WASH - Earnings call transcript Q4 2019 | Washington Trust Bancorp, Inc.

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Operator

Good morning and welcome to Washington Trust Bancorp Inc.’s Conference Call. My name is Andrew. I will be your operator today. [Operator Instructions] Today’s conference call is being recorded. And now I will turn the call over to Elizabeth B. Chief Corporate President, Officer. Vice Senior Marketing Communications and Eckel, Ms. Eckel?

Elizabeth Eckel

be Welcome good Trust President, and conference Thank Executive Trust Officer; will Chief and and Vice President Officer; Handy, everyone. team call. by to Ned Treasurer. executive call Mark XXXX you, Andrew Executive Chief quarter Officer and morning Ron Washington Chief Chairman Senior Washington Financial fourth Bancorp Today’s and Gim, hosted Operating Inc.’s Ohsberg,

the like we from contain presentation today’s the that we remind Before results what materially on may would statements differ to actual begin discussed and call. forward-looking everyone call, could is

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

Washington now, Trust’s And to CEO, Ned I and Chairman am pleased introduce Handy.

Ned Handy

Good Beth. you an on results the will on answer and call. fourth for morning thank you, XXXX. thoughts of full provide the XXXX, financial at about Thank our of analysis Mark conclusion Ron, and us Ron the I I our some the highlights year will This review quarter and for today’s remarks, questions provide and morning joining fourth and will XXXX quarter

net earnings to pleased of share. with XXXX am report million I income year or posted that Trust per full $XX.X Washington diluted $X.XX record

in our business year. amounted billion included our the year $X.X end. us which at the a deposits reflect by during results enabled from to of core stability deposits, the key growth business generate year X% XXXX in-market strength which model, Total billion $X.X This of grew Our and record lines. to through revenues

low we time. all current deposit generation interest challenge had made deposit have has over rate banks, a the environment consistent While for growth

commercial, supporting management highly branch size clients our team, efficient service in institutional customer-facing our network and effective bring average relied bankers a team have retail an on our enjoy high million. to branch and $XXX with We cash municipal We approximately of deposits.

have believe branches brand add We strong reputation. and opportunity Island we to service given in Rhode that our

in we ago. a Island recall, It de opened good was fifth may Rhode years branch to a in novo as branch start. you is North a our Providence, As year and the off many branch

We look Rhode locations continue a Island. few more for to attractive in

new We customers. recent from out have mortgage checking had with state success attracting residential accounts of

but branches do special opening, As those convenient great with deal Island, in mortgage don’t have you deposits Rhode markets. of we retail By those outside new generated some know, online we a clients. offering we account of lending mortgage in pricing

year us in was loans was fees was XXXX growth areas referenced for the growth remained million, a commercial reached a challenge million $XXX up in X% year-to-date new during billion Early end, and up record Total a growth On businesses. million. generated $XXX $XX basis, approximately in $X.X Commercial year. lenders mortgage residential while as pay-offs the at these at banking an loan income derivative generated construction million XXXX to and sales achieve for volume net all-time $XXX full loan I key levels the and earlier, and hit of mortgage high. year revenues both also record portfolio loan-related revenues advances prepayments

in commercial increased the Total year-over-year real portfolio. by by commercial estate growth loans driven X%

production C&I They Both in ahead. hit of hired in developers market. influence. connections the year we for a banker real and are Connecticut and strong As the centers commercial we mentioned a with and in have lenders expectations history with experienced ground optimistic estate running we the banker borrowers, last have quarter, their

throughout origination pipeline commercial the processing kept year. our Federal keep rates teams low momentum rate cuts Reserve with a hope mortgage in busy the XXXX to healthy entered residential We and and going. production

us. looks model Our good mortgage pipeline a mortgage enter still customers and the first as and advantage we on is has entered which to mortgage the quarter. for XXXX as both to were been and competitive our speed built continue banking Applications we deliver strong service we

XXXX. from $X.X to Wealth and totaled the A Western gross a management lending and in billion private of aimed assets of at improving new businesses. under Financial administration at we business in December in under market XX the introduced loss wealth second quarter departure our senior counselors Group that XXXX, financial from strong new clients similar XXXX year in our links assets two management which management benefiting addition to organic initiative due subsidiary appreciation XXXX the commercial helped ago, the to between of offset

high in We from is influence working closely business and generated with million new In under more area. new clients as and XXXX. XXXX, assets to member growth to we the are wealth and Group Private in generate Boston clients build report forward Private and continues we look XXXX. We outreach in net pleased mortgage in in wealth, Clients Clients He added officers $XX management to a the Group than help commercial of mid owners. centers to its management further prospects, worth assets with relationships our

financial the I will now for performance. Ron over a turn review to our call of

Ron Ohsberg

some of our for fourth more today, XXXX results on Ned. you our morning call Thank in you, Good our review joining detail. everyone. us Thank quarter

down Ned or was was interest for as million Net was points. income fourth $X.XX the net third $XX the and per XX quarter million quarter $X.XX fourth diluted share for $XX.X $XXX,XXX. basis interest for by income to quarter. $XX.X and declined As million margin mentioned, compared $X.XX, the Net

