Q1 2022 Washington Trust Bancorp Inc Earnings Call
Contained in our earnings press release, which was issued earlier this morning and other documents that are filed with the SEC. These materials and other public filings are available on our Investor Relations website at IR Dot Wash Trust Dot Com, Washington Trust trades on NASDAQ under the symbol wash I'm now pleased to.
Introduce today's host.
Washington, Trusts, chairman and CEO Ned handy.
Thank you Beth good morning, all and thank you for joining our first quarter call for.
We're grateful for your time and continued interest in Washington Trust. This morning, I'll provide an overview of our first quarter highlights and then Ron asked Greg will review our financial performance. After our remarks, Mark Jim and Bill Ray will join US and we will answer any questions you may have about the quarter.
I'm pleased to report that Washington Trust posted solid first quarter results with net income of $16 5 million or <unk> 94 per diluted share compared with $22 million or $1 15 per diluted share in the prior quarter.
In the quarter strength in core margin and our wealth business helped to offset reduction in mortgage revenues.
<unk> expense management assisted in the sound results and Ron will provide detail on his comments.
I'm very proud of the way our teams have navigated through the pandemic keeping customers at the forefront while positioning the pillars of our business model margin wealth and mortgage for relative strength as the fed begins to implement anti inflation measures.
Our asset sensitive positioning will drive continued margin improvement and our investments in technology and process improvement in all of our business units will optimize productivity and what will be a challenging operating environment.
In the quarter, we hit a record high in wealth management revenues, although assets under management declined at quarter end due to market volatility.
Net new customer flows were strong in the quarter.
Our rebranding and wealth to the unified Washington Trust wealth management brand is helping to build awareness in Connecticut, and Massachusetts and promises to deliver a simplified comprehensive offering across our footprint we've.
We've invested in continuous improvement in our financial planning capabilities, reflecting our deep long term care for our customers and their families.
Our efforts have been well received by clients prospects and centers of influence.
Total end market deposits hit a high of $4 7 billion at quarter ends and enabled us to continue reducing wholesale funding.
Given our strong brand positioning we continue to explore branching opportunities in Rhode Island construction of our new branch in Cumberland, Rhode Island is progressing and we expect an opening in late summer.
First quarter mortgage revenues and volume were down as expected, but both weekly applications and pipeline remain above pre pandemic levels.
We're built to a statistic service a purchase oriented market and the new England markets, we serve remain relatively strong.
Total loans, excluding pp P loans were up 1% in the quarter and 8% year over year.
Our commercial lending business was impacted by early payoffs as customers continued to take advantage of high valuations and the sellers market.
Commercial loans net of PPP declined by $12 million in the quarter as new originations and advances of $110 million were more than offset by payoffs and paydowns of $122 million.
The commercial pipeline remains strong entering second quarter 2022.
Robust growth in residential mortgage loans helped to offset the commercial decline.
Once again this quarter, we are well served by the diversity of our business lines and revenue sources.
<unk> has remained very strong and Ron will provide some detail on both our credit statistics and some comments on our provisioning and reserve position.
We've maintained a conservative posture on credit risk, which has served us well through the pandemic and prior cycles.
We feel confident about how Washington Trust, and our customers and manage through the pandemic.
And while there have been some positive signs of economic growth. We recognize there are many variables at play locally and globally.
We're planning for and continuously analyze the potential impact of several interest rate adjustments in the near term we.
We remain cautiously optimistic about the underlying economic fundamentals of low unemployment strong corporate earnings and buoyed consumer strength.
We believe that active engagement with the Fintech ecosystem is an important method of understanding of the competitive landscape.
We are continuously updating our products improving our processes and working with our core providers and other fintech partners to ensure we are providing the best experiences and solutions for our customers and our employees.
We issued our inaugural ESG report in the quarter, highlighting our long held belief that we are well positioned to help our entire communities find opportunity for success and to be a positive contributor to environmental health and to operate with the highest level of integrity security and ethics, we are proud of our 221.
Our heritage and of our depot awareness of today's important opportunities and obligations.
