WASH - Earnings call transcript Q3 2019 | Washington Trust Bancorp, Inc.

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Operator

Good morning and welcome to the Washington Trust Bancorp Inc.'s Conference Call. My name is Jamie and I will be your operator today. [Operator Instructions] Today's conference call is being recorded.

And now I would like to turn the conference call over to Elizabeth B. Eckel, Senior Vice President, Chief Marketing and Corporate Communications Officer. Ms. begin. may you Eckel

Elizabeth B. Eckel

Chairman Good Ohsberg, quarter welcome call XXXX Washington Financial Operating Treasurer. Ned hosted Jamie. Kim, and Officer; Bancorp and Officer Executive President will Washington Vice Inc.'s by Chief Handy, team Executive third conference and Trust Chief morning you, Executive to Mark Ron and Officer; Trust be and Senior Thank call. Chief Today's President,

actual contain results note take differ Before we forward-looking -- today's is statements presentation like and call. what begin, from of may the could that materially to on we'd discussed

our Our on that complete documents and Safe of NASDAQ earnings SEC. visit Harbor trades press Safe with at complete WASH. filed the Relations' and statement We documents all statement. appears ir.washtrust.com other Investor SEC you Washington review Trust to in under our our in filed the Harbor symbol encourage release the we website to

Trust's Handy. Chief to pleased and Executive Chairman now Ned Officer, introduce I'm Washington

Ned Handy

who Thank our for you, questions the and Beth. third Good call Yesterday, then I'll Ohsberg, turn discuss quarter over quarter's This XXXX. third may answer we Mark, review will and about highlights the our you morning, any the Then in our financial I depth. will more the outlook or quarter us. Ron, joining Ron of earnings. performance to morning and have for thank released you performance remainder

net income million report Washington third $XX.X that earnings Trust of to pleased with $X.XX record I'm share. per posted or diluted quarter

our and rate consistent from cycles revenues benefits interest Our generating performance varied reflects diverse business of and model the realities. economic

also we asset strong, remain strong. and profitability be to quality Our key continues well-capitalized, measures are

quarter us. decisions challenges opportunities rate and both Reserve's presented Federal during the third The for

had quarter at a and some at We at total all-time levels highlights XXth now quarter's billion September high demand We as moment the third deposits growth end-market market momentum deposit of deposits in and take also solid deposits both quarter. the in a reached $X.X end. review money the me record Let had good accounts. of to were

call, we rates the saw of clients the quarter had quarter's we time cuts, and in quarter. anticipation from rationing and Fed's down last inflows in runoff institutional deposits municipal rate We the during As deposits. modest mentioned seasonal early in ultimately the began

End enabled Changes our of to FHLB margin wholesale reduce end market pricing, deposit market deposit to deposit pressure. help growth will and careful us borrowings. growth deposit continued management mix, offset

and We've in an continues Island third FDIC Washington deposit market share and during opened we're FDIC share. statistics market at last that rank shares success the XX our our footprint quarter ranking reflects XX% branches to market to in expanding eight the were our with years Island Rhode Trust report the released Rhode third state. pleased in in

and customers' experience continue We in an see branches network our important to Rhode role play retail our banking expand believe to communities. branch several locations in still Island

moderating both Total real through estate. Commercial $X.X record real a continued in But pipeline healthy year quarter in concentrated C&I loan the in end activity mortgage, at billion estate commercial origination quarter's increases in quarter growth remains loans commercial pre-payoffs commercial consumer loans. estate, and was end. somewhat. real the Early reached the residential third including and with commercial

and revenues so our in mortgage is volume mortgage mortgage lending at in deliver the helped applications continue record We volume pipeline retail of through should end. pace had rates team during strong, number mortgage a interest good Reduced third record-level banking a the quarter year quarter. the

conditions mortgage be steadfast We opportunistic have times in strength with results. supportive. elsewhere therefore quarter our business, the We've to been pleased remained the are third in mortgage and are business when at by team's mix, positioned

new growth, improve our to improvements process operations streamline to committed We've remained customers' invested and made experience. technologies, in and have have

under administration billion assets are investments those from at previous Wealth XXth, down September paying for were in the strategy $X.X Our off management quarter. us.

