Q2 2025 Washington Trust Bancorp Inc Earnings Call

Operator: Thank you for your patience. Today's call will begin shortly.

Hello, everyone, and thank you for your patience. Today's call Will begin short.

Operator: Good morning and welcome to Washington Trust Bancorp Inc's conference call.

Operator: My name is Lydia and I'll be your operator today. If participants need assistance during the call at any time, please press star zero. Participants interested in asking a question at the end of the call should press star one to get in the queue.

Lydia: Good morning and welcome to Washington. Trust Bank Corp ins conference call. My name is Lydia and I'll be your operator today.

If participants need assistance during the call at any time, please press star zero.

Operator: Today's call is being recorded.

Lydia: Participants interested in asking questions. At the end of the call should press star 1 to get in the queue, today's call is being recorded.

Sharon Walsh: I'd like to turn the call over to Sharon Walsh, Senior Vice President and Director of Marketing and Corporate Communications. Miss Walsh, over to you. Thank you, Lydia.

Speaker Change: I'd like to turn the call over to Sharon Walsh, senior vice, president, and director of marketing, and corporate Communications, Miss Walsh over to you.

Sharon Walsh: Good morning and welcome to Washington Trust Bancorp Inc's conference call for the second quarter of 2025.

Sharon Walsh: Joining us this morning are members of the Washington Trust 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, Bill Wray, Senior Executive Vice President and Chief Risk Officer. Please note that today's presentation may contain forward-looking statements and our 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 yesterday, 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.

Sharon Walsh: Washington Trust trades on NASDAQ under the symbol WASH.

Edward Handy: I'm now pleased to introduce you to today's host, Washington Trust Chairman and Chief Executive Officer, Ned Handy. Ned? Thank you, Sharon.

Sharon Walsh: Thank you, Lydia. Good morning and welcome to Washington, Trust Bank or Banks conference call. For the second quarter of 2025 joining us. This morning, our members of the Washington, Trust executive team, Ned handy, chairman and chief executive officer, Mary Nunes president and Chief Operating Officer Ron ohsberg, senior Executive Vice President, Chief Financial Officer and Treasurer Bill Ray, senior Executive Vice, President and chief risk officer. Please note that today's presentation may contain forward-looking statements and our actual results could differ from material from what is discussed on, today's call our complete Safe Harbor statement is contained in our earnings release which was issued yesterday as well as other documents that have filed with the FCC. All of these materials and other public filings are available on our investor relations website at irw cam Washington, Trust trades on NASDAQ, under the symbol wash. I'm now pleased to introduce you to today's host Washington Trust, chairman and chief executive officer. Ned handy, Ned

Edward Handy: Good morning and thank you for joining our second quarter conference call. We respect and appreciate your time and your interest in Washington Trust.

Edward Handy: I'll briefly comment on the quarter and then Ron will provide more detail on the financial results.

Ned Handy: Thank you, Sharon. Good morning, and thank you for joining our second quarter of conference call. We respect and appreciate your time and your interest in Washington Trust.

Edward Handy: After our prepared remarks, Mary and Bill will join us for the Q&A session. Washington Trust second quarter results reflect our diversified business model performing positively. We realized growth in net interest income, wealth management revenue and mortgage banking revenue, and we continued to build capital. This was a solid quarter with loan and deposit growth on target.

Ned Handy: I'll briefly comment on the quarter and then Ron will provide more detail on the financial results. Um, after our prepared remarks Mark, uh, Mary and Bill will join us for the Q&A session.

Ned Handy: Washington Trust second quarter results. Reflect our Diversified business model. Performing positively we realized growth in net interest income, wealth management, revenue and Mortgage Banking revenue. And we continued to build Capital. This was a solid quarter with loan and deposit growth on target.

Edward Handy: This quarter, while we continue to focus on deposit generation, we enhanced our wealth management team with the addition of a new client services manager and business development additions to our wealth advisory and private clients team. This added expertise will be instrumental as we continue to grow and evolve to meet the needs of our clients and communities and continue to provide the highly personalized consultative experience that has defined our firm for generations.

Ned Handy: This quarter while we continue to focus on deposit generation. We enhanced our wealth management team with the addition of a new client services manager, and Business Development additions to our wealth advisory and private clients teams.

Edward Handy: Also in the quarter, we finalized the conversion of our core wealth management system to ensure enhanced customer experience. The company remains committed to providing exceptional full service banking, mortgage and wealth services to our customers, and is focused on continuing to be a financial partner that provides solutions and resources the customers need for all life stages, and the unique opportunities and challenges that come with those miles.

Ned Handy: This added expertise will be instrumental as we continue to grow and evolve to meet the needs of our clients and communities and continue to provide the highly personalized. Consultative experience, that is defined. Our firm for Generations. Also, in the quarter, we finalized the conversion of our core wealth management system, which will ensure enhanced customer experience.

Ronald Ohsberg: I'll now turn the call over to Ron for some additional details on the quarter. We'll then be glad to address any of your questions.

