Speaker 600:13:35Okay, got it. Okay. And then with regards to your outlook for credit, I mean things continue to trend pretty favorably there, low charge offs and obviously the provision remains on the lower side given the slower loan growth. Are there any areas of the portfolio where you're seeing some signs of stress, particularly in the commercial real estate side? Speaker 300:13:58Yes. Bill, you want to take that? Sure. Speaker 700:14:02I think the one everyone pays attention to is office. We pay attention to office a lot. We essentially in the next couple of years have about a dozen maturities, each of which we know we don't even think of them as on a portfolio basis. But we're not seeing any trends anywhere else in the portfolio and even within office, we're kind of handling them 1 at a time. And a couple of them are going to limp their way forward, but we think we understand the issues, we understand the assets and the borrowers and we don't see any particular adverse trends that aren't already reflected in our accounting. Speaker 600:14:43Got it. Okay. That's helpful. Thank you. And then just on fee income, I guess, I think, Ron, you alluded to a little bit higher comp related to mortgage banking here in the Q3. Speaker 600:14:56I guess, how are you thinking about overall fee income in the back half of the year? Do you feel has the impact from the loss AUM and the wealth management kind of been reflected in the fees? Or should we expect some bit of a decline there? Speaker 400:15:12Yes. Speaker 300:15:14Our wealth income largely depends on markets. I think out of the gate, I would expect Q3 to look somewhat similar to Q2 in terms of wealth revenue. We expect mortgage to be up maybe 5 more mortgage revenue may be up maybe 5% to 10% just on higher volume in the 3rd quarter. Speaker 500:15:34And we did Damon, this is Mary. We did implement a fee increase that should start to be reflecting in the numbers for 3rd Q4. Speaker 200:15:46On the wealth Speaker 600:15:48side. On the wealth side. Got it. Okay. Well, great. Speaker 600:15:52That's all that I had. Thank you very much. Speaker 200:15:55Thanks, Damon. Operator00:15:58And our next question today comes from Laurie Hunsicker with Seaport Research. Your line is open. Speaker 800:16:06Yeah. Hi. Good morning. Good morning. I'm hoping we can just go back to wealth management. Speaker 800:16:11The 2 advisers that departed, how much did they actually manage? Speaker 500:16:20Well, they manage as a team, so they're advisors as part of a trust officer and portfolio manager and associate team. I don't have the numbers relevant to their portfolios, but I will say that the runoff has been minimal. And it's because of that approach. It's not it's very unlike the departures that had happened in our Wellesley area. So we're confident that that's not going to be a big contributor on any runoff. Speaker 800:16:55Got it. And then just And Laurie, we've actually Speaker 200:16:59Mary talked about the 2 departures and the one unexpected death. We have actually added 2 investment advisors in the course of the 1st two quarters as well. So we're kind of net down 1. Speaker 800:17:16Got you. And then just Mary, just to frame that, the $163,000,000 of client outflows in 2Q, how much was related to those 2 advisers? I mean, I know you said minimal, but it was just one of the larger quarters we've seen. So I'm just trying to understand that. Speaker 300:17:33Yes. So Laurie, that number is really net of three things, right? And we don't usually get into this level of detail, but you get new business, you got lost business and you've got routine flows where clients are living their lives and spending their money. So in the Q2, I will just say that new business and lost business was a net 0. Speaker 600:17:58Okay. So none of those Speaker 300:18:01yes, everything was kind of ordinary. Speaker 800:18:04Got you. Okay. And then just going back to non interest income kind of along the lines of Damon's question, but maybe just thinking more top level, because I know obviously the June has the tax prep in it for stripping out some of the noise, the sale of facilities, etcetera. How do you think about where that overall number is looking like for 3Q, netting everything out? Is $15,500,000 a good number? Speaker 800:18:32Or how should we be thinking about that? Speaker 300:18:35For total non interest income? Speaker 800:18:37For total non interest income, yes. Speaker 300:18:41Yes. Like I said, I think wealth will track in Q3 close to Q2 and we expect mortgage to be up about 5% to 10%. We're not doing much of anything on the swap side