Income $XX $XXX,XXX prime-based October third LIBOR affected modest July, the balances market The and interest Income were residential mortgage-backed basis, on in yield portfolios. in to by the prepayment up securities by million, compared to and quarter. was were investment The average decreased assets the basis Federal loan lower earning September and interest from increased from margin points while in loan our a continuing average by and down totaled rates. reductions balance earning linked rate assets of downward third and $XXX,XXX quarter were loans with $XX average on penalties X.XX% million resetting by prepayments $XX XX million. by to due Reserve loan payoffs and quarter securities

in the million, balance by of the while deposits the funding rose sources from On declined average bearing during cost wholesale $XX XX were $X.X points the with wholesale liabilities fourth basis was includes declined Net deposits revenues average side, million under to The and which comprised third administration down interest X% or brokered down from to million, or $XX.X funding X%. of This million, decreased of line total average $XX million of quarter. interest balance income $XXX,XXX quarter. in-market or the borrowings million and X.XX%. which the quarter the third XX% in management by revenues quarter. FHLB $XXX by X% $X.X amounted assets by Wealth

the administration counselors end XX assets assets of cumulative X.X% under at was $X.X by million XXXX December of XXXX. of of second of despite end-of-period up balance the due $XXX The $XXX million end approximately from since and the X% or totaled end departure through client senior lost to or $XXX billion, in two This the the XX up September quarter. million

current additional impact We quarter estimate Associated attrition about the $XXX,XXX. an $XXX,XXX lost of in revenues totaled levels. run-rate the based in first beginning fourth on quarter

loans quarter, after between strongest of a million mortgage $X.X revenues decline in in shift which year fourth in quarter originated the banking part versus sale linked quarter. million third mix was our second QX quarter of origination was the Our to and seasonally the $X.X portfolio. lower due totaled The levels for

in resulted hedging in decrease program volatility, quarter-over-quarter. of our Additionally, does some which some timing cause the

However, expect above continue were you from by income QX. very million QX. this release momentum This to the $XXX,XXX table level average on was into in Loan-related that strong our derivative we can still close recorded to mortgage down of to out year see amounted the the $X.X QX. our in originations

turn non-interest me form Total of expenses. by expenses a to were $X.X QX. let couple quarter was items. million up linked by impacted change The Now,

in OREO third This second, quarter credits, FDIC expense a was was no QX were difference down of are assessment linked in a $X the such an to which in of and of million quarter and firth the there in rate First, $XXX,XXX adjustments were recognized $XXX,XXX. quarter. recognized compared $XXX,XXX, QX contra

currently a Excluding available flat for to compared the XX.X% the when of XXXX rate QX. to We second rate year XX.X%. approximately remain increased our rate in increases by was modest to QX various XX.X% Income resulting for with or FDIC utilized effective for be effective for The for were the $X.X and about as additional expense about blended of first tax million expenses across two X% expect half they of XX.X% half tax QX credits $XXX,XXX No us fully tax items, non-interest the quarter. fourth these totaled expense quarter. the categories. in

Consumer in million about to XX and $XXX by $XXX December from or balance were real million loans securities. declined by investment million year. portfolio estate end million of X% $XX These loans were Wholesale September portfolio million were fourth the And million. slightly brokered up total borrowings In-market by largely were million. end $XX the million the XXXX. down by up securities QX $X fourth X% $XXX $XX commercial September loans up total offset and the were quarter, the $XX increased In million Residential end million by included portfolio from up up to sheet, of million Total by securities. quarter from and of were or and $XX and were $XX $XXX at The the XX% were commercial the of up X%. of $XXX were Investment in X% X% increased routine assets purchases CDs concentrated or million XXXX. or $XXX the Turning the purchased $XX X% FHLB up This X%. during of from end purchases or deposits loans mortgage-backed of by calls by compared on or the pay-downs XX. securities million. by or we represented while quarter. C&I million the