Ned Handy: The company remains committed to providing exceptional, full service, banking mortgage and wealth services to our customers and is focused on continuing to be a financial partner that provides Solutions and resources that customers need for all life stages and the unique opportunities and challenges that come with those milestones.

Ronald Ohsberg: Ron. Great. Thank you, Ned.

Ronald Ohsberg: And good morning, everyone. For the second quarter, we reported net income of $13.2 million, or $0.68 per share, compared to $12.2 million and $0.63 per share last quarter. As previously disclosed, there were two infrequent items included in first quarter results, a pension termination charge and a sale leaseback net gain. Excluding these items, adjusted net income increased by $1.5 million, or $0.07 per share. That interest income was $37.2 million up by $763,000 or 2% on a link quarter basis. The margin was 236, up by 7 basis. Non-interest income totaled $17.1 million in Q2, excluding Q1 sale leaseback net gain of $7 million.

Ned Handy: I'll now turn the call over to Ron for some additional details on the quarter. Let me glad to address any of your questions run. Great. Thank you, man. Good morning everyone. So the second quarter, we we reported net income of 13.2 million or 68 cents per share compared to 12.2 million and 63 cents per share last quarter.

Ned Handy: As previously disclosed, there were 2, infrequent items included in first quarter, results, a pension termination charge and a sale lease back net gain, excluding these items, adjusted net income increased by 1.5 million or 7 cents per share.

That interest income was 37.2 million up by 763,000 or 2% on a on a link quarter basis. The margin was 236 up by 7 basis points.

Ronald Ohsberg: Adjusted non-interest income was up by $1.4 million, or 9%. Wealth management revenues were $10.1 million up by $229,000 or 2%, reflecting an increase in transaction based and seasonal tax servicing fee income. Asset base revenues were down modestly reflecting a decline in average AUA balance. However, at the end of and a period AUA balances totaled $7.2 billion up by $363 million or 5%. Mortgage banking revenues total $3 million, up by $730,000, or 32%. Our mortgage pipeline at June 30 was $102 million, up by $6 million, or 7% from the end of March. Loan Related Derivative Income, which is transactional in nature, total $676,000 in the second quarter compared to $101,000 in Q1.

Ned Handy: Non-interest income total, 17.1 million, in Q2 excluding q1 sale lease back net, gain of 7 million, adjusted non-interest income was up by 1.4 million or 9%.

Ned Handy: Wealth management revenues were 10.1 million up by 229,000 or 2% reflecting an increase in transaction based and seasonal tax servicing fee income.

Ned Handy: And a period AUA balances totaled, 7.2 billion up by 363 million or 5%.

Ned Handy: Mortgage Banking revenues total 3 million up by 730,000 or 32%, our mortgage pipeline at June 3002 million up by 6 million or 7% from the end of March.

Loan related derivative income which is transactional in nature. Total 676,000 in the second quarter compared to 101,000 in q1.

Ronald Ohsberg: Non-interest expense totaled $36.5 million in Q2, excluding Q1's pension plan settlement charge of $6.4 million. Adjusted non-interest expense was up by $770,000, or 2% on a link order-based basis. Salaries and benefits expense was up by $603,000, or 3%, largely due to volume-related increases in mortgage originator compensation. Income tax expense in the second quarter totaled $3.9 million and the effective tax rate was $22.7. Full year effective tax rate is expected to be 22.4%.

Ned Handy: Non-interest, expense total 306.5 million in Q2.

Ned Handy: Excluding q1's Pension Plan settlement, charge of 6.4 million adjusted 9, interest expense, was up by 770,000 or 2%, on a link quarter basis.

Ned Handy: Salaries and benefits expense was up by 603,000 or 3%, largely due to volume related increases in mortgage originator, compensation.

Ned Handy: Income tax expense in the second quarter total 3.9 million in the effective tax rate was 22.7.

Our full year effective. Tax rate is expected to be 22.4%.

Ronald Ohsberg: Turning to the balance sheet total loans were up by 44 million or 1% total commercial loans increased by 57 million or 2% while residential loans decreased by 1%. Market Deposits were up by $30 million, or 1% from the end of the first quarter, and by $407 million, or 9% on a year-over-year basis. broker deposits were down by 25 million and FHLB borrowings were up by 151. Our asset and credit quality metrics remain solid. Non-accruing loans were 51 basis points and past due loans were 27 basis points compared with total loans. The allowance totaled 41.1 million or 80 basis points on total loans and provided NPL coverage of 157%.

Ned Handy: Turning to the balance sheet. Total loans were up by 44 million or 1% total commercial loans, increased by 57 million or 2%, while residential loans, decreased by 1%,

In Market, deposits were up by Thirty million dollars, or 1% from the end of the first quarter and by 407 million or 9% on a year-over-year basis.

Ned Handy: Work with deposits were down by 25 million and fhlb borrowings were up by 151 million.

Ronald Ohsberg: And the second quarter provision for credit losses was 600,000. had net charge offs of $647,000 in the second quarter.