because we're not originating those types of loans right now. Speaker 800:19:04Got it. Okay. So that'll be close to this level as well. Okay, got it. That's super helpful. Speaker 800:19:09And then in terms of sale of other facilities, can you help us think about that a little bit? What else is there potentially to sell? Are you expecting more gains as we look toward the back half of this year? Speaker 300:19:26No. I mean, we have considered from time to time doing some sale leaseback. So we could implement that. We have no specific plan to do that at the moment, but that could generate some gains for us at some point. There are no other kind of excess facilities that we have right now that we're intending to dispose of. Speaker 800:19:49Got it. Okay. And then just last question on office. Can you and I realize you may not be able to provide all this detail and I certainly appreciate all the color that you put in the release. But the $18,400,000 that currently is on non accrual Class fee, can you just give us a refresh on that in terms of vacancy any movement what you're thinking about there? Speaker 700:20:20Sure. I'll take that, Laurie. This is Bill. That's 2 properties, one of which is 50% vacant, the other which is only tenanted with Streetfront retail right now. The latter property there looks like there's some resolution potential, but again we never want to count it until it's over. Speaker 700:20:41So there's some movement on that. We feel good about both properties, not the fact that they're non accrual, but that they're stable to improving. So that's where they stand. Speaker 800:20:53Okay. And those are both the office buildings are located suburban Connecticut. Is that correct? Speaker 700:21:01No. 1 is suburban Connecticut and the other is Boston, Boston Metro. And I do want to point out they're all we have no delinquencies. So even these properties that are on non accrual continue to perform. So they're performing non performers to use the old phrase, yes. Speaker 800:21:20Got it. Got it. Okay. And then under 32% of your book is coming due in the next 2 years, but how does that look if we look the next sort of 1, 2, 3 quarters, where are we with maturity around that? Speaker 700:21:37Actually, that's they're mostly the properties we just talked about, the couple of non accruals. So there's not much in the next couple of quarters and it's those. But let me talk about maturities for a minute. Frankly, we view office properties as essentially a life sentence. There's no magic exit market out there. Speaker 700:21:58So we look at each one of them assuming we're going to be with it to maturity and beyond. And so that's kind of how we manage the credit and work with the sponsor. If rates go down and there appears to be a refinance market out there at some point that would be great. But our assumption is we have to stay the course with the sponsors on these. Speaker 800:22:20Got it. Okay. Got it. That's helpful. Thank you very much. Speaker 200:22:26Thanks, Laurie. Operator00:22:30Thank you. We have no further questions in the queue. So I'll turn the call back over to Ned Handy for any closing comments. Speaker 200:22:37Well, thank you all for joining us today. We certainly appreciate your time and your interest in Washington Trust. And we look forward to speaking to you all again soon. So have a great day, everybody. Operator00:22:51This concludes today's call. Thank you for joining. You may now disconnect your line.Read morePowered by Conference Call Audio Live Call not available Earnings Conference CallWashington Trust Bancorp Q2 202400:00 / 00:00Speed:1x1.25x1.5x2x Earnings DocumentsSlide DeckPress Release(8-K)Quarterly report(10-Q) Washington Trust Bancorp Earnings HeadlinesQ2 EPS Forecast for Washington Trust Bancorp Cut by AnalystMay 3 at 1:29 AM | americanbankingnews.comBrokerages Set Washington Trust Bancorp, Inc. (NASDAQ:WASH) Price Target at $34.00April 25, 2025 | americanbankingnews.comHere’s How to Claim Your Stake in Elon’s Private Company, xAII predict this single breakthrough could make Elon the world’s first trillionaire — and mint more new millionaires than any tech advance in history. And for a limited time, you have the chance to claim a stake in this project, even though it’s housed inside Elon’s private company, xAI.May 5, 2025 | Brownstone Research (Ad)PBOC’s Pan Warns Trade Frictions Threaten Trust in World EconomyApril 25, 2025 | msn.comIMF's Georgieva, World Bank's Banga need to earn Trump administration's trust, Bessent saysApril 25, 2025 | msn.comKBW Sticks to Their Hold Rating for Washington Bancorp (WASH)April 23, 2025 | markets.businessinsider.comSee More Washington Trust Bancorp Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like Washington Trust Bancorp? Sign up for Earnings360's daily newsletter to receive timely earnings updates on Washington Trust Bancorp and other key companies, straight to your email. Email Address About Washington Trust BancorpWashington Trust Bancorp (NASDAQ:WASH) operates as the bank holding company for The Washington Trust Company, of Westerly that provides various banking and financial services to individuals and businesses. The company operates in two segments, Commercial Banking and Wealth Management Services. The Commercial Banking segment offers deposit accounts, including interest-bearing and noninterest-bearing demand deposits, NOW and savings accounts, money market and retirement deposit accounts, and time deposits; various commercial and retail lending products, such as commercial real estate loans, including commercial mortgages, and construction and development loans; commercial and industrial loans comprising working capital, equipment financing, and financing for other business-related purposes; residential real estate loans that consist of mortgage and homeowner construction loans; and consumer loans comprising home equity loans and lines of credit, personal installment loans, and loans to individuals secured by general aviation aircraft. This segment also provides debit cards; automated teller machines (ATMs); telephone banking, internet banking, mobile banking, remote deposit capture, and other cash management services; and investment portfolio and wholesale funding services. The Wealth Management Services segment offers investment management; financial planning; personal trust and estate services, such as trustee, personal representative, custodian, and guardian; and settlement of decedents' estates, as well as institutional trust services comprising custody and fiduciary services for personal and institutional clients. Washington Trust Bancorp, Inc. was founded in 1800 and is headquartered in Westerly, Rhode Island.View Washington Trust Bancorp ProfileRead more More Earnings Resources from MarketBeat Earnings Tools Today's Earnings Tomorrow's Earnings Next Week's Earnings Upcoming Earnings Calls Earnings Newsletter Earnings Call Transcripts Earnings Beats & Misses Corporate Guidance Earnings Screener Earnings By Country U.S. Earnings Reports Canadian Earnings Reports U.K. Earnings Reports Latest Articles Is Reddit Stock a Buy, Sell, or Hold After Earnings Release?Warning or Opportunity After Super Micro Computer's EarningsAmazon Earnings: 2 Reasons to Love It, 1 Reason to Be CautiousRocket Lab Braces for Q1 Earnings Amid Soaring ExpectationsMeta Takes A Bow With Q1 Earnings - Watch For Tariff Impact in Q2Palantir Earnings: 1 Bullish Signal and 1 Area of ConcernVisa Q2 Earnings Top Forecasts, Adds $30B Buyback Plan Upcoming Earnings American Electric Power (5/6/2025)Advanced Micro Devices (5/6/2025)Marriott International (5/6/2025)Constellation Energy (5/6/2025)Arista Networks (5/6/2025)Brookfield Asset Management (5/6/2025)Duke Energy (5/6/2025)Energy Transfer (5/6/2025)Mplx (5/6/2025)Ferrari (5/6/2025) Get 30 Days of MarketBeat All Access for Free Sign up for MarketBeat All Access to gain access to MarketBeat's full suite of research tools. 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There are 9 speakers on the call. Operator00:00:00Good morning, and welcome to Washington Trust Bancorp Inc. Conference Call. Operator00:00:04My name is Lydia, and I'll be your operator today. As a reminder, today's call is being recorded. I'd now like to turn the call over to Elizabeth Eckel, Executive Vice President, Chief Marketing and Corporate Communications Officer. Please go ahead. Speaker 100:00:30Thank you, Lydia. Good morning, and welcome to Washington Trust Bancorp Bank's conference call for the Q2 of 2024. Joining us this morning are members of Washington Trust's executive team Ned Handy, Chairman and Chief Executive Officer Mary News, President and Chief Operating Officer Ron Osberg, Senior Executive Vice President, Chief Financial Officer and Treasurer and Bill Ray, Senior Executive Vice President and Chief Risk Officer. Please note that today's presentation may contain forward looking statements and our actual results could differ materially from what is discussed on today's call. Our complete Safe Harbor statement is contained in our earnings release, which was issued yesterday, as well as other documents that are filed with the SEC. Speaker 100:01:14All of these materials and other public filings are available on