from to compared compared of the days loans. Our in of residential asset no non-accruing sale The QX. more at OREO And loans loss and QX. property, million total The loans. a write-down. loans past commercial by QX. X.XX% in well quality the X.XX% of OREO X.XX% $X increase $X decline concentrated by gain as at had included $XXX the or Non-accruing of remains of were previously loans increase in This due declined strong. X.XX% in Non-performing was million of $X.X million end assets or as a loans were reflected million to the the end decrease the total XX mentioned end

by and the third the quarter end And total loans from was We total ratio January of to equity per tangible the allowance coverage provision $X.X million compared the of recoveries remain And was for the of the share charge-offs Net No declined at to was declaration third and of end a and quarter. loss the losses million finally, of on from NPL $XXX,XXX at equity quarter to was fourth risk-based X.XX% well capital provision recorded $XXX,XXX in provided quarter. the slightly in net of X.XX% loan XXX%. dividend $XXX capitalized. to $X.XX $XX,XXX QX unchanged our of The December XX.XX%, in quarter fourth up QX. was shareholder’s loan assets were of in quarter paid necessary XX, third XX. tangible to compared X.XX% compared third

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

Ned Handy

know another was XXXX time, over The value remain as our achieve in but for growth and of We entered year interest enhanced Trust. to we service, given challenging continue be our Ron. we will our to yield success to the to you, year to shareholders. year we environment our who have right and communities employees, technology contributed people, providing have low our markets. rate curve, committed And the the ahead good flat XXXth Washington continued customers, our Thank and our products those positive

to our We notch by financial have solutions a dedicated top customers backed closely with service. personal work employees offer who team of

strategy people we the our best technology have our in over contributed and to XXX customers. to deliver to Trust employees we incremental our has experience success to continue all continue will past the the will Washington necessary As to make in for past and tools our follow years, the years. that ensure investments

$X.XX continued their of enhance thank per company our to We shareholders. have their investment in our paid capital share consistent quality cycles. revenues financial a a provided solid of divined for continued foundation, and of recently model and them the and Trust. strong that management value support during business and for asset types has stream all economic of have Washington We We the

This may happy any be concludes Ron and marks. my prepared And have. now you answer I Mark, will questions to

Operator

Sandler. [Operator Fitzgibbon Instructions] question-and-answer ahead. now of begin Mark question comes from go the will Piper The first We session. Please

Mark Fitzgibbon

guys. Hey, Good morning.

Ned Handy

morning, Good Mark.

Ron Ohsberg

morning, Good Mark.

Mark Fitzgibbon

management getting you you if but unique us I revenues if you do in could that, run-off, wonder to said through first pretty on run-off think will? I know the $XXX,XXX, some the end the is wealth there you update customer on of we we much are residual are quarter that of impact

Mark Gim

Mark, are through We behind I if you like to It feels that’s yes. anything of handicap obviously know the but have we of this Gim. think one don’t probabilities, is amounts Mark can’t Ron, substantially I majority the us. And that, add?

Ron Ohsberg

down bit. last things have Yes. quite couple of months, slowed the No, a

moment. will attrition, So, be no it that pretty more the good feels I don’t say at think but we there can

Mark Fitzgibbon

thoughts on if the expected CECL? you sort I Ron, from update us your of then impact on And Okay. could wondered

Ron Ohsberg

Yes.

will of $X a range. a basis of we stick to effective it’s banks but an our other $X million on range, X.X – like kind increase think non-tax So of we to

Mark Fitzgibbon

to the adjustment That’s equity?

Ron Ohsberg

equity, Yes, to adjustment Mark.

Mark Fitzgibbon

then Okay, that’s that was there? us in it And of that, be funding me strategy to mortgages to resi help Can yield sort you going great. this degradative I quarter a when the you margin. cost, at just X.XX%, of factor $XX of bought million strikes the about think you curious

Ron Ohsberg

margin income. And we also accretive about Well, the net to so care income. but obviously, certainly we about care it’s

Mark Gim

our high-quality Gim, loan this profile. an fit view replace resi Mark, as MBS yielding lower opportunity it Secondly, to Mark risk that is also we purchases with in-market

low opportunities quality make will resi see purchase market high to sometimes as attractive in reinvesting credit to an terms cost the we alternative we flows. when markets, So, cash recourse MBS

Mark Fitzgibbon

a in coming bit would but probably down Okay, expect little considering should we margin be that, quarters more say? the you to

Ron Ohsberg

Actually, no.

than said For our faster the loans borrowing downward cost. past quarters, tend we couple to of re-price that have our

X expansion to expect first quarter. X the the get another and in NIM in X second point X to points We to basis quarter basis

us quarter rest from for of the So out would that year. X.XX% put approximately the things and would NIM for level second – kind of the with there

Mark Gim

And Mark, to course unknown which the by that is assumes no action us. Reserve Federal of further

Ron Ohsberg

right. That’s

Mark Fitzgibbon

mentioned, earlier then you in in lastly, the any for you there we any during am front, unique – And I on is your of look this to Ned some about branches Rhode expense I Okay. increases the expenses have comments think should open curious capacity in Island, course year?