Ned Handy: Our asset and credit quality metrics, remain solid, non acru and Loans were 51 basis points and past due. Loans were 27, basis points compared with total loans, the allowance total 41.1 million or 8%. 80 basis points on total loans and provided npl coverage of 157% and the second quarter provision for credit. Losses was 600,000, we had net charge offs of 647,000 in the second quarter.

Edward Handy: At this time, I will turn the call back. Thanks, Ron and Lydia, we can open it up to questions. Thank you.

Nick: And at this time, I will turn the call back to Nick.

Nick: Thanks Ron and Lydia, we can open it up to questions.

Operator: Please press star followed by the number one if you'd like to ask a question and ensure your devices are muted locally when it's your turn to speak.

Nick: Thank you.

Speaker Change: Please, press star, followed by the number 1. If you'd like to ask a question and ensure your devices are muted locally when it's your turn to speak.

Mark Fitzgibbon: Our first question today comes from Mark Fitzgibbon with Piper Sandler. Please go ahead to your line, Hey guys, good morning. Hey, Mark.

Speaker Change: Our first question today comes from Mark Fitzgibbon with Piper Sandler.

Please go ahead to your Line's open.

Mark Fitzgibbon: Hey guys. Good morning.

Ronald Ohsberg: First question, Ron, I had for you was sort of how you're thinking about the net interest margin and what you're assuming for Fed rate cuts in the back half of the year. Yeah, so for the third quarter, yeah, I would say you can see our margins starting to level out. So I think we're expecting a pretty modest expansion in the margin, maybe only a couple of basis points in the third quarter. What we are seeing, you know, higher than previously rejected margin. Yeah. deposit costs. So kind of reaching the top on that.

Mark Fitzgibbon: Hey Mark. First question, Ron, I had for you was sort of how you're thinking about the net agents margin and what you're assuming for Fed rate Cuts in the back half of the year.

Mark Fitzgibbon: Yeah. So, um, for the third quarter. Yeah, I I would say you can see our Mars is starting to level out. So I I think we're expecting a pretty modest.

Mark Fitzgibbon: Uh, expansion in the margin, may maybe only a couple of basis points in the third quarter. Um we are seeing you know, higher than previously rejected.

Ronald Ohsberg: As far as the Fed, we're a lot less liability sensitive than we were last fall when the Fed was cutting. And I think we did a good job last fall of repricing our deposits down. We will aggressively reprice our deposits down as much as we feel we can without causing attrition if the Fed indeed does start to cut. But I don't think that we'll necessarily see as much impact as we did in the third and fourth quarter of last year. Okay, great.

Mark Fitzgibbon: Uh deposit costs. Um, so kind kind of reaching the top on that as as far as the FED uh where a lot less liability sensitive than we were last fall. When the Fed was cutting uh and and I think we did a good job last fall of of free pricing our our deposits down. We will aggressively reprice our deposits down as much as we feel we can without causing attrition. If the feds indeed. Let's start to cut.

But I, I don't think that will necessarily see as much impact as we did in the third and fourth quarter of last year.

Mary Noons: And then look like you had pretty good mortgage origination this quarter, I think 181 million. I guess I was curious, how much of that was purchased versus refi?

Mary Noons: And also, you know, what was the mix between sort of hybrid arms and 30 or Hi, Mark, this is Mary. We have about 75% of our origination related to the purchase market. It goes as high as 80%, depending on the timeframe. As far as the mix, predominantly the saleable is 30 year fit. But we do do a Some origination into portfolio that is a hybrid arm, mostly 7-1. Okay. Great.

Mark Fitzgibbon: Okay, great. And then look like you had pretty good. Mortgage origination this quarter. I think 181 million. I I guess I was curious how much of that was purchased versus refi and also, you know, what was the mix between sort of hybrid arms and 30-year fixed?

Mary Nunes: hi Mark, this is Mary, um,

Mary Nunes: We have about 75% of our origination uh related to the purchase Market. Uh it it goes as high as 80% uh depending on the time frame. Um as far as the mix, um,

Mary Nunes: Predominantly the saleable is uh, 30-year fixed.

Mary Nunes: um, but we do do a a

Mary Nunes: Some origination into portfolio, that is, uh, hybrid Farm mostly 71.

Edward Handy: And then I guess, Ned, I'm curious with all the consolidation that we've seen up in Massachusetts recently, it would seem like kind of an opportune time to maybe open some branches up there or even consider a merger with a bank up in the mass market since you have so much of your loan portfolio up there and you're the mortgage business, the wealth business. I guess I'm curious, is that in the cards for you all or how are you thinking about sort of strategic expansion into Massachusetts? Yeah, always on the list of possibilities. We think there's probably some talent opportunity.

Mary Nunes: Strategic expansion into Massachusetts.

Edward Handy: We've added a few people in wealth that have spent prior periods in their life in the in the Boston marketplace. We think, Mark, we've got locations in Rhode Island that we can build out where our brand is stronger. Before we jump into the Massachusetts market on the DeNovo branching side. You know, we'll see what comes out of the various transactions that are going on in terms of, obviously, one of those transactions has Rhode Island presence. That's going to be interesting to see what kind of what what opportunities come out of that. You know, M&A, you know, our history, nobody would accuse us of being overly acquisitive.

