Q2 2022 Washington Trust Bancorp Inc Earnings Call
Question at the end of the cool Shade press star one to get in the queue.
Today's call is being recorded and now I will turn the call over to Elizabeth B Eckel, Senior Vice President Chief marketing and corporate Communications Officer Ms Echo.
Thank you Melissa good morning, everyone and welcome to Washington Trust Bancorp, Inc. 's 2022 second quarter conference call joining us for today's call are members of Washington Trust Executive team, Ned Handy, Chairman and Chief Executive Officer, Mark <unk>, President and Chief operating Officer, Ron Osberg Senior executives.
Vice President Chief Financial Officer, and Treasurer, and Bill <unk> 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 the call. Our complete safe Harbor statement is contained in our earnings press release, which was issued yesterday.
Hey afternoon, as well as 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 todays host, Washington, Trust's, Chairman and CEO Ned handy.
Thank you Beth and good morning, and thank you for joining our second quarter call. We appreciate your time and continued interest in Washington Trust I'll provide some commentary on the second quarter and our view of the current environment and then run Osberg will review our financial performance.
After our remarks, Mark Jim and Bill rate 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 second quarter results with net income of $20 million or $1 14 per diluted share compared with $16 $5 million or <unk> 94 per diluted share in the prior quarter.
In the quarter, our results benefited from interest rate movements offsetting fee pressure in our wealth and residential mortgage businesses.
While our wealth management net new business and our mortgage portfolio volume were both strong in the quarter market conditions negatively impacted fee revenues.
The fundamentals of our customer facing businesses are very strong.
Continued expense management assisted in the results the diversity of our revenue streams combined with credit discipline and strategic balance sheet positioning enabled us to deliver a strong quarter.
Total loans were up 5% in the quarter, primarily due to strong growth in our residential portfolio.
Both residential and commercial loan pipelines remained strong and despite the continued payoff pressures that muted commercial growth in the first half of 2022, we remain confident that we will see mid single digit commercial loan growth for the full year.
New loan formation has been strong all year and the commercial pipeline remains near its historic high point.
With expectations of prepayments will moderate with rising rates, we expect to see strong net commercial growth in the second half.
Overall credit has remained very strong our commercial loan book has no non accruals and virtually zero delinquency at quarter end, our consumer lending is almost entirely secured by residential properties in nearby markets with excellent asset quality metrics built on sound underwriting standards and practices.
Ron will provide some detail on our credit statistics and provide some comments on our provisioning and reserve positioning.
While the pandemic has clearly not over the financial programs designed to help our clients through the most difficult times like loan deferments and the PPP program. PPP program has successfully culminated we have no loans remaining in deferral status and only five PPP loans remaining in the forgiveness process of the nearly 3000.
That were originated between the two phases, we are proud of our intensive approach to assisting both new and existing customers and feel that our franchise has been strengthened by a comprehensive response.
Over the past few years, we have invested an incremental improvements in all of our business units, both in product and process with an eye towards continuous enhancement of our customers and employees experience.
We've made appropriate investments in building our capacity to enable a highly productive hybrid work environment, allowing our teams to meet their customers, when how and where the customers prefer.
Our technology investments continue to provide us a firm foundation for growth, while continually improving our system resiliency.
Our intent on delivering the best balance between digital access and personal service to accommodate our evolving customer requirements.
We continue our efforts to be convenient to our customers and will open a branch in Cumberland, Rhode Island in early August .
And we opened a commercial lending office in New Haven, Connecticut yesterday and.
And then the Haven office is adjacent to our existing wealth management office, enabling our strategy of relationship building between those two business units to thrive we.
We will also have some residential mortgage loan officers in that office.
Our teams have positioned all of our businesses to weather any current economic challenges and to excel as and when the business climate improves.
And there are challenges in the current economy the.
The discouraging impact of inflationary pressures on segments of the population that can least absorb it and the general pressure on consumer spending has negatively impacted GDP growth expectations.
Fed will likely stay aggressive in combating inflation throughout 2022, while there is speculation that we are already in a recession. There are also signs that a soft landing is still possible pent.
Pent up consumer demand strong labor markets relatively sound corporate balance sheets combined with the remaining ARPA funds available in most municipalities might provide cushioning unemployment.
Unemployment rates in our markets are matching all time lows for example, Rhode Island.
Payment levels are significantly favorable to pre pandemic levels of.