our Investor Relations website atirwashtrust.com. Washington Trust trades on NASDAQ under the symbol WASH. I'm now pleased to introduce today's host, Washington Trust Chairman and Chief Executive Officer, Ned Handy. Ned? Speaker 200:01:33Thank you, Beth. Good morning and thank you for joining our Q2 conference call. We appreciate your time and interest in Washington Trust. I'll provide brief comments and then Ron Osberg will offer more detail regarding our Q2 performance. After our prepared remarks, Mary Nunes and Bill Ray will join us for the Q and A session. Speaker 200:01:51We continue to prioritize building balance sheet strength, managing credit, controlling expenses and positioning to be opportunistic for earnings growth as the economy and interest rates allow. Capital ratios improved somewhat in the quarter as we deemphasized asset growth and stabilized earnings in the quarter. Credit remains strong and expenses are down quarter over quarter. We've introduced new deposit growth oriented tools to enhance our customers' experience in online account opening, bank switching and to reward our customers for referrals. We look forward to opening a new branch in the Olneyville section of Providence next month. Speaker 200:02:28Other than this branch, we have no other planned branch expansion at this time. In recent years, we shifted much of our operations to the cloud, allowing us to make a strategic decision to sell our operations center and consolidate team members into existing offices. We continue to review every owned or leased space for optimization of our occupancy efficiency. With continued pressure on the margin, our fee based businesses wealth and mortgage performed well and generated higher revenues in the quarter. Again, continued expense discipline and our diversified revenue base contributed to this quarter's results. Speaker 200:03:03I'll now turn the call over to Ron for some more detail on the quarter and then we'll be glad to address any questions. Ron? Speaker 300:03:09Yes. Thanks, Ned, and good morning, everyone. 2nd quarter net income was $10,800,000 or $0.63 per share. Net interest income was $31,600,000 and the margin was $183,000,000 Average earning assets increased by $7,000,000 and had a yield of $4.97 up by 4 basis points. On the funding side, average in market interest bearing deposits increased by $36,000,000 and average wholesale funding decreased by $25,000,000 The rate on interest bearing liabilities increased by 5 basis points to 3.68. Speaker 300:03:41Prepayment fee income was $46,000 in the 2nd quarter and $20,000 in the 1st quarter neither with any impact to the margin. Non interest income comprised 35 percent of revenue and amounted to $16,700,000 down by $503,000 or 3 percent from Q1. Included in the Q2 was a $988,000 gain on the sale of our operations center, while the Q1 included $2,100,000 in settlement income. Excluding these items, non interest income was up by $609,000 or 4%. Wealth Management revenues were $9,700,000 up by $340,000 or 4%. Speaker 300:04:20This included an increase of $190,000 in seasonal transaction based revenues, largely tax servicing, as well as an increase of $150,000 in asset based revenues, which correlated to an increase of 1% in average AUA balances. Mortgage banking revenues totaled $2,800,000 up by $255,000 or 10%. Realized gains were $2,200,000 up by 39%. Turning to expenses, non interest expenses were down $453,000 or 1 percent from Q1. Salaries expense decreased by $515,000 or 2%, reflecting lower staffing levels and payroll tax expense, partially offset by higher mortgage commissions. Speaker 300:05:11In the Q2, the effective tax rate was 21.8%. We estimate our full year 2024 effective tax rate will be 21.2%. Turning to the balance sheet, total loans were down by $56,000,000 or 1% from March 31. In the 2nd quarter, total commercial loans decreased by $22,000,000 or 1% and residential loans decreased by $27,000,000 also 1%. In market deposits, which exclude wholesale broker time deposits, were seasonally down by $37,000,000 from March 31. Speaker 300:05:46Wholesale broker deposits were down by $355,000,000 and Federal Home Loan Bank borrowings were up by $310,000,000 from March 31, reflecting a shift in wholesale funding mix based on pricing. Our loan to deposit ratio increased in the quarter due to the reduction in broker deposits. We have since replenished broker deposits in the 3rd quarter. Turning to asset quality, these metrics remain solid. Non accruing loans were 54 basis points and past due loans were 21 basis points as a percentage of total loans. Speaker 300:06:22The allowance