Edward Handy: But if the right transaction were to come up at the right price point and enabled us to grow reasonably, you know, we'd have to think about it. So, so, you know, I think we've got work to do. I'm sorry.

Mary Nunes: Yeah always on the list of possibilities. Um, we think there's probably some Talent opportunity. We've added a few people in in wealth that that uh, have have spent prior periods in their life. In the, in the Boston Marketplace, we think. Mark, we've got locations in Rhode Island that we can build out where our brand is stronger. Um, before we jump into the Massachusetts Market on the denovo, branching side. Um, you know, we'll see what comes out of of, uh, the various transactions that are going on. Um, in terms of obviously, 1 of 1 of those transactions, transactions has some Rhode Island presence. Um, that that's going to be interesting to see what kind of what what opportunities come out of that. Um, you know, m&a, you know, our history, nobody would, uh, accuse us of being overly inquisitive. But but if, if the right transaction were to, to come up at the right price point and and uh, enabled us to to grow reasonably, uh,

Mary Nunes: You know, we'd have to think about it. Uh, so, so, you know, I think we've got work to do. What, what about the other? What about?

Edward Handy: I was gonna say, what about the other way? There's some much bigger banks up in Massachusetts now that seem to be looking south. You know, what could Washington Trust be a target for one of those banks? I suppose we could. We haven't, hasn't come to our attention yet.

Speaker Change: I'm sorry. Yeah, go ahead. No, no, go ahead. I was gonna say, what about the other way? There's some much bigger Banks up in Massachusetts. Now that seem to be looking South, you know, would could Washington Trust be a target for 1 of those banks at some point?

Edward Handy: We think we're, we're, we're, you know, obviously, Mark, our job is to try and try and maintain independence. And we know we have to earn that. And we know, we've got work to do on the organic front to assure that. And that's where we're focused. And so we're, we're, we like our independence, and we want to stay independent, we'd rather be an acquirer than, than acquired. But that's always, obviously, we have a fiduciary duty to, to, to respond to any kind of any kind of activity, but we haven't seen any yet. Okay.

Speaker Change: I, I suppose we could we haven't uh, that hasn't come come to our attention yet. Um, we think we're we're uh, we're you know, obviously Mark our job is to try and try and maintain Independence and we know we have to earn that and we know, uh, we've got work to do on the organic front to, to assure that. Um, um, and that's where we're focused. Uh, and so, we're, we're, uh, we, we, we, we, we, we like our independence and we want to stay independent, we'd rather be an acquirer than, than, than acquired. Um, um, but you know, that's always obviously we have a fiduciary duty to to, uh, to to respond to, to, to any kind of, uh, any kind of activity. But we haven't seen any yet.

Edward Handy: And then lastly, and I hate to beat a dead horse here, because I've asked about this in the past, but we've had, I think, 13 consecutive quarters of net outflows in the Wealth Management Unit. You know, could you talk about maybe some of the things you're doing to try to stem that or, or, you know, change the direction? Yeah, as I pointed out, we've added some talent, you know, not not, not not hundreds of people, but a few few people that are that are going to add to our client service capabilities and our sales capabilities in the private clients group.

Okay. And then lastly I and I hate to beat a dead horse here because I've asked about this in the past but we've had, I think 13 consecutive quarters of net. Outflows in the wealth management unit, you know, could you talk about maybe some of the things you do want to try to stem that or or you know, change the direction?

Edward Handy: We just finished the conversion of our wealth core system, which I know will will create a better customer experience going forward. That's just being rolled out now. Um, you know, I, I think we've talked about small M&A activity, uh, in the primarily in the Rhode Island marketplace where our brand is strongest that continues to be in our, um, sort of strategic plan. Um, so, uh, and and, you know, I think. There's a little bit of marketing activity that we're embarking on, but I think the combination of all those things, there's no silver bullet mark. It's a hard business to grow organically.

Speaker Change: Yeah, as I pointed out, we've we've added some some Talent. Um, you know, not not, uh, not not hundreds of people but a few few people that are that are going to add to our client service capabilities in our sales capabilities in the private clients group. Um, we just, uh, finished the conversion of our wealth core system which I, I know, we'll, we'll, uh, uh, create a better customer experience, going forward. Um, that's just being rolled out now, um, you know, I, I think we've talked about small m&a activity, uh, in the primarily in the Rhode Island marketplace where our brand is strongest, um, that continues to be in our um, sort of strategic plan. Um so uh and and you know, I think

Edward Handy: We know that. You've made that point, and you're not wrong, that in addition to market support, we need to see net growth, and so all I can tell you is that we're focused on that incrementally on a lot of fronts.

Um, there's a, there's a little bit of, of marketing activity and, and, uh, that, that we're embarking on, but I, I, you know, I think, I think the combination of all those things, there's no Silver Bullet Mark. It's a, it's a hard business to grow organically. We know that. Um, you you've made that

Point. And, and you're not wrong, um, that that, in addition to Market support, we, we need to see see net growth. And so we're we're, uh, you know, all I can tell you is that we're focused on that uh, incrementally on a lot of fronts.