Ned Handy

think we other Yes, branch locations. I looking mean, I at are

that, revenue lenders we that revenue in those customer So might generators, we are invest hired came that’s for The a If possibility. Connecticut facing. we across growth. opportunities in like

might… the On Ron, technology, you

Ron Ohsberg

Yes.

So, core Mark, X% see expenses to we a XXXX range. on about X% at about a at up basis, going

some We wage are pressure. seeing

will and X-year desktops out with also we and final We We of stages windows. this year, infrastructure are on up the technology warping We started servers to moved cloud. the migrate upgrade. to things

And branches along is to we we as make in right higher than seen always, find on will there bit but little X% unusual in what of this X% appropriate some years range. the at the have increase way, operating the the horizon additional So level strategic Ned the as opportunities expense in past couple the core as if said, investments such business we point. nothing of

Mark Fitzgibbon

you. Thank

Ned Handy

Thanks Mark.

Operator

next The comes Please Zwick Boenning from Erik & go of question Scattergood. ahead.

Erik Zwick

morning everyone. good Hey,

Ned Handy

Erik. Good morning.

Ron Ohsberg

Hey, Erik.

Erik Zwick

the of kind as from you mix what are purchase perspective? organic thinking or would of from we a little to curious there the just bit, purchase given just you in expect of about the strong be loan a targeting have bit the well, follow-up organic an of year loan growth finish XXXX to growth in a versus should Maybe perspective, what be you on kind the little kind growth activity how and

Ron Ohsberg

Yes.

Ron. it’s Erik, So,

So, good both our are commercial XXXX. right into residential pipelines now pretty heading and for

kind expect we such, a growth single-digit As into strong of mid heading XXXX.

mentioned On the purchase kind and in be fourth it. but did that Mark the could we additional with – see resi third some how supplemented of side the we as activity as quarter, that’s

Erik Zwick

strong thinking that of loan current have then of And forward of just XXX% ended kind loan helpful. that letting target? curious as that’s trend that the as the your around deposits a deposit run you well off, and going might kind how wholesale year that level Okay, at given the growth some ratio

Ron Ohsberg

Yes, right.

both well So, deposit total as a we as track loan-to-deposits an deposit basis. on in-market

seeing CDs to that the loan-to-deposit the the are brokered and really FHLB So, the which with we run-off you ratio the in kind reflects increase advances cheaper quarter. wholesale interchangeable of just was XXX% of consider fourth in FHLB

run-off FHLB. some be we to that So, CD by allowed of replaced

Erik Zwick

Okay.

it based may ratio the and constant of of think in of loans if should fluctuate to to just I alternative expect more kind be the funding the – of of you on that total about then in-market terms try cost deposits level funding? So, kind kind

Ron Ohsberg

have That’s deposit It’s de difficult we as are deposit priority many about talked why novo out us. there. are that rate. our we Yes, can environment We growth we a we the for times, recognized everything doing increase to branching. are deposits and doing

Erik Zwick

on And year your fee of XXXX $XX.X into the is million, year, too beginning number would heading mortgage in to you at expect XXXX be Sure. of revenue, tell pipeline again obviously mentioned that able or approach point? great this then to expectations the kind a for you side, income the in the early that to strong

Mark Gim

Erik, Mark this Gim. is

least of you I end strong resi accurate. and given the on our and And and we first the We out ball curve, volume just trend really of quarters yield areas half less the to year the further half would on level growth based we rates are at market the the for color clear little on don’t the I current you long So, of demand it pretty pipeline and have be is the standpoint if believe cycle, lending in but of supply. first up because from in that of of late from there decreased anything where is any second what the that both signs said expectation The XXXX housing know aren’t major strong. pressure second a of trend strength year a think any crystal and on seems have the will add? the it’s don’t here. have Ron,