totaled 42,400,000 or 75 basis points of total loans and provided NPL coverage of 139 percent. We had net charge offs of $27,000 in the 2nd quarter and $79,000 year to date. And at this point, I will turn the call back to Ned. Speaker 200:06:40Thank you, Ron. I know you're all busy this morning, so we will go right ahead and turn it to questions. So, Lydia, if you can open the lines. Operator00:06:51Thank Our Our first question today comes from Mark Fitzgibbon with Piper Sandler. Please go ahead. Your line is open. Speaker 400:07:07Hey, guys. Good morning. Good morning, Matt. Good morning, Ned. It looks like you replaced $300,000,000 or so of broker deposits with FHLB advances. Speaker 400:07:18And I know, Ron, you had said that you replaced those subsequently. But what was the rough difference in rate between the broker deposits and the FHLB advances? Speaker 300:07:29Yes. And Mark, it could be 10 basis points, 15 basis points. I mean, we look at those as pretty much interchangeable sources of funding. So whichever is cheaper is where we tend to go. Speaker 400:07:43The loan to deposit ratio because of that move in is starting to creep up a little bit, I think it was 113%. How high are you willing to let that go? Speaker 300:07:54Yes, it's back down to 107 right now after we added those deposits back. So listen, we don't want that ratio to be any higher than it is now, to be honest. I mean, we're trying to bring deposits in just like everyone Speaker 200:08:11else. And we deemphasized asset growth, Mark. I think you saw loans down in the quarter. We are we'd love to be at 100% or below, but that's the challenge as it is for a lot of folks and deposit growth continues to be our number one priority and we're focused on that both in our cash management area and obviously in the retail side of the bank. So I think where we are now is we're comfortable with it, but we'd like to maintain or reduce. Speaker 300:08:45Okay. Speaker 400:08:46And then you had again a bit of an outflow in the wealth management business. I think it was $163,000,000 Any more departures of relationship people in the wealth management business recently? Speaker 500:09:02Hi, Mark. This is Mary Noon, and I'll take that question. We did have departures of 2 advisers and we had an unfortunate unexpected death of one of our advisors. The departures were unrelated. 1 was in the Q1, 1 was in the 2nd quarter. Speaker 500:09:26So there's no trend on that. This was in the Rhode Island offices where there are team based approach. So we've had minimal outflow attributed to that. We really just had we've looked very deeply into the outflow composition and we're not seeing any trends on this. It just was some client deaths that resulted in the estates being closed out and some other client expenses at higher levels than we've seen. Speaker 500:09:59But we're keeping a very close eye on that. Speaker 600:10:04Okay. Speaker 400:10:06And then Ron, I wondered if you could share with us some thoughts on sort of the outlook for the NIM, assuming maybe one Fed cut in September and also outlook for expenses in the Q3? Speaker 300:10:19Yes. So I'm only going to go out 1 quarter on the NIM and we think NIM in Q3 will be pretty much in line with Q2. I don't think at this point anyone really knows what the Fed is going to do and when they do start to reduce rates. As you know, we have a large commercial loan book of 1 month sulfur. So out of the gate, we'll probably see that interest income come down a little bit as we let our funding start to reprice. Speaker 300:11:00So I think it could be a little choppy for a couple of quarters depending on how many rate cuts come through and the timing of those. Overall, lower rates are beneficial to us. Most of our funding is short term. Most of that maturity funding is short term and we have a lot of money markets that can be repriced down as well. So not giving any Q4 guidance yet, but we think Q3 will be in line with Q2. Speaker 400:11:26Okay, great. And then lastly, and I know you built capital a little bit this quarter, but what are your thoughts on sort of the current capital position? Would you contemplate raising some capital given the more challenging environment? Do you have a target for the CET1 or some other capital ratio? Speaker 300:11:48Yes. I mean, we're if you look back, we've had sequential improvements in our regulatory capital ratios now for 3 or 4 quarters. We've slowed down the asset growth as Ned mentioned. We're going to continue on that trajectory expecting to improve capital on a linked quarter basis from this point forward. Yes, we'd like to