Mark Fitzgibbon: Thank you. Thanks, Mark.

Speaker Change: Thank you.

Mark Fitzgibbon: Thanks Mark.

Damon Delmonte: Our next question comes from Damon DelMonte with KBW. Please go ahead. Hey, good morning, everyone. I hope you're all doing well today. Thanks for taking my questions.

Our next question comes from Damon Damonte with KBW.

Speaker Change: Please go ahead.

Damon Delmonte: I guess, first morning, first question on loan growth. Good to see some positive movement here with I think you had about 3% link quarter annualized for the whole portfolio, but you really got the majority of the growth on the commercial side about 9%. Could you talk a little bit about kind of how your pipelines are looking today and kind of what your expectations are here for the back half of the year? Yeah, thanks, Damon. Yeah, we were happy with the growth and the pipeline continues to grow at quarter end. It was close to 145 million, which is which is not the highest it's been over the last, you know, five to 10 years, but it's, it's, it's substantially from the end of first quarter, with with equal balance between C&I increase.

Damon Damonte: Hey, good morning, everyone. Hope you're all doing well today. Um, thanks for taking my questions, I guess. Uh, first morning, first question on on loan growth, um, good to see, uh, some positive movement here with, uh, I think you had about 3% link quarter annualized for the whole portfolio, but uh, you really got the majority of the growth. In the commercial side about 9%. Um, could you talk a little bit about kind of how your pipelines are, are looking today and kind of what your expectations are here for the back, half of the year?

Damon Delmonte: So we're, we're, we're happy with the activity levels. And, you know, continue to support kind of the low single digit growth for the year. You know, the second quarter was was obviously strong payoffs were down a little bit. We do have some projected payoffs still in the, in the second half of the year. So so I think we stay with the guidance that we've given but happy with happy with the growth in the quarter.

Uh, um, and and, you know, continue to support kind of the low single digit growth for the year. Um, you know, the second quarter was was obviously strong. Payoffs, were down a little bit. Um, we do have some, um, projected payoffs still in the

Speaker Change: In the, in the second half of the year. So, so I think we stay with the the guidance that we've given, but, uh, but happy with happy with the growth in the quarter.

Edward Handy: How would you characterize the sentiment of your of your borrowers, you know, today versus call it 90 days ago, when there was a lot more uncertainty coming out of DC? Do you feel like people are believing in the economy and believing in their businesses and and, you know, looking to take the next step forward with investing? Or do you think there's still some skepticism out there? Yeah, it's interesting. I've been looking at some of the larger regional bank reports, and I've seen a couple people comment on higher utilization of lines. We haven't necessarily seen that.

Speaker Change: How would you characterize the, um, the sentiment of your of your borrowers? You know, today versus call it 90 days ago, when there was a lot more uncertainty coming out of DC, do you feel like people are believing in the economy and believing in their businesses? And and, you know, looking to take the next step forward with investing or do you think there's still some, uh, skepticism out there?

Edward Handy: We don't have a whole lot of lines of credit. But I think there's still a level of uncertainty. You know, on the real estate side, I think projects are costing more and people are being all the more careful for it. I think investment in machinery and equipment is, you know, not certainly not back to the sort of the old days. But I think I think people are optimistic, but careful, I would say. And I think we're, I'd put us in the same category. We're optimistic about the opportunities we're seeing. We're seeing some, you know, a little more construction opportunity, although that's slowed down a fair amount in our footprint.

Speaker Change: Yeah, it's interesting. I've been looking at some of the the larger Regional Bank reports and and I've seen a couple people comment on higher utilization of lines. We we haven't necessarily seen that and we don't we don't have a whole lot of, you know, um, lines of credit. But, um, but uh, I, I, I think there's still a level of uncertainty. We, you know, on the real estate side, I think projects are are costing more, and people are being all the more careful for it. Uh, I think investment in in machinery and equipment is, is, uh, you know, not not certainly, not back to sort of the old old days. But I, I, I think, uh,

I think people are optimistic, but, but careful, I would say, and I, I think we're, we're, uh, I put us in the same, uh, same category. We're, we're optimistic about the opportunities we're seeing we're seeing some, uh, um, you know,

Edward Handy: So, you know, I'd say it's a, A little better than lukewarm but it's not quite warm yet. How's that? That sounds good. Good characterization.

Speaker Change: A little more construction opportunity, although that's slowed down a fair amount um, in our in our footprint. So I you know I'd say it's it's it's uh,

Speaker Change: It's a little better than lukewarm but it's not quite warm yet, how's that?

Damon Delmonte: Thank you.

Ronald Ohsberg: And then I guess on the on the fee income, you know, the swap gains were up or the derivative income was was very strong this quarter. Um, you know, do you think that based on what you're seeing today, like you could kind of repeat a level of this quarter? Or do you think it kind of goes back to a more normalized level after this quarter's result?