Ron Ohsberg

year. going mean, we stronger pipeline had up revenue we again, mortgage necessarily do much I think No, that record We go a levels than this is but volumes normally time of and XX% year. the have Yes. we don’t at to

mortgage. it’s So on pretty things good – are

Erik Zwick

little think I kind appreciate the me it’s the loan bigger a of as profitability or color think you bit growth interest are given certainly there. expectations your you how shaping as the how some I of well the ROA for the terms in operating picture, shape of obviously environment And one about on about earnings profitability XXXX one just of guess? last maybe kind success measurement in tough curve, or environment rate terms putting I earnings for a of pressure as In either XXXX? that other

Ned Handy

think quality don’t worry Yes, and let have great. well that. front. the anything We is in Ned thanks about positioned. feel start question. It’s Certainly, with me to that for we credit And I

about rates talked growth our achievable. one Ron is We the continues think that are number I our that – has to do be know priority. deposits it

are And so that strategically. thinking about we

are comes if great prepared talked up, about trigger we our think on branch hasn’t As that. pull changed. earlier, M&A, M&A to the a in location view we we

side. and it, and going both We wealth bank about on very the cautious to be thoughtful are

it, how great we capital just So, look deploy and we all ways what off think the a the some do to we are foundation. we about growth generating of we time to have and things, got is for think continue obviously capital

Mark Gim

And Mark. Eric, this is

top in have, on deploy – And the repurchase banking manage or the dividend this. the through rate always of opportunistic we emphasizing that’s think for goal business And mortgage wealth are we of in remain group. to business, all M&A of as or differentiators community to them, challenging to lastly, said is our Our through worth of use levers. we environment Ned management environments peer through the some enough whether like routes those profitability have certainly are as the banks this quartile capital

Erik Zwick

so Thank taking much Great. questions. for my you

Ned Handy

Thanks, Eric.

Operator

of next Point. Compass The go ahead. from question Hunsicker Please comes Laurie

Laurie Hunsicker

hi, morning. Yes, Good thanks.

Ned Handy

Laurie. morning, Good

Ron Ohsberg

Laurie. Hi,

Laurie Hunsicker

Just to there a core as at vehicle or when in on you wondered are reported core your are base what just back it XXXX, a to you for whether the go because looking increase if wanted said you was certainly, to level? outside I using was this OREO some expenses, X% X% noise fees the expenses, or more just

Ron Ohsberg

in It’s benefit OREO offsets basically the on a write-down of reported the FDIC. that that OREO write-down – level December had took the on kind we that we the

I the forward. going So things expense of our representative is base on reported think that a year full basis, we pretty have

Laurie Hunsicker

Okay. opened you And does guide, for novo then or if your de any year are than likely branches assume identify? full ‘XX more that would

Ron Ohsberg

No.

Laurie Hunsicker

Okay, XX? would us in the of so around jumping dividend comments would it rank we should about you terms at capital about can versus and selective then And how – to sitting stand okay. help as where you buyback, think be think stock XXXX, just here your you use versus M&A about back that with buyback of

Ron Ohsberg

Yes.

overall So not. terms relative considering I necessarily a I seems important we of is of these to be closely doesn’t decision. preferable our at price that would levels. we or we share And value lot be at dividend what would book like in when investors sense to mean think where tangible whether mean, make making just looking trade buyback a

Laurie Hunsicker

Okay.

is the…. And so what

Ned Handy

in capital I a dividend that’s stock doesn’t which investing going we Sorry. Laurie, but was about from it’s alternatives mean us part to the and say the we our of that big historically obviously a deployment. we value of paid other priority, to don’t Ned. that is think just is think it

Laurie Hunsicker

Okay, great. And then…

Ron Ohsberg

And as opportunistic. M&A lastly, know Laurie, is you

put money fit for side a work or us. are funds opportunities appropriate would the have those a acquirer We are to when – wealth we on disciplined been bank historically as and good

Laurie Hunsicker

around question you buyback, more point the what constructive? last just And become price great. Okay,

Ned Handy

that. I get we into that Yes. don’t would know

Laurie Hunsicker

fair Okay, will it enough. I leave Thanks. there.

Ned Handy

Okay, thank you.

Ron Ohsberg

Thanks, Laurie.

Operator

Handy remarks. like the would for question-and-answer back over any our turn concludes to I Ned to session. This closing conference

Ned Handy

Washington it for time in and know on We a your have appreciate plate. your we your you all and you interest lot Trust. thank Well,

will that, with very So I you much. you Thanks soon. talk again and thank we say will to

Operator

now has presentation. attending conference today’s The concluded. Thank for you

You disconnect. may now

Washington Trust Bancorp (WASH) 28 Jan 202019 Q4 Earnings call transcript