We launched a new multiyear financial literacy initiatives in the quarter designed to provide individuals families businesses and nonprofit organizations with the money management tools and resources they need to achieve economic empowerment.
We've committed multiyear funding to support literacy programs at three local nonprofits and introduced a free web based financial literacy program for local schools and community groups.
We also added a new financial Wellness center on the company's website.
I want to once again, thank our employees for their strength of character and Theyre consistent care and concern for each other and our customers.
With that I'll turn the call over to Ron for comments in the first quarter financial results, Brian Great. Thank you, Matt Good morning, everyone and thank you for joining us on our call today.
As Ned mentioned net income was $16 5 million or <unk> 94 per diluted share for the first quarter.
This compared to $20 2 million $1 15 per diluted share for the fourth quarter.
Net interest income amounted to $35 1 million down by $2 6 million or 7% from the preceding quarter net.
Net interest margin was $2 57 down by 14 basis points.
Net interest income continued to benefit from PPP forgiveness fee income, which totaled 819000 and had a six basis point benefit to the margin as compared to $1 2 million and nine basis points in the fourth quarter.
Additionally, there was $2 2 million of commercial loan prepayment fee income in the fourth quarter, which had a 16 basis point benefit to the margin.
It was a $76000 prepayment fee in the current quarter, which had zero basis point impact.
Excluding both of these items the margin increased by five basis points from $2 46 to $2 51.
Average, earning assets increased by $7 million the yield on earning assets was $2 83 for the first quarter down by 14 basis points.
On a core basis. It was $2 76 up by four basis points from 272 in Q4.
On the funding side average in market deposits rose by $216 million or wholesale funding sources decreased by $176 million and the rate on interest bearing liabilities declined by one basis point to 33%.
Noninterest income comprised 33% of total revenues in the first quarter and amounted to $17 2 million down by $3 1 million or 16%.
Wealth management revenues were $10 5 million up by 27000.
This included an increase in transaction based revenues of 233000, reflecting seasonal tax reporting and preparation fees that are concentrated in the first half of the year.
This was partially offset by a decrease in asset based revenues, which were down by 206000 or 2%.
The decrease in asset based revenues correlated with a decrease in the average balance of assets under administration, which were down by $83 million or 1%.
At March 31 end of period assets under administration totaled seven 5 billion down by $291 million or 4% from December 31, largely due to market depreciation.
New business activity in the first quarter was strong as net client asset flows inflows totaled $97 million.
Our mortgage banking revenues totaled $3 5 million in the first quarter down by 831000 or 19%.
Realized gains on sales of loans were $3 3 million down by $2 4 million or 42% from the preceding quarter, reflecting lower sales volume and a lower sales yield.
Mortgage loans sold totaled $130 million in the first quarter down by $67 million or 34%.
Competition has also been compressing the sales yield as expected.
The decline in realized gains was partially offset by changes in fair value of mortgage loans held for sale and forward loan commitments.
Mortgage loan originations amounted to $271 million in the first quarter by $92 million or 25%.
Our mortgage origination pipeline at March 31 was $210 million up by $16 million or 8% from a $194 million at the end of December and as of last week, the pipeline was over $240 million.
Loan related derivative income was 301000 down by $1 $7 million from the preceding quarter, reflecting lower commercial swap volume.
And income from bank owned life insurance totaled 601000 down.
Down by 543000 from the preceding quarter due to the recognition of 526000 of life insurance proceeds in the fourth quarter.
Regarding noninterest expenses these were down by $4 million or 11% from the fourth quarter.
In the fourth quarter of 2021 debt prepayment penalties of $2 7 million were incurred to pay off higher cost <unk> advances.
No such debt repayment expense was incurred in the first quarter first quarter of 2022.
Excluding the impact of these penalties noninterest expense was down by $1 3 million or 4% from the fourth quarter.
Salaries and employee benefits expense decreased by 522000 or 2% in the first quarter, reflecting volume related decreases in mortgage originator compensation expense and lower performance based compensation accruals.
These were partially offset by higher payroll taxes associated with the startup of the new calendar year.
Yes.