Ronald Ohsberg: I would lean towards more normal. I mean, they're hard to predict right there. They're chunky in nature. And, you know, we're working with our with our, we're working with our customers and making sure that they understand that the product is available to them. Ultimately, it's whatever works best for the customers. But, you know, we're I think we're pushing that a little harder than we were, say last year. So Hard to know, Damon, exactly what we'll comment on. Got it.

Speaker Change: That sounds good. That's good. Good characterization, thank you. Um and then I guess on the on the fee income you know the swap games were or the derivative income was was very strong this quarter. Um, you know do you think that based on what you're seeing today? Like you could kind of repeat a level of of this quarter, or do you think it kind of goes back to a more normalized level. After this quarter's result? I, I would lean towards more normal. I mean, they're they're hard to predict, right? They're they're, they're chunky in nature and, uh,

Speaker Change: you know, we're working with our with our um,

Speaker Change: yeah. We're working with our customers and and and making sure that they understand that the product is available to them. Ultimately, it's it's whatever works best for the customers. But, you know, I think we're pushing that all harder than we were, uh, say last year. So,

Speaker Change: Hard hard to know name and exactly what will come in on that.

Damon Delmonte: Okay.

Damon Delmonte: Um, that's all that I have for now. Thank you very much. Thanks, Pam. Thank you.

Speaker Change: Got it. Okay, um, that's all that I have for now. Thank you very much.

Speaker Change: Thanks man. Thank you.

Operator: Thank you and just as a reminder to ask a question today, please press star followed by the number one on your telephone keypad.

Speaker Change: Thank you. And just as a reminder to ask a question today, please press star followed by the number 1 on your telephone keypad.

Laurie Hunsicker: We have a question from Laurie Hunsicker with Seaport Research Partners. Please go ahead. Yeah, hi, thanks. Good morning. Just saying it was not interesting to him for a moment. The Foley looked a little bit outsized. Was there anything one time in that? No. Okay.

We have a question from Lori Hansa with C Port, research partners.

Speaker Change: Please go ahead.

Lori Hansa: Yeah, hi thanks. Good morning. Um so um just thank you with non interesting confirmation. Um the bowling looked a little bit outside was there anything. 1 time in that.

Speaker Change: No.

Ronald Ohsberg: Okay, and then just going back to Nim here, your wholesale broker, you know, down to almost zero, which is great, but obviously you had a sharp jump in your FHLBB. How do we think about that? Do you have a spot margin for us for the month of June? Yeah, I'll start with the spot margin, which was 238. And so, you know, wholesale funding, whether it's brokered or FHLB is really just a balancing function on the rest of the balance sheet, probably carrying a little bit higher interest bearing deposits at other banks, just from a timing standpoint.

Speaker Change: Okay.

Speaker Change: Okay, okay and then um, just going back to MIT to to Nim here. Um, your wholesale broker, you know down to almost zero, which is great, but obviously, you had a sharp jump in your fhlbb. How do we think about that? And, and do you have a slot margin for us, um, for the month of June?

Speaker Change: Yeah, the the well I'll start with the spot margin, which was 238.

Speaker Change: Um, and so, you know, wholesale funding, whether it's brokered or fhlb is, is really just a balancing function on the rest of the balance sheet.

Ronald Ohsberg: So we will pay down that FHLB with excess cash as soon as those advances hit maturity. So, you know, there's no particular. reason for a lorry other than that's just kind of what the balance sheet called for. Brokered CDs are way down because they're just not economical for us right now. They're, you know, we look at those as interchangeable with FHLB just depending on price. And the CD market is just more expensive than FHLB. So we're not doing Okay, okay. That's helpful.

Probably carrying a little bit higher uh interest bearing deposits at other Banks, just just from a timing standpoint. Um so we we'll pay down that fhlb uh with with excess cash as soon as the as those advances hit maturity.

So, you know, there there's no particular, uh, you know, reason for it or other than, that's just kind of what the balance sheet called for, um, broker CDs are way down because they're just not economical for us right now. They're, you know, we, we look at those as interchangeable with that fhlb just depending on price.

Speaker Change: And the CD Market is just more expensive than fhlb. So we're we're not doing it.

Ronald Ohsberg: And then on expenses, the sale lease back that you did, is that fully reflected from an expense standpoint this quarter?

Ronald Ohsberg: Or just remind me when that when that happened last quarter? What was the timing? Yeah, it happened in the first, you know, we did them in the first quarter. And so I think the I think the leases kicked in February. So that's all on there, and it was in the guidance that I gave. back in January. Right, okay. So we had about a half a quarter expense last quarter, so fully, fully in this quarter. Okay, great. And then, okay.

Okay, okay, okay, that's helpful. And then, um, on expenses, the the sale lease back that you did is that fully reflected from the next standpoint this quarter or just remind me when that, when that happened last week. What was the timing?

Speaker Change: uh, I think that I think the leases kicked in in February

Speaker Change: So that that's all, that's all in there. And, and it was in the guidance that I gave, uh, back in January.