Weston by fee quarter. conditions lost partially in the and client seasonal as client the as well this favorable our outflows third year from new impact of in Expected were income, growth two tax offset senior market which division, declines preparation counselors earlier

named I'd turn was mention I the one of Banker For honor. largest the by Before Rhode some by bank American based August, In nation's and Trust for the to Northeast recognition of through. part over call Work best Banks the review We're Island Washington Magazine as to its important Washington the like annual Ron, institution to received. only Trust very companies named the Best

based employees program regarding a work is on for satisfaction Washington outstanding life workplace identifies, honors practices employee recognizes and banks well growth environment, and Trust, benefits opportunities. at moral, U.S. policies and as as The and of survey our

As with be aspire employer an choice, their people an to a stay strive place employer We're and careers us. work of are proud work, to to to we as lives it where extremely the reconfirms and and to employees to of communities. they to to commitment banks as proud best be and outstanding recognized our for the one provide our work customers our our nation's build service

Ron discussion for of in-depth our turn review a financial over to more now I'll the performance.

Ron Ohsberg

everyone, joining us today. Thank on call thank you, you Ned. our for Good and morning,

This Ned to $X.XX and $X.XX second As the record quarter. net mentioned, or $XX.X third income a per $XX.X diluted for was quarter. for share compared the million million

equity on XX.X% We of assets and on X.XX%. also reported of a return return

the backed our was of margin July and prepayments the X%. for the LIBOR resetting or declined affected were portfolios. in million residential nine with and rate prime-based third Fed points. loan $XX down $XXX,XXX income and X.XX%, interest Income reduction in mortgage by securities continuing interest by Net in loans net basis funds The quarter downward margin

$XX $XX balance assets The while points Average basis. preceding million quarter linked earning X.XX%. securities decreased down or were up earning by from on basis $XX The to of X.X% quarter investment million the loans XX assets declined on average were interest yield average average a million.

$XX liabilities two rose from points. second funding the cost interest-bearing deposits sources wholesale funding quarter. average the the average to On million side, while basis million declined The $XXX end-market of balance declined of

XX% management million, $X.X total in comprised quarter. revenues to down the from X% million $XXX,XXX amounted quarter or million, third preceding were income $X.X $XX.X up revenues of Non-interest from QX. the or X% and Wealth

Transaction-based reporting the revenues basis tax and a on in are half which of concentrated by year. $XXX,XXX down first preparation fees, linked quarter totaled due $XXX,XXX, the to

million, revenues or Asset-based $X basis. a down X% on totaled $XXX,XXX linked quarter

under The The September million XX, QX. of $X.X under administration decreased end was or balance $XXX X% assets billion, or end X.X% of at of from the the period $XX million balance balance of down assets QX. administration average from

assets a two associated under lost administration The in approximately due at lost end outflows through client million client the of of of QX. counselors in decline with The of the $XXX,XXX of accounts to accounts the asset-based approximately and estimated quarter. a reflected XX impact third these departure of reduction senior $XXX fourth the was to $XXX,XXX September be revenues is during about reduction of the quarter

the volume the totaled $X.X million in of $X.X quarter, sold or substantially mortgage a revenues loans results banking by mortgage secondary record market. million in Our These third XX%. a up higher reflected

Our since million, very $XX healthy June helpful origination XX was September XX% $XXX at pipeline XXth. -- an or of at million increase about

was of third at QX. million. increase Loan to quarter average to fourth in quarter expect the above income comparable We the $XXX,XXX This an related and from an third quarter. was to amounted level derivative revenues $X.X

reduction deposit change or Now, from X% costs, $X.X FDIC was were Included assessment I'll to linked expenses. credits, which this quarter million the non-interest expenses in $XXX,XXX previous approximately $X QX. in in included turn Total decreased million of insurance quarter. which FDIC by recognized

assessments. We future additional offset in quarterly $XXX,XXX have an credits to available

in $XXX,XXX counselors, were due of X% Excluding costs management of down $XXX,XXX partially costs departure by or FDIC the commission reflected a expenses an compensation QX. activities. senior to which the the offset mortgage non-interest was impact lower increase banking volume-related and associated included salaries in with which two benefits, the This change net expenses, to decrease of wealth compared

promotion in costs, higher of a an and volume-related decrease timing servicing due increases support volumes. processing in also to third-party largely and $XXX,XXX costs $XXX,XXX derivatives We increase largely of reflecting mortgage to had expense and outsourced and advertising