Supply chain issues in general supply scarcity resolve the current levels of demand may provide positive momentum as recovery begins.
With that I'll turn the call over to Ron for comments on our second quarter financial results Brian .
Thank you Matt Good morning, everyone and thank you for joining us on our call today.
Ned mentioned net income was $20 million or $1 14 per diluted share for the second quarter as compared to $16 5 million or <unk> 94 for the first quarter.
Net interest income amounted to $37 5 million up by $2 4 million or 7% from the preceding quarter.
The net interest margin was $2 71 up by 14 basis points.
Net interest income benefited from PPP fees, which totaled 323000 and had a two basis point benefit to the margin.
This compared to 819006 basis points in the first quarter.
We do not expect PPP fees to impact the margin in future periods as an immaterial amount of PPP loans remain at June 30.
Prepayment fee income was modest at 62000 in the second quarter and 76000 in the preceding quarter, having zero basis point impact to the margin.
Excluding these both of these items the margin increased by 17 basis points from $2 51 to $2 68.
Average, earning assets increased by $25 million.
Yield on earning assets was 3.0% to 3% for the second quarter up by 20 basis points on.
On the funding side average in market deposits rose by $100 million to $151 million, while wholesale funding sources decreased by $82 million.
The rate on interest bearing liabilities increased by nine basis points to four 2%.
Noninterest income comprised 30% of total revenues in the second quarter and amounted to $15 9 million down by $1 3 million or 8% whilst.
Wealth management revenues were $10 1 million down by 465000 or 4%. This included a decrease in asset based revenues, which were down by 570000 or 6% from the preceding quarter.
The decrease was partially offset by an increase in transaction based revenues of 105000, largely due to higher tax servicing fee income.
Tax fees are seasonal and concentrated in the first half of the year.
The decrease in asset based revenue is correlated with a decrease in the average balance of assets under administration, or <unk>, which was down by $490 million or 7%.
June 30 end of period balances totaled $6 7 billion down by $843 million or 11% from March 31, largely due to market depreciation.
Net new business was positive and was offset by routine client withdrawals.
Our mortgage banking revenues totaled $2 1 million in the second quarter down by $1 4 million or 41% from the first quarter mortgage loans sold totaled $80 million in the second quarter down by $50 million or 39%.
Note, however that overall loan origination activity was strong and amounted to $350 million in the second quarter up by $79 million or 29%.
A higher percentage of loans are being placed into portfolio, leading to lower sales gains.
Market competition has also been compressing the sales yield as expected.
Our mortgage origination pipeline at June 30 was $234 million up by $24 million or 12% from $210 million at the end of March.
Loan related derivative income was $669000 up by 360000 368000 from the preceding quarter, reflecting increased customer swap transactions.
Regarding noninterest expenses these were down by 142000 or <unk>, 5% from the first quarter.
Salaries and employee benefits expense decreased by 621000 or 3% in the second quarter, reflecting lower payroll taxes and a reduction in share based compensation expense. In addition, we benefited from higher deferred labor costs, which is which is a contra expense and which was partially offset by higher.
Mortgage commissions.
Advertising and promotion expense was up 373000 from the preceding quarter largely due to timing.
Yes.
Income tax expense was $5 3 million for the second quarter. The effective tax rate was 21, 1%.
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 $196 million or 5% from March 31, and by $180 million or 4% from a year ago.
Excluding PPP loans increased by $207 million or 5% from Q1 and were up by $325 million or 8% from Q2 2021.
In the second quarter total commercial loans decreased by $14 million or 1%, which included a reduction in PPP loans of $11 million.
Within this category Cree loans decreased by $19 million.
Payments of $121 million were partially offset by new loan volume of $102 million.
C&I loans, excluding PPP increased by $16 million.
Residential loans increased by $188 million or 11% from March 31 originations.
Originations for retention and portfolio were $268 million up $99 million or 60%.
And consumer loans were up by $21 million or 8% reflecting growth in home equity.
Investment securities were up by $12 million or 1% from March 31.
Purchases of debt Securities were partially offset by a temporary decline in fair value as well as routine pay downs on mortgage backed securities.
In market deposits were down by $178 million or 4%. The decrease was concentrated in rate sensitive institutional money market accounts and included seasonal withdrawals by municipalities in higher Ed.
In market deposits were up by $555 million or 14% from a year ago.