see I mean, I would personally like to see us get our total risk based capital up to about 12%. Speaker 300:12:18It's going to take a little bit of time to get there. Speaker 600:12:24Thank you. Speaker 300:12:28Mark, you asked about expenses. So we're expecting Q3 to be about $35,000,000 mortgage commissions will be a little higher, advertising will be a little higher in the quarter and then we expect expenses to come down a bit in the 4th quarter. Operator00:12:50Thank you. Our next question is from Damon DelMonte with KBW. Please go ahead. Your line is open. Speaker 600:12:58Hey, good morning, everyone. Hope everybody is doing well and thanks for taking my questions here. Just to follow-up on the expenses. You mentioned earlier that you and we saw this quarter with the realized gain on the sale of the operation center. Are you expecting any material cost savings related to that? Speaker 600:13:17And how does that figure into the outlook? Speaker 300:13:21Yes, that's already incorporated and I'm thinking off the top of my head. I think it's about $200,000 to $300,000 of expenses annually, but that's already baked in. Speaker 600:13:35Okay, got it. Okay. And then with regards to your outlook for credit, I mean things continue to trend pretty favorably there, low charge offs and obviously the provision remains on the lower side given the slower loan growth. Are there any areas of the portfolio where you're seeing some signs of stress, particularly in the commercial real estate side? Speaker 300:13:58Yes. Bill, you want to take that? Sure. Speaker 700:14:02I think the one everyone pays attention to is office. We pay attention to office a lot. We essentially in the next couple of years have about a dozen maturities, each of which we know we don't even think of them as on a portfolio basis. But we're not seeing any trends anywhere else in the portfolio and even within office, we're kind of handling them 1 at a time. And a couple of them are going to limp their way forward, but we think we understand the issues, we understand the assets and the borrowers and we don't see any particular adverse trends that aren't already reflected in our accounting. Speaker 600:14:43Got it. Okay. That's helpful. Thank you. And then just on fee income, I guess, I think, Ron, you alluded to a little bit higher comp related to mortgage banking here in the Q3. Speaker 600:14:56I guess, how are you thinking about overall fee income in the back half of the year? Do you feel has the impact from the loss AUM and the wealth management kind of been reflected in the fees? Or should we expect some bit of a decline there? Speaker 400:15:12Yes. Speaker 300:15:14Our wealth income largely depends on markets. I think out of the gate, I would expect Q3 to look somewhat similar to Q2 in terms of wealth revenue. We expect mortgage to be up maybe 5 more mortgage revenue may be up maybe 5% to 10% just on higher volume in the 3rd quarter. Speaker 500:15:34And we did Damon, this is Mary. We did implement a fee increase that should start to be reflecting in the numbers for 3rd Q4. Speaker 200:15:46On the wealth Speaker 600:15:48side. On the wealth side. Got it. Okay. Well, great. Speaker 600:15:52That's all that I had. Thank you very much. Speaker 200:15:55Thanks, Damon. Operator00:15:58And our next question today comes from Laurie Hunsicker with Seaport Research. Your line is open. Speaker 800:16:06Yeah. Hi. Good morning. Good morning. I'm hoping we can just go back to wealth management. Speaker 800:16:11The 2 advisers that departed, how much did they actually manage? Speaker 500:16:20Well, they manage as a team, so they're advisors as part of a trust officer and portfolio manager and associate team. I don't have the numbers relevant to their portfolios, but I will say that the runoff has been minimal. And it's because of that approach. It's not it's very unlike the departures that had happened in our Wellesley area. So we're confident that that's not going to be a big contributor on any runoff. Speaker 800:16:55Got it. And then just And Laurie, we've actually Speaker 200:16:59Mary talked about the 2 departures and the one unexpected death. We have actually added 2 investment advisors in the course of the 1st two quarters as well. So we're kind of net down 1. Speaker 800:17:16Got you. And then just Mary, just to frame that, the $163,000,000 of client outflows in 2Q, how much was related to those 2 advisers? I mean, I know you said minimal, but it was just one of the larger quarters we've seen. So I'm just trying to understand that. Speaker 300:17:33Yes. So Laurie, that number is really net of three