We XX.X% year expect for rate effective XX.X% Income tax approximately effective currently totaled million was full the tax The expense to rate to XXXX $X.X in compared QX. XX.X%. QX. be income tax

were million and June were compared estate. Turning loans Total were up $XX million. Payoffs a $XX $XX million downs real ago. and year to Originations $XX pay in to commercial balance up million $XXX from million. XX, sheet, total X% approximately loans commercial and the were concentrated up or or X% were

As by a result, portfolio the $XX increase by net commercial portfolio real C&I million, estate $XX million. the while declined

decreased was quarter. $X Investment up $XX loans securities pay Investment to million, XX% million. mortgage-backed at were the the securities. downs Residential end primarily assets $XX of of total on securities due and represented million third consumer up

or end and were depositors. million, a X% representing seasonal million or End-market were deposits – and up Total ago. $XX of up X% governmental million X% of up the QX $X.X institutional various $XXX year inflows deposits from or $XXX reflecting billion, from

Wholesale by home brokered million $XXX federal CDs million. down loans borrowings were were and $XX down

quality asset remains total of X.XX% at loans to compared loans strong, were QX. very Our of non-accrual the end X.XX%

quarter. the of losses $XX.X The net were quarter. the allowance versus finally, loans or million, previous And X.XX% was of $XXX,XXX coverage was QX. $XXX,XXX total the provided due loans loan The equity more compared and loan provision of shareholder's XX loss $XXX,XXX X.XX% days total for up the of X.XX% to XXX%. And past in of total MPL from end Loans QX. compared in was at $XXX,XXX charge-offs second to end $XXX million were

And Ned. over call at turn to time, I'll this back the

Ned Handy

third We're will Ron. continue quarter performance the through with that hopeful the year-end. you, momentum Thank pleased and

well uncertainties that challenges well as may are presented operating of current the the aware the as by We environment mid-year the bring.

many solid during a year foundation. history, XXX-plus We've economic have weathered storms and our financial

capitalized. well are We

thank and and continued sensible oldest have community your value you to continue Washington a Trust, proven to in we'll work business growth. We We America's bank. set on are hard sights continued for our enhance support of shareholder model

happy morning. your Mark, Ron for I to your you thank answer So, questions. and time are And this now

Operator

Sandler [Operator with we'll question. comes go And from and session Instructions] from gentlemen, today Ladies the first Mark Fitzgibbon ahead question-and-answer Please our begin your O'Neill. question

Mark Fitzgibbon

morning. Hey, guys. Good

Ned Handy

Hey, Mark.

Mark Fitzgibbon

I pretty mortgage to that had morning. in comparable you XQ? Hey, XQ, in to Ron, guys, hear expect good which just side on correctly be clarify, revenues you mortgage the did

Ron Ohsberg

Yes, yes.

is real quarter. second strong was pipeline the the Our than of little it end of higher quarter, at end actually at the a

of our the So, the value yes. sales be think revenues A mortgage hedge of will was fair pipeline. mortgage We component pretty activity strong.

to We be So of end point We don't will see don't mortgage when quarter, before know fourth tapering that will though. volumes. think of off exactly some the going some we're our at it the be.

Mark Fitzgibbon

as And the in pretty saw to QX gain on sale well? similar margins what look you

Ron Ohsberg

strong. up through Yes. been I mean been the year. They've they've trending

Mark Fitzgibbon

Okay.

to outflows sort of we we'll Are of come? at you much do from how Or Weston? those folks you it's still think through more little Secondly, do likely see think there's that a most bit left in that?