Wholesale broker deposits were up by $57 million in the second quarter and <unk> borrowings were up by $273 million.
Total shareholders equity amounted to 477 million at June 30 <unk>.
Down by $37 million from the end of Q1. This was largely due to a temporary decrease in the fair value of available for sale Securities.
In the second quarter, we repurchased 175000 shares at an average price of $48 93.
And a total cost of $8 6 million under our stock repurchase program.
Including third including third quarter repurchases were at a total of 194000 shares at an average price of $48 82.
For a total of $9 5 million.
We do not expect to go much higher than that.
Washington Trust remains well capitalized.
Our second quarter dividend declaration of 54 per share was paid on July eight.
Regarding asset quality non accruing loans were up two 8% of total loans compared to two 9% at March 31.
Past due loans were one 9% of total loans compared to one.
One 6%.
At June 30, virtually all of these.
Loans were residential and home equity.
The allowance for credit losses on loans totaled $36 3 million or <unk> 81 basis points of total loans and provided NPL coverage of 293%.
As compared to $39 2 million or <unk> 92 basis points at March 31st the.
The second quarter provision for credit losses was a negative $3 million compared to a $100000 positive provision in the preceding quarter. This reflects continued low loss rates solid asset and credit quality metrics as well as our current estimate of forecasted economic conditions, we had net recoveries of 10010.
In Q2 compared to net recoveries of 148000 in Q1.
This concludes my prepared remarks and at this time I will turn the call back to Ned.
Thank you Ron and we will now gladly take your questions.
Okay.
If you would like to ask a question. We invite you to press star followed by the number one on your telephone keypad.
If you change your mind also that your question has already been answered you can press star followed by T to withdraw your question.
We'll be taking our first question today.
From Mark Fitzgibbon of Piper Sandler.
<unk>.
Good morning, and thank you for taking my question.
Good morning, Ron.
Ron I apologize I missed part of your comments on the capital steps. So I'll just ask it I know that <unk> was a big factor and it's obviously temporary but with the TCE ratio below 7% now I guess im curious how low you'd be comfortable taking that.
Yeah. So thanks, Mark so.
We view.
Unrealized losses on investment Securities.
That results from higher interest rates as having a transitory effect on GAAP capital.
It's why regulatory capital ratios allow for any OCI opt out for these unrealized losses.
We view capital adequacy through our regulatory capital wins, because we have the ability and intent to hold those securities until maturity and thus avoid losses.
Our position on that is is we're not overly concerned about this this temporary impact on GAAP capital.
I guess I'm curious then why not categorize them as held to maturity if you intend to hold them to maturity.
Yes, I know some banks are doing that and we feel like that.
That's an accounting exercise and it doesn't really affect how we run the business. So we've elected to not do that.
Okay.
So this isn't going to really affect your expectations for balance sheet growth.
At all no.
Now we believe we are capital is more than adequate to support growth.
Okay.
And then secondly, I saw that you guys bought back some stock during the quarter and I guess I'm. Just wondering if you could kind of help us understand the math.
How it makes sense buying back shares at north of two times tangible book value.
How do you kind of look at the buyback.
Sure Yeah, So mark we're very focused on shareholder return.
And I guess I have a couple of points to make about that.
First our regulatory capital has been building steadily throughout the Covid period.
Total risk based capital grew from $13 five 1% at December 31 2020.
<unk> to $14, one 5% in March of 2022.
Hi.
Just in excess of what we believe we need to run and grow the business.
So the next thing that we do as we evaluate our options to deploy excess capital.
Our preference is organic growth and we will continue to pursue that in accordance with our disciplined approach.
The more the better.
Assuming our discipline.
But earnings have been growing faster than the balance sheet, and thus generating additional capital, which is really not a bad problem to have.
The next thing we would look at as prudent dividend payout or dividend payout ratio is typically in the 50% range backing.
Backing out this quarters reserve release, it was about 53%.
That's a substantial payout it's near the upper end of what we believe to be prudent also provides a dividend yield of four 3%.
So finally, we consider share repurchases with which we just returned $9 5 million to our investors.
Which is an amount in excess of our second quarter dividend.
So channeling that that level of return through regular dividend increases is really not feasible given our existing payout ratio.
And we consider a special dividend to be inferior to repurchases because the special dividend.
Lax tax optionality to our investors as well as the lack of an EPS benefit.