things, right? And we don't usually get into this level of detail, but you get new business, you got lost business and you've got routine flows where clients are living their lives and spending their money. So in the Q2, I will just say that new business and lost business was a net 0. Speaker 600:17:58Okay. So none of those Speaker 300:18:01yes, everything was kind of ordinary. Speaker 800:18:04Got you. Okay. And then just going back to non interest income kind of along the lines of Damon's question, but maybe just thinking more top level, because I know obviously the June has the tax prep in it for stripping out some of the noise, the sale of facilities, etcetera. How do you think about where that overall number is looking like for 3Q, netting everything out? Is $15,500,000 a good number? Speaker 800:18:32Or how should we be thinking about that? Speaker 300:18:35For total non interest income? Speaker 800:18:37For total non interest income, yes. Speaker 300:18:41Yes. Like I said, I think wealth will track in Q3 close to Q2 and we expect mortgage to be up about 5% to 10%. We're not doing much of anything on the swap side because we're not originating those types of loans right now. Speaker 800:19:04Got it. Okay. So that'll be close to this level as well. Okay, got it. That's super helpful. Speaker 800:19:09And then in terms of sale of other facilities, can you help us think about that a little bit? What else is there potentially to sell? Are you expecting more gains as we look toward the back half of this year? Speaker 300:19:26No. I mean, we have considered from time to time doing some sale leaseback. So we could implement that. We have no specific plan to do that at the moment, but that could generate some gains for us at some point. There are no other kind of excess facilities that we have right now that we're intending to dispose of. Speaker 800:19:49Got it. Okay. And then just last question on office. Can you and I realize you may not be able to provide all this detail and I certainly appreciate all the color that you put in the release. But the $18,400,000 that currently is on non accrual Class fee, can you just give us a refresh on that in terms of vacancy any movement what you're thinking about there? Speaker 700:20:20Sure. I'll take that, Laurie. This is Bill. That's 2 properties, one of which is 50% vacant, the other which is only tenanted with Streetfront retail right now. The latter property there looks like there's some resolution potential, but again we never want to count it until it's over. Speaker 700:20:41So there's some movement on that. We feel good about both properties, not the fact that they're non accrual, but that they're stable to improving. So that's where they stand. Speaker 800:20:53Okay. And those are both the office buildings are located suburban Connecticut. Is that correct? Speaker 700:21:01No. 1 is suburban Connecticut and the other is Boston, Boston Metro. And I do want to point out they're all we have no delinquencies. So even these properties that are on non accrual continue to perform. So they're performing non performers to use the old phrase, yes. Speaker 800:21:20Got it. Got it. Okay. And then under 32% of your book is coming due in the next 2 years, but how does that look if we look the next sort of 1, 2, 3 quarters, where are we with maturity around that? Speaker 700:21:37Actually, that's they're mostly the properties we just talked about, the couple of non accruals. So there's not much in the next couple of quarters and it's those. But let me talk about maturities for a minute. Frankly, we view office properties as essentially a life sentence. There's no magic exit market out there. Speaker 700:21:58So we look at each one of them assuming we're going to be with it to maturity and beyond. And so that's kind of how we manage the credit and work with the sponsor. If rates go down and there appears to be a refinance market out there at some point that would be great. But our assumption is we have to stay the course with the sponsors on these. Speaker 800:22:20Got it. Okay. Got it. That's helpful. Thank you very much. Speaker 200:22:26Thanks, Laurie. Operator00:22:30Thank you. We have no further questions in the queue. So I'll turn the call back over to Ned Handy for any closing comments. Speaker 200:22:37Well, thank you all for joining us today. We certainly appreciate your time and your interest in Washington Trust. And we look forward to speaking to you all again soon. So have a great day, everybody. Operator00:22:51This concludes today's call. Thank you for joining. You may now disconnect your line.Read morePowered by