Washington Trust Bancorp, Inc. (NASDAQ:WASH) Q1 2024 Earnings Call Transcript April 22, 2024
Washington Trust Bancorp, Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Good morning and welcome to Washington Trust Bancorp, Inc.’s Conference Call. My name is [Priyanka] (ph) and I will be your operator today. [Operator Instructions] Today’s call is being recorded. And now, I would like to turn the call over to Elizabeth B. Eckel, Executive Vice President, Chief Marketing and Corporate Communications Officer. Ms. Eckel?
Elizabeth B. Eckel: Thank you. Good morning and welcome to Washington Trust Bancorp, Inc.’s conference call for the 2024 first quarter. Joining us this morning are members of Washington Trust’s executive team, Ned Handy, Chairman and Chief Executive Officer; Mary Noons, President and Chief Operating Officer; Ron Ohsberg, Senior Executive Vice President, Chief Financial Officer and Treasurer; and Bill Wray, Senior Executive Vice President and Chief Risk Officer. Please note that today’s presentation may contain forward-looking statements and 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 earlier this morning, as well as other documents that are filed with the SEC.
All of these materials and other public filings are available on our investor relations website at ir.washtrust.com. Washington Trust trades on NASDAQ under the symbol WASH. I’m now pleased to introduce today’s host, Washington Trust’s Chairman and Chief Executive Officer, Ned Handy.
Ned Handy: Thank you, Beth, and good morning, and thank you all for joining our first quarter conference call. We appreciate your time and interest in Washington Trust. I’ll provide brief comments and then Ron Ohsberg will offer more detail regarding our first quarter performance. After our prepared remarks, Mary Noons and Bill Wray will join us for the Q&A session. Our primary focus continues to be on ensuring the strength of our balance sheet while we work towards regaining historic levels of profit generation. We continue our concentration on capital, credit, deposit growth, and expense management, controlling what we can as the administration of Washington works to balance interest rates and inflation risk. We are positioning to take advantage of prudent growth opportunities as they present themselves going forward.
We will soon roll out some deposit-related enhancements to power our deposit growth strategies, including the addition of an omni-channel automated deposit account opening tool. Overall, this quarter reflected the value of our diversified revenue base as our fee businesses somewhat offset continued margin pressure. It also reflected some good work the team has done to manage expenses in this inflationary environment. I’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 you might have. Ron?
Ron Ohsberg: Okay. Thanks, Ned, and good morning. First quarter net income was $10.9 million or $0.64 per diluted share. Net interest income was $31.7 million, down by about $1 million or 3%. The margin was 1.84%, down by 4 basis points. Average earning assets increased by $23 million in the quarter and had a yield of 4.93% up by 12 basis points. On the funding side, average wholesale funding rose by $122 million, and average in-market interest-bearing deposits decreased by $21 million. The rate on interest-bearing liabilities increased by 14 basis points to 3.63%. Prepayment fee income was $20,000 in the first quarter and $27,000 in the fourth quarter, no impact to margin in either period. Non-interest income comprised 35% of total revenues and amounted to $17.2 million, up by $3.9 million or 29% from Q4.
The first quarter included $2.1 million associated with the litigation settlement. Excluding this, non-interest income was up by $1.8 million or 13% from Q4. Wealth management revenues were $9.3 million, up by $457,000 and end of period AUA totaled $6.9 billion, up by $270 million or 4%. Mortgage banking revenues totaled $2.5 million, up by $952,000. 76% of our originations in the quarter were saleable compared to 66% in the fourth quarter. Turning to expenses, these were up by $1.8 million, or 5% from the fourth quarter. Salaries expense increased by $3.3 million, or 18%. Recall that last quarter we reversed $3.4 million in compensation accruals, which lowered fourth quarter expenses. Excluding this, salaries expense actually declined a bit.
Other non-interest expenses were down by $1.3 million or 35%, largely due to a $1 million contribution made to our charitable foundation in the fourth quarter. In the first quarter, the effective tax rate was 20.6%. We estimate our full year 2024 effective tax rate to be 21%. Turning to the balance sheet, total loans were up by $31 million, or 1% from December. Total commercial loans increased by $60 million, or residential loans declined by $19 million. In-market deposits were essentially flat, down $20 million from December 31st. Turning to asset quality, asset quality improved quarter over quarter. Non-accruing loans were 54 basis points on total loans compared to 79 basis points at year-end. And past due loans as a percentage of loans were 18 basis points compared to 20 basis points at year-end.
We had zero commercial real estate delinquencies. The allowance totaled $41.9 million or 74% of total loans and provided NPL coverage of 136%. The first quarter provision for credit losses was a charge of $700,000. And we had net charge-offs of $52,000 in the quarter. And at this time, I will turn the call back to Ned.
Ned Handy: Thanks, Ron. And we’ll now take questions.
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