The last point I would make about these repurchases as our average purchase price was $48 82.
Which was at a 20% discount to where we were trading in January so we feel comfortable that this is an appropriate and prudent.
Technique to return capital to shareholders.
Okay.
And then I wondered if you could help us think about the.
Provision.
I guess I'm curious so we're getting close to the end of the line with reserve releases given that loan growth is starting.
Starting to pick up here in your reserve ratios are starting to come down to.
Probably a more peer like level.
Yeah, Yeah I mean.
We maintain our level of reserves commensurate with our best estimate of credit risk in accordance with GAAP.
Provision going forward will be dependent on loan growth economic outlook in historical loss rates, we expect mid single digit loan growth and credit to remain stable at this time, but.
But we're obviously monitoring economic data and geopolitical events as well as inflation in defense policy response, and how these might affect credit quality. So.
Yeah, I mean, we're.
Every quarter, we assess where we think we are from a risk perspective and in.
And that led to the reversal this quarter.
Mark I guess I would just follow that up by saying that since since the onset of Covid. We've added about $12 4 million of reserves cumulatively, we have now reversed $7 8 million of that so we're still.
Higher by $4 6 million versus our pre pandemic level. So.
No no crystal ball as to where things are headed but we think that this is the right level of reserves for us right now.
I guess, where I'm headed with it ran it.
I know youre everybody's kind of box that a little bit with seasonal but.
You grew loans at a pretty good chunk here.
It's just hard to imagine that you view the economic environment.
<unk> today than it was three months ago.
And so I'm just wondering what kind of flexibility you have within the accounting rules to be able to.
Resume provisioning.
Yes so.
Mark a very healthy percentage of our of our allowance is qualitative in nature.
And our quantity our loss our historical loss rates are extremely well you can tell by our experience.
Year to date net recoveries.
We look at we will reassess the risk that we have in our portfolio and we established.
A corresponding reserve.
Yes.
Okay, Great and then just last question.
Your thoughts on the margin I heard your comments about PPP and.
And I know you had about $1 million loan prepayment penalty income in the quarter, but.
The core margin going forward any thoughts would be helpful. Thank you.
Sure, Yes, so we see some continued margin expansion.
I think that there is a lot of.
Uncertainty as to the direction that the fed is actually going to go, especially considering that you're talking about rate cuts in the first quarter of next year.
So I'll give you some guidance just for the third quarter, we think that the margin will expand to $2 75 to $2 80.
And just one more follow up on the on the credit piece Mark Yes, we did have.
Some pretty decent loan growth, but it was residential.
So.
That's a relatively lower credit risk asset versus commercial.
Thank you.
Yes. Thank you.
Thanks, Mark our next question today comes from Damon Delmonte of Kb, Debbie you Damon maybe Keith.
Hey, Good morning, guys hope everybody is doing well today.
Just a follow up on the margin.
Good morning, just to follow up on the margin question.
Mark you just asked.
So Ryan you're saying 275 to 80 off of the reported.
271, this quarter or is that off of the core level. When you exclude then thats Grupo <unk> income and PPE.
Yes, I would call that core.
We don't think we're going to get we're not going to get any more help on the margin from PPP.
So yes got it okay.
And then excuse me just to kind of.
Continuing with the discussion on the reserve level.
I think the initial commentary was that you know pipelines remained strong and you expect.
The pace of pay downs to slow here in the back half of the year, which gives you confidence in that mid single digit growth for the year.
How do we think about the provision expense if you start to add some higher risk loans and the commercial side versus the <unk>.
Lower risk residential mortgages that you added this quarter.
Sure Yes.
Increase in the loan portfolio will increase the provision.
In commercial has been it's been a headwind for us our origination volume has been quite good.
Payoffs continue to be high.
The pipeline is very very large net net you can comment on this but it's.
We expect some of that to show up on the balance sheet and will increase provisions accordingly.
Okay.
Yes, I would just add.
All things data.
Hum.
Hmm.
David I was just going to comment on the pipeline just to fill and fill in the blanks, where the commercial pipeline is at an all time high it's close to $400 million.
As Taylor twice normal normal size. So we've got a lot of activity going on payoffs have continued to be an issue in the first half, but we think that should.
Regulate a little bit with rising rates and so we still expect to see decent growth.
All other things being equal I think.
The reserves will reflect growth rates.
Got it okay, and if we wanted to try to like.