Speaker Change: Right. Okay, so we, we had about a half a quarter expense last quarter, so fully fully in this quarter. Okay, great. Um, and then, um,

Ronald Ohsberg: And then any de novo planned for This year, next year, next year, middle of next year. And how many are you looking? Right now, it's one.

Speaker Change: Okay. Um, and then any denovo's planned for

Speaker Change: this year. Next year about that middle of next year.

Speaker Change: And how, how many are you looking at?

Right now, it's 1.

Okay.

Unknown Executive: Great, and then just going back over to loan growth, your multifamily growth was substantial this quarter and even last quarter too, but really this quarter.

Unknown Executive: Can you just remind us, I don't think there's anything, but can you just remind us, do you have any New York City rent controlled? Do you have any New York City exposure? What should we think about that?

Speaker Change: Okay great and then um just going back over to loan growth, your multi family growth um was substantial um this quarter um and even last quarter too but really this quarter.

Can you just remind us? I don't think there's anything, but can you just remind us? Do you have any New York City, rent controlled exposure? Do you have any New York City exposure? Or should we think about that?

William Wray: Hey, Laura, this is Bill. No, we don't. Great.

Speaker Change: Well Hillary, this is Bill. No, we don't

William Wray: Okay, and Bill, probably these next few questions are for you. So just touching here on non-performers, can you go through that uptick, that C&I non-performer, that $9.4 million? Any details on that loan, timing, specific reserves, just how you're thinking about that? This is this is a potential $11 million exposure to a broadband infrastructure contractor. What happened was during the quarter, their largest customer backed out of a major contract. They had to file for Chapter 11 due to cash flow. And we're part of a bank syndicate pushing for expeditious resolution. We have, we think, appropriate specific reserves.

Speaker Change: Write.

Speaker Change: Okay, and, and Bill probably these. These next few questions are for you. So just touching here, um, um, a non-performers, um, can you go through that uptick that, that cni, non-performer that 9.4 million. Um, any details on that loan? Timing has been specific reserves, just how you're thinking about that.

Speaker Change: Um,

William Wray: We expect this will be at least partially resolved this year before the end of the year. And sorry, how much in reserves do you have on this specific loan? We have the appropriate amount. I'm sorry to be. No, I get that. Okay.

this is this is a potential 11 million exposure to a Broadband infrastructure. Contractor, what happened was during the quarter, their largest customer. Backed out of a major contract. They had to file for chapter 11 due to cash flow. Um, we're part of a bank Syndicate pushing for expeditious resolution, we have we think appropriate specific reserves, we expect this will be at least partially resolved, um, this year before the end of the year.

Speaker Change: Okay.

Speaker Change: And sorry, how much in reserve? Do you have on this specific loan?

We have the appropriate amount.

I'm sorry to be, um,

William Wray: Now, obviously, you're the class C office now performer, the 3.3 million you all said would resolve, resolve, which is great. Are there any details you can share generally with respect to that resolution? And then I know you had another credit that was part of that same relationship, the $4.3 million, which I think is the only free non-performer that you have. Can you update us on the vacancy and the timing of that? Unknown Speaker. Sure. One. As you noted, one was sold that actually was prompted by 1031. So we were pleased to see that go at it, you know, a loss, but not not a reasonable loss.

I I get that. Okay. Um and then obviously you you're um the class of the office. Now, perform of the 3.3 million, y'all said, would resolve resolve, which is great. Uh just are there any details you can share just generally with respect to that resolution and then I know you had a another credit that was part of that same relationship the 4.3 million which I think is the only

Speaker Change: Free non-performer that you have. Can you update us on the vacancy? And the timing of that is

Speaker Change: you know, just sure

William Wray: And then on the remaining non-performer, it's 50% vacant, they are paying, they are trying, they are seeing some leasing activity, but we're not seeing, to be blunt, a lot of positive momentum there. So that one, we're still, you know, watching carefully trying to push for expeditious resolution, if we can. And that and that is likely going to be resolved. And what do you think in the next couple quarters? Or how do you think about that? You know, that would be our hope. But right now they're paying. They're supporting the property. And, you know, we're it's the office market doesn't have demand that's really easily to estimate.

Speaker Change: as you noted 1 was sold that actually was prompted by 10:31. So we were pleased to see that go at a, you know, a loss, but not not a reasonable loss. Um, and then on the remaining a non-performance 50% vacant, they are paying

Speaker Change: They are trying, they are seeing some leasing activity, but we're we're not seeing to be blunt, a lot of positive momentum there. So that 1, we're still, um, you know, watching carefully trying to push for expeditious resolution. If we can

Speaker Change: And that and that is likely going to be resolved. And what do you think in the next?

Couple quarters or how do you think about that? You know, that would be our hope. But right now they're paying

William Wray: So we're pushing all things that we can looking for potential owner occupancy type sales, maybe other 1031. So I couldn't give you a timeline on that other than that we will resolve it as soon as appropriate. Okay, okay.

Speaker Change: Um, they're supporting the property. Um and you know we're it's the office Market doesn't have demand that's really easily to estimate so we're

Speaker Change: Pushing all things that we can looking for potential owner occupancy, type sales, maybe other 10:31. So I I couldn't give you a timeline on that other than that, we will resolve it as soon as as appropriate.