Ron Ohsberg

Well.

had we've $XX,XXX So lease of September. the million $XX end another -- since

not you Mark, quarter We would don't it Mark add the I know of in are say, or So at where for have I we're that? know, its if two. end we yet. another probably you on anything want to Gim. entirety won't

Mark Gim

we're No. keep calls, current have proactively. clients Mark, do we talked about really recently information. reaching client, right as -- we effort as prior do the out we'll on is and we to to to receive customer said, as the thing can you we as continue for but The Ron very

Mark Fitzgibbon

is if the continue Okay. some until suspicion that CDs pressure XQ. you of that about those And to help margin some could wondered year, get think in you'll see is fair? I then the us you reprice lastly, to next My

Ron Ohsberg

is. It

that, cut of quarter fourth a at end we bit. any cut time So, would That's the end low expecting in consideration expect at had be mid-XXXs. this break We're at month. considering of that into the taking another obviously, for not the September. the margin the you the can basis pressure. we of cut points kind this to XX down all year. end really of I at to We're a But of

reprice have $X.X liabilities we $X.X reset will of But and loan billion home it borrowings, consists interest-sensitive And in -- of downward of loans, have billion that offsetting So about we we billion will prime-based half the CDs. will actually those end those brokered by that that on June the in so out resets and LIBOR fourth of of quarter. X. that, CDs, retail expect November $X.X

to immediate each cut basis. relatively us causes on able rate but a that we short-term be So some will offset pain,

next as well actively In rates our and terms our money year on we the $XXX,XXX XXXX. by and and been that in shortening pay internally, will we $XXX,XXX managing wholesale some we've did advances, things doing institutional in And side, restructure which the interest lower down about expense by accounts, fourth lowering of $XXX,XXX quarter promotional offerings. we're on the market that as our

our have We expenses So to down. we're manage do some still. ability sitting not

Mark Fitzgibbon

Thank you.

Operator

Please with Erik your next Zwick Boenning comes question. go Scattergood. from and Our question from ahead

Erik Zwick

Good morning.

expense a questions the Just on couple side.

the you be pursue think of clients kind your potentially of non-competes I there related quarter from -- any could issue expenses mentioned I from your rate legal front? of two recall of the updated last like thoughts some going efforts Looks expensive to wealth or kind run management were kind managers legal is to any enforce quarter. on that I in-line left. this good this Or that a guess, forward? kind

Ron Ohsberg

to good. mean It's at expense see loss. FDIC revenue Yes. out, going about reduction pretty some XX% the the of variable on kind wealth I take of obviously. you We're side

in there. you're So that's – starting of some see to that

the some in saves had some wealth the compensation legal offset we've management So which of those of expenses. side, on short-term kind

do increased we the X% track variable revenue at I bit. and that in on guidance we're of good or just That's we less the that increase kind with have. expense mortgage issued the would a and reemphasize year-over-year, trade-off year the X.X% of a guess side expenses at which that. also some pushing of revenue derivative like like to on little up cost to beginning are more I have We things,

Erik Zwick

the XXXX? And helpful. the FDIC That's to credits expect record mentioned additional kind piece. Okay. fourth you first then in of you of any quarter into or quarter the Do

Ron Ohsberg

banks that's be kind which it at get get is -- think that timing, that that would But signaled we the they're FDIC to going that the quarter the at has we in the only that ensure level Realistically, fourth caveat, levels reserve FDIC assuming to the that which happens. Yes. that of we'll but into the are think XXX the they we'll maintain the QX.

Erik Zwick

Thanks my That's Okay. Great. questions. taking Thank for you. helpful.

Ron Ohsberg

You’re welcome.

Ned Handy

Erik. Thank you,

Operator

Damon DelMonte with comes KBW. Our next go from Please your ahead question from question.

Damon DelMonte

guys. Hey, morning good

Ron Ohsberg

Damon. morning, Good

Damon DelMonte

-- start everybody doing to off how’s today? Just

Ron Ohsberg

good. We’re

Ned Handy

you. Thank Great.

Damon DelMonte

Great.

question Just costs. to follow of up start off FDIC Eric's quick to kind the on on real expenses, just the on

somewhere So get amount, if that's fourth something coming the you're credit the quarterly that the range, you're correct? additional of looking $XXX,XXX in around of quarter? kind $XXX,XXX at normal $XXX,XXX credit you in if take off you $XXX,XXX So

Ron Ohsberg

XXX would our in quarter. say rate normal Yes. I That's about right. a to run is XXX

So would yeah, it less than that. $XXX,XXX be

Damon DelMonte

Got it.