Outsourced services expense was down 343000 from the preceding quarter, largely reflecting lower swap volume.
Income tax expense totaled $4 4 million for the first quarter. The effective tax rate was 21, 3%. We expect our full year 2022 effective tax rate to be approximately 21, 5%.
Now turning to the balance sheet.
Total loans were up by $11 million from December 31, and up by $89 million or 2% from a year ago, excluding PPP loans increased 9% versus Q4, and seven 7% compared to Q1 2021.
In the first quarter total commercial loans decreased by $37 million or 2%, which included a net reduction in PPP loans $25 million.
Excluding PPP commercial loans decreased by $12 million or 1% from December 31.
Within this category.
<unk> loans decreased by $11 million.
Payoffs and Paydowns of $100 million were partially offset by new loan originations and advances of $89 million.
Commercial C&I loans include excluding PPP decreased by $1 million as payoffs and Paydowns.
$22 million were essentially offset by new volume in the quarter.
Yes.
Residential loans increased by $51 million or 3% and.
And by $320 million or 22% year over year.
Investment Securities were down by $35 million or 3% from December 31, reflecting a temporary decline in fair value and routine pay downs on mortgage backed securities partially offset by purchases.
In market deposits were up by $261 million or 6% from December 31 concentrated in money market accounts and were up by $713 million or 18% from a year ago.
Wholesale brokered Cds.
Yeah.
Wholesale brokered Cds were down by $113 million in the first quarter <unk> borrowings were down by $90 million from December 31, as lower levels of wholesale funding where needed given the end market deposits increase.
Total shareholders equity amounted to $513 million at March 31 down by $52 million from the end of Q4, the decline reflected a decrease of $60 million and accumulated other comprehensive income largely due to a temporary decrease in the fair value of available for sale Securities.
Washington Trust remains well capitalized.
Our first quarter dividend declaration of <unk> 54 per share was paid on April eight.
Now regarding asset quality nonperforming assets declined by $1 6 million in the first quarter.
Nonaccruing loans were <unk>, two 9% of total loans compared to 33% at the end of Q4.
Past due loans were one 6% of total loans compared to two 4%.
As of March 31, there were no COVID-19 deferrals.
The allowance for credit losses on loans totaled $39 2 million or <unk>, 92% of total loans and provided NPL coverage of 312%.
This compares to $39 1 million or <unk>, 91% in Q4.
The first quarter provision for credit losses was a positive 100000.
A $2 $8 million negative provision recognized in the preceding quarter.
The first quarter provision related to an increase in the reserve for unfunded commitments. There was no provision for loans recognized in the first quarter, reflecting continued low loss rates strong asset and credit quality metrics as well as our current estimate of forecasted economic conditions net.
Net recoveries were 148000 in Q1 compared to net recoveries of 27000 in Q4.
Yes.
This concludes my prepared remarks and at this time I will turn the call back to Nick.
Thanks, Ron The road ahead is going to be challenging and we appreciate you taking the time to listen to our story and understand our positioning we had a good quarter, our balance sheet capital position and credit quality remains strong and we believe our diversified business model positions us well in a rising rate environment.
So with that we will own.
It up to questions.
Thank you Andy we'd like to ask a question. Please press star followed by one on your telephone keypad.
If for any reason you would like to make that question. Please.
<unk>.
As a reminder, if you are using a speaker phone. Please remember to pick up your handset before asking your question.
Our first question today comes from Mark Fitzgibbon from Piper Sandler. Please go ahead. Your line is now open.
Hey, guys good morning.
Good morning, Mark and Mark.
Well just to clarify one of the comments you made.
Did you say the commercial loan pipeline was $240 million.
No the residential pipeline.
Well I thought you had said the residential pipeline was $210 million.
As of March 31.
And as of last.
240.
Gotcha.
The commercial pipe commercial pay a visit about $2 70.
270, okay great.
Up like $100 million from last quarter right, yes.
Things are very strong right now in terms of.
In the flow of opportunities.
Okay.
Secondly.
Assuming the fed rate hikes follow what the forward curve is suggesting what do you think the core net interest margin can get up to by the end of this year Ron.