William Wray: And then just to remind us, I know you took a charge off last quarter.

William Wray: What, what is the, what's the reserves on that specific? That loan's been that loan's been appropriately reduced, you know, via via charge off to to the right carry value based on on accounting rules.

Speaker Change: Okay. Okay. And then just remind us. I know you took a charge off last quarter. What what is the, what's the reserves on? That specific loan.

um, that loan's been

William Wray: So I don't want to get any more specific than that if I can avoid it. Okay, okay. All right.

Speaker Change: That loan's been appropriately reduced you know via VIA charge off to to the right carry value based on on accounting rules. So

I don't want to get any more specific than that if I can avoid it.

William Wray: And the $21.5 million, the new construction that's part of, you know, part of the SNCC, the lab, the $21.5 million.

William Wray: Do you have any updates on that? Yes, that's gone from 50% to 62% least. And if we things keep moving, it's on track for 70. If we were, there's an LOI out for that, we hope. So good momentum on that project, still classified where it is, but you know, we think it's got some some traction.

Okay. Okay. All right. And the 21 and a half million in the new construction. That's that's part of you know part of the snack that the lab, the 21 and a half night. Do you have any updates on that? Yep.

Speaker Change: Yes, that's gone from 50% to 62% leased and if we things keep moving, it's on track for 70. If we for, there's an Loi out for that, we hope. Um, so good momentum on that project still.

Speaker Change: Is but, you know, we think it's got some um, some traction.

William Wray: Okay, great. Thank you so much.

William Wray: I know I asked a lot of questions on credit here. Your credit's really good, but just wanted some details.

Speaker Change: Okay, great. Um,

Speaker Change: it's really good.

Edward Handy: And I guess, Ned, just very high level back to you. Your capital levels are strong. you know, but your stock is still sitting here 15% below your cap rates. Can you talk a little bit about how you're thinking about buyback consideration? Yeah, Laura, you know, we have the approval in place and Ron, we We've been in the water for a day. Lori, we really decided that capital preservation and growth is a more prudent thing for us right at the moment. It's something we keep our eyes on. Yeah, Laurie, listen, it's it's tempting. And I can certainly make an argument.

Um, just wanted some details and I guess. Um, Ned just very high level back to you. Your Capital levels are strong. Um,

Speaker Change: You know, but your stock is still sitting here, 15% below your cap rates, can you talk a little bit about how you're thinking about buyback consideration?

Ned Handy: yeah, Lori, you know, um, we we have the approval in place and and, uh,

Speaker Change: Ron, we we we just our toe in the water for a day. Um, but but Lori, we really decided that Capital preservation and growth is is a more prudent thing for us, right at the at the moment. And you know something we keep our eyes on, right? I don't know if you have a

Edward Handy: And as I said, we actually did initiate for a single day, and then decided that, you know, we're more focused on operations and just kind of, you know, our capitals fine, and we think we'd like to have a little bit more. So that's kind of where we are.

Yeah, Lori. Listen, it's it's tempting and I, I can certainly make an argument. And, and as I said, we, we actually did an initiate for for a single day. Um, and and then decided that, uh, you know, we're, we're more focused on operations and just kind of, you know, our, our capital's fine. And we, we think we like to have a little bit more, so that that's kind of where we are at the moment.

Laurie Hunsicker: Okay, and how many chairs back in the corner? I think it was $10,000. Okay, great. Thanks for taking my question. Thanks, Laurie. Thank you.

Speaker Change: Okay. And how many services back in the quarter?

Speaker Change: Uh, I think it was 10,000.

Speaker Change: Okay. Great. Thanks for taking my question.

Speaker Change: Thanks Laurie.

Edward Handy: We have no further questions, so I'll pass you back over to Ned Handy for any closing comments.

Speaker Change: Thank you, we have no further questions. So I'll pass you back over to Ned handy for any closing comments.

Edward Handy: Great, thanks, Lydia. And thanks, everybody. I hope we presented a clear picture of the current state and our focus going forward.

Speaker Change: Great, thanks. Lydia and thanks everybody. Um, I hope we presented a clear picture of the current state and our

Edward Handy: And as we near our company's 225th birthday next month, we want to say thank you to our customers for entrusting us as their partner along their journeys, to our employees, past and present for bringing their expertise and heart to every customer interaction and to our shareholders for continuing to support our vision and investing in community banking in general. We certainly appreciate your time today and look forward to speaking to you all again soon. Thanks, everybody. Have a great day.

Speaker Change: Focus going forward. Um, and as we near our companies, 225th birthday next month, um, we want to say thank you, um, to our customers from trusting us as their partner, along their Journeys, to our employees, um, past and present for bringing their expertise and heart to every customer interaction, and to our shareholders for continuing to support our vision and investing in community banking in general. We certainly appreciate your time today and look forward to speaking to you all again soon. Thanks everybody have a great day.

Operator: This concludes our call today. Thank you for joining. You may now disconnect your line. Want more?

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