Estimate a.
Ah level going forward would you say like a 1% reserve on net growth would be reasonable.
Yeah.
If you want to model that that's fine I mean that might be a little high but.
Okay Fair enough and then I.
Believe you guys said you just opened the opt in New Haven, Connecticut.
Our loan production office.
Can you talk a little bit about the staffing of that did you do you have people from Rhode Island that are now working out of behaving or did you hire some local lenders in the greater New Haven area.
The staffing situation with that.
Yes, it's a combination of both so it's 1400 fee that's not.
The two giant and it's adjacent to our wealth office in downtown New Haven, and we've got a couple of lenders that are on the ground. There we've got.
Three people that are that are actually on the ground in Connecticut fully we still have some westerly based lenders that do business in in Connecticut, but we're also we're also interviewing and look to fill a few more seats. So we expect there'll be five or six commercial lenders will have some some.
<unk> lenders.
In that office from time to time out of the Glastonbury office. So yeah. We said we think it's.
But putting or if you've done in the marketplace and having some permanence that will.
We will help with our growth.
Okay, Great and then just one final question on the outlook for mortgage banking income.
And obviously down a decent amount this quarter, but you also portfolio at a lot of loans.
I understand the dynamics of what's happening in the market, but how are you.
How is your pipeline looking especially with your exposure to the greater Boston area and some of the more affluent areas in Connecticut.
Do you think you've kind of bottoms.
At this point $2 $1 million level or do you think that theres still some headwinds ahead.
Okay.
Mark So I'm going to start on that one.
Okay.
Yes, I'll take part of that and then turn it back to you Ron.
Yes, so as you saw during the second quarter, our total portfolio origination volumes were very strong the majority of it was destined for our portfolio as opposed to pipeline and part of that payment is due to a shift in mix.
As adjustable rate loans that become more attractive than fixed rate loans, there is less of a favorable market for.
Conforming certainly less of a sale of the market for jumbo arm loans, so shorter duration high quality loans with tentative putting portfolio I think we feel like we're kind of approaching a floor level in terms of conventional refinancing both salable agency mortgage loans. So it's always going to be a certain amount of that.
It's hard to predict any further ahead than next week.
III, but.
I think it feels safe to say, we're approaching a kind of.
Trough point.
In terms of refinanced the loan volume and associated sales gains going into Q3, we do think though that unlike some lenders who may be focused exclusively on the originate to sell the ability to originate high quality loans and what is still a very strong housing market.
Massachusetts, Connecticut, Rhode Island.
With low risk weights for portfolio was definitely a source of growth that we're happy to see gallons.
Brian I don't know if you have anything to add.
Yeah, I mean, I guess I would just say Damon.
Industry wide I think the MBA was expecting a 2% decrease in origination volume.
Ours went up on a linked quarter basis ours was up 29%, we're quite pleased with that level of activity.
And just given the pipeline is a little bigger at the end of June than it was in March we think some of that will carryover into Q3, So Q3, probably looks like it's a little better than Q2 from a from a revenue standpoint.
<unk>.
We've seen a huge shift in the mix from from originated sales to originate to portfolio.
Right.
Yes, I think some of that will carryover into Q3 and I don't think we can really see out further than that.
Got it Okay fair enough that's all that I had thank you very much.
Yes, Thanks, Dan.
Thanks, David Thank you Damon.
Next question today comes from Laurie Hunsicker from Compass point.
G H.
Great Hey, thanks, good morning.
If you go back to credit and certainly your credit is very pristine you all give a lot of details and we appreciate that but if you had to sort of peg Raytheon, where your reserves to loans with D.
Obviously, we saw linked quarter you went from 92 basis points on the 81, just looking at where you were in 2019 pre pandemic you're sitting at 69 days, Mike can you just help us think about.
And I realize there's a lot of things that go into that but can you help us think about where you would like to see that right now.
Knowing everything that you know just how you think about that.
Yeah, So I would say and I don't want this to sound flip I would say, we're right where we should be based on.
Our interpretation of what we think our credit risk is so.
There isn't any target ratio it depends on the size of the portfolio and the dynamics within it and our assessment is what it is right now at 80 182 basis points.
Okay. Okay can.
Can you give me a quick refresh I guess Ron. This is this is to you about.
On the asset book and your leverage lending book can you just remind us where you are in those two categories.
You are seeing and how youre thinking about that.