Yeah.
What is it going to go out that far but.
Alright statically.
Thanks, a statically.
We think that the kind of the recurring margin could be.
Two high 270, <unk> by the end of the fourth quarter for the fourth quarter.
And in a market that so totally dependent on what actually happens right. So yes.
Understanding that the big assumption.
Okay.
And then also I was curious if the securities book is about 17% of the balance sheet today, where would you like that to be over time is it likely to get a lot smaller as loan growth picks up.
I think it's it's probably a little bit on the light side of where we normally are.
We usually between 17 and 20% Mark we're not looking necessarily to take that down.
We look at it quarter by quarter, and if we have excess capital to deploy sometimes will just with this top off the investment portfolio and.
Mark This is mark Yeah, I think.
Part of that depends on the span of total loan outstanding growth.
Better formation has been strong as Ned mentioned net growth is what's important to us and interest rates have risen to the point that the securities purchases.
That buy at low cost deposits are a relatively more attractive source of earnings.
<unk> before the yield curve flattens the levels, where it is today. So if we could fund loan.
Loan growth with deposits and liquidity.
Not exceptive than securities balances, probably would not grow we have the opportunity to continue growing deposits and loan growth is not as strong securities purchases are a way of providing net interest income at reasonable spreads going into 2020.
More so than it has under the last couple of years.
Okay, and then lastly, just a couple of questions around the wealth management business.
You had really good client flows this quarter I think $97 million I guess I was curious where that's coming from any particular type of client is it new or existing clients.
What would you guess the average size of the new relationships that you're bringing in look like thank you.
Mark This is mark again.
Large portion of those inflows in the first quarter were driven by a.
Significant relationship that was brought in by a combination of the private clients group.
Proceeds from the business sale, along with the wealth management division as well.
Those kinds of opportunities don't come along all the time, we are happy to be able to take advantage of our service levels to be able to accommodate we can more typically are our relationships are between the $210 million range as they come in but one of the advantages of having a better linkage between the balance sheet side of the bank and the wealth side.
Why is that.
For example business succession planning opportunities of our business sale. If we are banking a commercial customer we're now able to be in a position to take advantage of that on a liquidity event occurs and that pipeline, maybe a long time multiple years, but if we service the client effective late in the credit side.
Naturally in a good position to be able to offer our wealth services as well.
Thank you.
Okay and Mark just to supplement on your question on the margin I also just wanted to put out there that we're expecting this the second quarter margin on a core basis to be more like the mid $2 <unk>.
So obviously more and more confident in that.
Okay guidance further out.
Yes.
Yes.
Okay.
Okay.
Thank you Mark.
The next question today comes from Erik Zwick from Boenning and Scattergood. Eric. Please go ahead. Your line is now really a thing.
Good morning, everyone.
Good morning, Eric.
Yeah.
I was wondering if first ill follow up with kind of the margin discussion there Ron within those kind of expectations.
You've provided can you remind us what you're assuming for deposit betas.
Over the next few quarters.
Yeah. So so we still have.
We think that deposit beta is this time around will be somewhat less than what they were during the last rate increase cycle. We have brought our wholesale funding levels down quite a bit, but we still have I think higher wholesale funding levels than our peers. So.
So that that's obviously variable some of the deposit growth that we brought in this quarter is variable.
But we have about $2 billion of loans that will reprice in 12 months of $1 7 billion of that will reprice in the.
In the first month.
And about $400 million.
Liabilities were price in one month and about $1 billion over the course of 12 months. So we.
We still have quite a bit of asset sensitivity baked in there.
Our core rack rates, probably won't move that much but we do have some variable funding in there that will move up.
But we would expect it would be.
Net beneficiaries of rate increases.
Thanks for the color there and then.
Thinking about the commercial loans and I appreciate the commentary on the pipeline being up.
Quarter over quarter curious, where your line utilization rates stand today relative to kind of what you would consider.
Normal from a historical perspective, and if you're starting to see any upticks there. It seems like that could potentially be a headwind to net growth going forward.
Well, so I'm kind of curious what youre seeing there.