Okay. for that. Thanks clarifying

loan growth. guess my little question a kind I So next of talking about

kind softness how commercial and we C&I, noted activity you as kind those in of the real of two your good about think prepared As progress through buckets estate the into remarks, end of in do we XXXX XXXX?

Ron Ohsberg

Yeah.

mid year-to-date. sound. another I I X.X% think we'll stick mean, of with the have our sort fourth net kind would require quarters. generally pipeline guidance. We strong quarter. in $XX pretty single-digit in fourth is The That of million we're growth

it C&I had of Some reduction customers. we probably of so that not in the it's the half was of loss quarter, utilization

but say pipeline. tilted in a some would the its there towards the I that C&I opportunities pipeline has creep, little are

what's XXXX. we're we'll So through to but think comfortable I the fine for knows Who I now growth going about feel mid of kind and levels in single-digit -- economy, we're with year-end. the see happen

Damon DelMonte

Got it.

regards on where with able disclose come you to come to you loss the impact loan to to are point the then XXXX? CECL, level your And reserve guys Okay. expectations have the

Ned Handy

Yeah.

ability So to I said, would going strategic provide impact implement modest that capital, a fair no not specific impact now. on initiatives. would we're any guidance expect say, to we to our be on I'd say just our it

just specific this tuning our We’re methodology some on point yet. to with we're implementation to control where implementation and on fine track ready we're the give ongoing have completely numbers but track do, at not with really quite any testing implementation just

Damon DelMonte

overall any some throughout in areas book seeing that's war on? loan the of you're of manufacturing going And Any in portfolio enough. Fair that your -- the regards then been credit impact because the anything quality clients, Okay. weakness? to kind of trade

Ned Handy

to was marketable of pretty property foreclose in softening into the That on handful to think foreclosure able it We We it. route did take a Yeah. in We We don't on that we We quarter. NPA. think one of just this in past was had turn a our it's and due foreclosed at we'll of be really aggressively kind best one just slight around It any all. of portfolio end mortgages. uptick and property. see a residential kind at was the a June quickly.

Ron Ohsberg

Actually, it's sold.

Okay.

Ned Handy

It's Okay. sold?

Here you go.

Damon DelMonte

Perfect.

you I much. Okay. had. That's all there. Thanks Thank that very really everybody to out

Operator

Our Instructions] question. [Operator from Compass ahead Laurie Please next question Hunsicker comes from go your Point. with

Laurie Hunsicker

Yeah. Hi. Thanks. Good morning.

Ron Ohsberg

morning Good Laurie.

Ned Handy

Laurie. morning Good

Laurie Hunsicker

I've to back to right. Just just want we AUA. make wondered the this could sure, if go got I

we So, that estimated deduction your saw quarter. next obviously for this reduction quarter $XXX,XXX is $XXX,XXX

Is related million the a rate or off. that $X.X So to annualized so correct? reduction run run of that's

Ron Ohsberg

like Yeah. I $X that. more mean, looking million on we're

Laurie Hunsicker

two about run $X Okay. had these folks billion. And

out? out. And we so for your million million have that's come you the what $XXX so fourth revenue reduction Is saw on outflows, quarter total $XXX $XXX,XXX assuming in come

your million. at around $XXX terms just updated $XX our on You about should us assuming sticks are how million that? we I of mean think Or flows? in that, that's

Ron Ohsberg

Yes.

tell it's -- early outflows what I be. total the think going mean, So to to I too are

$XXX running early too it's And Friday. So to it's million know. through

Laurie Hunsicker

it. Got

certainly How remedies this, Okay. at but two pertains pursuing that departed the to one-year you color could I as had folks it you are around are thinking or more update if legal us this. Where recapture? you appreciate that? about thought And non-competes. one These

Mark Gim

can't we we the in had place. gave Laurie, add is call you ongoing provide in We more to much matter on So what agreements earnings this and non-compete Mark. We than second we in have said. believe, quarter non-solicit comment Really guidance the is place. more

believe pursue We appropriate time. We this at that remedies. that's to most action legal continue

people efforts. doing retention the And to at client We're very to updates as have and to become front, the provide we'll thing business proud core both outreaching our available. and serve right very on updates on needs continue place retention We're the on any best of in they litigations then be we active Weston. we