Thanks.
Yes.
Having built right okay, yes, yes.
We have about $227 million of office, it's all pass rated so none of it is even special mentioned or reclassified.
It's all performing.
No delinquencies.
Our refreshed weighted average loan to value on that is 68%. So that reflects any sort of the pandemic effects on office.
The weighted average debt service coverage is about $1 50.
And the nice thing about our office portfolio is it's mostly kind of decentralized low rise suburban oriented we don't do big floor plate High rise Center city stuff.
Which is where some of the big issues might be with lease rollovers that said of the $227 million, we think of about 20% of it is on the higher risk side, because it might be single tenant.
It might have some upcoming rollover risk that might happen vacancy you're repositioning thats going on again, all performing nothing delinquent all pass rated but so our thinking is about $44 million of that is the kind of stuff, we keep an eye on it and so we'll what we'll do in a case like that is we will do a targeted.
Credit review look at those loans and make sure they're getting the kind of scrutiny.
That they deserve so that's that's an overview of our office portfolio than any other.
Anything else you want to know about that Laurie.
No okay.
Do you have a refresh on your leverage lending book.
Yes.
We don't really do leverage lending so in our entire commercial portfolio. We have one loan that would be classified as highly leverage meaning leverage of three X or greater.
And that's 165 million and it's part of a much larger much more.
Well secured relationship related to a recent M&A deal. So that's 0.2% of our risk based capital because we do measure our concentration there. So again, it's almost nonexistent, which is one of the reasons, we feel very good about our credit status.
Okay. That's helpful.
Great last question Ron can you help us think about expense guide, how we should be looking at it for next year.
Well, yes so.
I'm not ready to talk about 2023.
I would say.
We think about expenses, we have a lot of variable.
Costs that that kind of run through our expense base tied to to fees, particularly on the mortgage side. So.
Excluding that kind of that variable cost.
Component.
Year over year, 22 versus <unk> 21, and excluding the prepayment expenses that we incurred last year.
Looking at a 5% to 6% year over year increase when you layer on those variable type costs, such as mortgage commissions and deferred labor and overtime and incentives and those kinds of things.
Kind of brings year over year to about breakeven.
Yeah.
Breakeven sorry breakeven in terms of that.
Yeah, So our total expense base, including variable, which is declining would be breakeven 2022 versus 2021.
Got it got it.
Right.
Okay. Okay.
Great. Thanks for taking my question.
Sure.
Thank you Laurie we'll take our last question today, which is a follow up from Mark Fitzgibbon of Piper Sandler.
Back to you.
Hey, guys. Thanks, just one additional question maybe for Mark given the downdraft in the markets, we had sort of in the first half of this year I was curious what customer behavior looks like in the wealth management business or are those customers sort of reshuffling assets staying put are they adding risk taking risk off thank you.
It's a good question Mark we haven't seen very much customer concern about being invested on a core basis as Ron mentioned in his opening comments.
Net new customer flows were strong and particularly in relationships, where we have more than one component of business with the customer for example, commercial financing in the past leading to wealth management with issues like say business succession pipeline flows have been good and we build confidence about that behavior. Lee I think customers are not really pushing up.
But we haven't seen as much money in motion due to concerns about returns of the way money is being managed compared to say 2008 2010.
I think we're obviously in a curve.
<unk> phase for financial markets.
A lot of that around the fed and the potential future recession, overshoots or doesn't manage inflation correctly, but.
It feels like while customers are taking a little bit of risk appetite off the table. There has not been a real wholesale change and part of that is due to how we advise people to manage money, which is the way we manage the company for the long run so I guess I would say.
Caution around the path of equity markets over the next 18 to 24 months, but we're not seeing people head for total safety in bonds or cash.
Thanks for that answer the question.
It does thank you.
Okay.
Thank you Mark is that was our final question today I would like to turn the call back to Ned Handy Netback Ta.
Thanks, very much and thank you all for joining US we do appreciate you taking the time with US this morning to understand.
Positioning we had a strong quarter and we think our balance sheet and capital position and credit quality remains strong and that our diversified business model will continue to be supportive.
Before closing I wanted to once again, thank all our employees.
They're consistent care and concern for each other and for our customer base.
We've got a great team and they're doing a wonderful job.
<unk> time, so thank you all have a great day.
This concludes the call today and we thank you all for joining you may now disconnect.
Okay.