Yes, Erik it's Ned.
First of all we don't have a ton of lines in the commercial book.
But we have not seen much move in utilization.
Yet I think are the biggest variables for us.
Our real estate closings and fundings on the one side a fair amount of construction and in fact in the first quarter we.
In addition to the funded loans that we talked about earlier, we closed another $27 million of construction loans in the quarter that just havent funded so there is future funding there.
I would tell you.
Through the first half of April we closed $55 million in loans.
Not all funded but but I think that that pace suggests that the pipeline is converting.
Fairly well.
So I'd.
I feel optimistic about Q2 loan growth.
Of course, the other big variables payoffs and we think that as rates increase payoffs will at some point start to slowdown we did not see that in the first quarter.
We scheduled payoffs as much as we can and feel like it'll be somewhat reduced in the second quarter, but that's a that's a tough one to pay people are still.
Selling at low cap rates and taking advantage of.
The opportunity to do so so that that'll be a variable that we just have to keep our finger.
And then transitioning over to the mortgage residential mortgage mortgage loan pipeline I think you said those balances were up.
Quarter over quarter, and just curious kind of maybe what drove that increase.
Increases are starting to move into kind of the beginning of that.
Prime home selling season or anything else.
Given kind of market dynamics. It seems like those continue to come down but curious what you guys are saying.
Yeah. So I think there is some seasonality built in there Eric So our pipeline as I mentioned is higher at the end of the quarter versus last quarter and then even into April it's continued to increase.
In terms of our kind of our mortgage expectations I can't really go out further than the second quarter, but we would expect Q2 to be somewhat better than Q1, just on the basis of that of that pipeline.
A lot of competition out there in the purchase market, where we are is very strong that theres a lot of demand probably constrained somewhat by supply.
But.
The market is still very very hot in terms of.
Customer demand, yes, Eric this is mark the purchase market is traditionally seasonal but the strength in Q1, as we think really reflective of just the demand and lack of inventory in new England.
Ahead of mortgage said to me the other day that it felt like the spring market started in the second month of January which is a little early as far as purchase activity is concerned and Bob we're careful about going out very far given the rate sensitive outlook at the mortgage business in general.
The main catalyst in new England, or lack of inventory and interest rate levels. Notwithstanding demand is really strong across all the markets we serve.
Obviously higher rates will have some impact on that and.
The offset of course is that the housing price appreciation that has been.
So strong over the last couple of years may stabilize and that in conjunction with the inventory shortage ought to keep for the foreseeable future.
Demand strong.
The purchase market for us tends to be more depth in our portfolio and sale. So that should provide a source of balance sheet outstanding growth in that business for us.
As Ned said earlier in his comments.
The purchase market serves us well, we don't only serve the rate by market, we can generate high quality sustainable growth and.
An attractive well collateralized asset class, so that should bode well for loan growth for the foreseeable future.
That's helpful. I appreciate the detailed commentary there and just one last one for me I know I think you mentioned it.
Turning commentary you've got a new branch in Colorado opening late summer and I know you guys are always kind of on the lookout for new markets and feel that there is some opportunity to gain deposit some long term kind of core deposit funding that way any new branches targeted for the second half of the year or.
Nothing yet at this point.
Yes, I don't think anything that would be delivered in 2022, but we've got one other site that we're working and we're in the approval process on so.
If you can tell me exactly along zoning approval will take.
I will give you a very concrete answer but we're.
So thats, probably first quarter 'twenty three and then we've got a couple of other sites, we're looking at but nothing that.
We signed onto yet.
Got it I understand.
The challenge with some of those approvals sometime so that's great. Thanks for taking my questions today.
Thanks, Eric.
Yeah.
Thank you Eric.
The next question today comes from Damon Delmonte from <unk> Damon. Please go ahead. Your line is now open.
Hey, Good morning, guys hope everybody is doing well today.
Good morning, Dave question.
So my first question just wanted to kind of circle back on the loan growth.
The strong traction you guys are seeing on the commercial side.
The pipeline activity.
Ned could you give a little color around where in the footprint youre seeing and kind of what some of these types of loans look like as far as sizing.