So happening. that's still

Laurie Hunsicker

the of expense much then third think quarter? was going side the expense And just how of that, forward? around And last one question in about how should the that side that we

Ron Ohsberg

Yes.

run-rate of think thinking So way it kind the of lost a basis of the best is I XX% about revenue. at

Laurie Hunsicker

Okay. Fair enough.

that that thinking going your How just the we approaching saw are you that's we that deposits have then How next one regarding year? other into And great. brokered drop should forward? be and about Okay. head wholesale question I as wholesale was

Ron Ohsberg

Yes.

brokered the that out as break at So - why we base. think because we separately end-market FHLB is borrowings really and the interchangeable we core look that's CDs which deposits pretty our deposit

the versus we FHLB off with moment. So is all the to cheapest looking up do range. to three We be keep at relatively roll we X X about funds just curves We're the to six we we shorten play trying rate the it whatever short -- mostly brokered the that roll come months. month be source think of the how to and over, it strategic at or able at

We run down. the investment portfolio

about probably to And opportunities generally, increase of some type will with the thinking wholesale be start We in funding. we that months. would reinvestment fund coming

Mark Gim

expand but those both bit. consider tend brokered little Laurie, is this some regard requirement FHLB and We just that alternative funding. Obviously, of an -- sources Ron has and in do I'll fungible. kind we collateral CDs added what to a as of is no advantages Mark. on has there wholesale as brokered

said, consider to And a shape. CDs. brokered think little has regulatory also the less-owned for Ron it's to treatment as curve bit I But important risk changed be

portfolios. because wholesale reinvestment One effectively of it’s we're -- the find a flat to money to is in ways curve book have within environment, we to down yield the the manage securities run tough reasons that

the is those those related. decline balances So in -- both

Laurie Hunsicker

much. so you Thank Great.

Mark Gim

Thanks Laurie.

Operator

question and follow-up. from Even Boenning the ahead from go follow-up Zwick Scattergood. is Please our next a Erik with

Erik Zwick

or regarding a lost the impact that in mentioned third follow-up revenue, managers to fourth. on off quarter in in the then delta the it? two that, lost Is is $XXX,XXX term was run that -- this so the third with revenue associated right? third left So Just the Laurie's for you question quick the the that an quarter really additional and $XXX,XXX quarter. be of understanding rate a projection fourth Am the $XXX,XXX from may I $XXX,XXX

Ron Ohsberg

Yes.

-- on run-rate a the July that's of into right? because QX So kind didn't going the forward $XXX,XXX $XXX,XXX is on $XXX,XXX the we a basis. lose in everything And so would impact X, on equate

Mark Gim

is the new $XXXXXX The annualized...

Erik Zwick

Got you…

Mark Gim

It's the rate. in quarterly

Ron Ohsberg

Quarterly, right?

Erik Zwick

are you is mentioned about $X.X that so point. about about And That this think of at annually. XX% originally million $X.X at $XXX,XXX running they million I were annually we

Ron Ohsberg

Yes.

Erik Zwick

Great. Okay. That's helpful.

Ron Ohsberg

a clarify, so under quarter. so run-rate we've per fourth -- equal would to per $XXX,XXX year $XXX,XXX far the management. assets in just $XX lost we've on in And million another quarter about basis That

Erik Zwick

it. Got

Ron Ohsberg

So QX run an $XXX,XXX tranche our the rate on and tranche at on for -- would QX rate the quarterly a XXX. give $XXX,XXX us

Erik Zwick

Perfect. so That's you great. Thank much.

Ron Ohsberg

Okay.

Operator

additional conference closing at time And questions. turn to the I'm for showing ladies this I'd no back and like any over gentlemen call remarks.

Ned Handy

Trust. in appreciate Thanks interest all it great forward you have Thank very a look you Washington and updating quarter. to much. for your We day. And next we

Operator

today's We thank Ladies and gentlemen, call. you conclude that conference does presentation. for today's joining

You now your disconnect may lines.

Washington Trust Bancorp (WASH) 22 Oct 192019 Q3 Earnings call transcript