And industry.
Yes.
I don't think average size has changed a whole lot I would say, we're kind of in the on average in the $5 million to $15 million size, we're seeing some more activity in Connecticut, we have made a concerted effort.
CLI.
Push in.
Some marketing support in Connecticut.
We're seeing some C&I growth there.
Ni growth is little bit manufacturing, a little bit distribution, a little bit more on the senior housing.
Memory care space.
We're seeing activity in the commercial real estate side and more in Connecticut, and the greater Boston market place than in Rhode Island itself, but some some in Rhode Island as well.
Multifamily.
Construction.
We're seeing some real activity in the industrial side very strong.
Opportunities there we're being.
For obvious reasons I think careful on the office front careful on the retail front.
So I think pretty much down the middle.
Not taking a lot of speculative risk risk.
So I think does that does that we are we are seeing a lot of.
Construction opportunities new construction.
On the multifamily side and conversion construction on on the industrial side and renovation.
Yes, that's great.
Color. Thank you.
And then kind of switching over to fee income.
Swap gains were down.
Pretty notably quarter over quarter.
And how do you kind of think about.
That line item as we go through the rest of this year.
Yeah, I mean, it's kind of chunky and hard to predict but.
We typically are somewhere in the $3 million to $4 million a year range at the end of the year, so kind of hard to know exactly what quarter that lands, but.
That's where we've been and that's kind of what we expect will continue to happen.
Okay. That's helpful. Thanks, and then I guess, just lastly on the expense side.
Having seen some variable components with mortgage banking and the slot swap business, but you kind of look out over the upcoming quarters.
You have a targeted range for <unk>.
Rent level that we could kind of considered here.
Yes.
And I think.
The guidance I gave back in January as we're thinking five ish.
That doesn't necessarily factor in.
But the variable stuff, but yes, we're seeing some some expense pressures I think everyone is but there is nothing.
Unusual happening within our expense base that we would need to call out to you we have the branch coming online later in the year.
That's about it.
So I'm, sorry, you said about 5% growth.
For the year.
Yes.
5%.
Okay great.
All that I had thanks, a lot guys I appreciate it.
Thanks, Tim.
Okay.
Thank you David.
Question today comes from Laurie Hunsicker from Compass point. Please go ahead. Your line is now open.
Yeah, Hey, thanks, good morning.
Good morning going back to David's question on expenses I, just wanted to make sure that I heard this right. So the 5% base youre using a base for last year of 135.
5 million argue are there some other adjustments that you are.
We're taking India now.
No no no other adjustments.
Got it okay, and so even though mortgage banking may come down a little bit and there will be extensive.
Some of that expense growth is.
Obviously related to the new branch that.
Sorry, what else what else are you focused.
And then spending.
A little bit of a bigger number.
Yeah.
Yes.
It's just kind of across the board with.
Salaries.
Supplies.
Outsourced services expense.
Just reflecting inflation.
Inflation, yes.
Yes, Laurie this is mark I think we are seeing signs of wage pressure and pretty much across the board not only in the banking industry, but elsewhere.
That is reflective of an overall.
Our costs on the.
Salary and wage line item with regard to the mortgage banking business accounting creates some weird artifacts, where commissions. For example are expensed when alone is sold but deferred labor costs and commissions can be a contra expense. If you originate portfolio loans, so when I think Ron.
And we think about core expense.
Some of those components are 10 changeover time so.
Your entire portfolio origination is balance sheet, driven by deferred labor will be a contract, but we try to think in terms of core expense run rates overtime or dollars for salaries wages outsource services. So Portland.
That's what we base that on.
Also that this will be 2022 would be the first full year of operation for the branch that we opened in May of 2021, so relatively speaking, even though theres one branch opening this year.
Months of expense for the one we opened last year versus seven or so months last year, which is why that growth rate enabled card.
Got it perfect. That's helpful. And then just switching over to noninterest income.
I appreciate the color, obviously around mortgage banking and flat, but can you talk a little bit about where you stand on NSF and overdraft fees, maybe how much.
Within the quarter, how youre thinking about that in terms of potentially being more consumer friendly going forward and how that may impact fee income.
Yeah. So.
So our overdraft NSF is really not that material it was under $2 million in.
In 2021.
So we are reviewing our policies around that we are well aware of the regulatory stance with regard to overdrafts.
We will do the right thing for our customers.
Likely implement changes that will be directionally consistent with what our peers are doing.
That has not happened yet you don't see that reflected in our numbers for the first quarter.
Something that will be implemented probably over the course of the year sometime by the end of the year. So yes.
Yes, Laurie this is mark I think what Robert said is right on but likely the second half of 2022 is when we would feel any impact from that roughly $2 million being lessened by changes probably with those that have effect, mostly on the consumer side. The business side. So the whole universe of NSF odp's isn't necessarily going to change as much.
That said.
We do things at the source of fees will be under sort of secular long term pressure.
We're glad it's not very material contribution.
Contribution to our fee income source will continue to do the right thing a customer to make sure. The programs we put in place match client needs and the competitive market. So 2023 would be the first full year of those.
Changes taking full.
Got it great that's helpful and then.
Just lastly, going back up.
Interest income margin.
I just have your PPP fees, obviously booked 819000 this quarter how how much is remaining is that around 500000 or do you have a better figure there.
Yes, I do.
It is 425000.
Okay, great and.
Just to sort of quantify with Jameson backend math as you were talking to Mark earlier. It's good. It's looking like basically every 25 basis points are still up hike, we're getting round numbers three $3 five basis points of margin does that sound right or did I did I do my math on.
Yes.
Alright.
What that did from a dollar standpoint versus our.
A basis point, but we've calculated every 25 basis points is about and this is an estimate is about $1 billion of <unk>.
Net interest income.
Annualized annualized.
Annualized alright, that's helpful. Okay.
Great and then just lastly on credit as we're starting to see normalized loan loss provision reserves to loans, obviously sitting here at 92 basis points.
Where is the comfort level, there how should we be thinking about that.
Yes.
We're obviously comfortable with critical we just with what we just published but so provision is dependent on loan growth economic outlook in historical loss rates, we expect mid single digit loan growth.
For the year and to remain stable credit remains stable and the absence of Covid relapse or some unforeseen economic shock.
We are monitoring events in Ukraine in China, and the related impact on supply chains.
As well as inflation in the first policy response, and how those might affect asset quality. So.
I would also say we are still carrying some COVID-19 related qualitative reserves and the release of those would serve to offset any incremental reserve requirements.
So.
Having said all that we are comfortable with where we are at the end of March.
Looking for a little bit more clarity on those things that I just discussed.
So for.
For the time being it's kind of steady as she goes I think it's.
Our asset quality is good and we feel comfortable with where our reserves are right at the moment.
Great. Thanks Bill.
Bill I don't know if you have any other color that you want to provide for Lori on that or.
I would simply confirm that Ron and I are completely aligned in terms of our outlook on that.
Thanks, Laura.
Thank you Laurie.
Next question is David a follow up question from Damon Delmonte from <unk> Cayman. Please go ahead.
Hey, Thanks for taking my follow up I just wanted to clarify.
The commentary on expenses.
So the 5% growth is off of a base from last year on the reported which was like a $135 $5 million or like kind of the operating when you take out the <unk> and some other charges, which was closer to like 128 and a half.
Yes. Thank you Damian, yes, obviously, we had high levels of prepayment.
In 2021 that would come out.
Okay Alright.
The adjusted level then okay, yes, okay. That's all I had thank you very much.
Okay. Thanks, Dan.
Thank you David.
There are no additional questions waiting at this time, so I'd like to pass the conference over to Ned Handy for closing remarks. Please go ahead.
Thanks, very much and thanks, everyone for joining us.
We had a strong quarter and we feel like we're very well positioned and we certainly appreciate your time and your interest in Washington Trust. So have a great day and we'll talk soon thanks.
Phil.
That concludes the Washington Trust Bancorp incorporated conference call. Thank you for your participation you may now disconnect your lines.
Okay.
Okay.
Okay.