Washington Trust Bancorp Q4 2024 Earnings Report

HCA Healthcare EPS Results

• Actual EPS: $0.59
• Consensus EPS: $0.57
• Beat/Miss: Beat by +$0.02
• One Year Ago EPS: N/A

HCA Healthcare Revenue Results

• Actual Revenue: N/A
• Expected Revenue: $31.74 million
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

HCA Healthcare Announcement Details

• Quarter: Q4 2024
• Date: 1/29/2025
• Time: Before Market Opens
• Conference Call Date: Thursday, January 30, 2025
• Conference Call Time: 8:30AM ET

HCA Healthcare (NYSE:HCA), through its subsidiaries, owns and operates hospitals and related healthcare entities in the United States. It operates general and acute care hospitals that offers medical and surgical services, including inpatient care, intensive care, cardiac care, diagnostic, and emergency services; and outpatient services, such as outpatient surgery, laboratory, radiology, respiratory therapy, cardiology, and physical therapy. The company also operates outpatient health care facilities consisting of freestanding ambulatory surgery centers, freestanding emergency care facilities, urgent care facilities, walk-in clinics, diagnostic and imaging centers, rehabilitation and physical therapy centers, radiation and oncology therapy centers, physician practices, and various other facilities. In addition, it operates behavioral hospitals, which provide therapeutic programs comprising child, adolescent and adult psychiatric care, adolescent and adult alcohol, drug abuse treatment, and counseling services. The company was formerly known as HCA Holdings, Inc. HCA Healthcare, Inc. was founded in 1968 and is headquartered in Nashville, Tennessee.

Washington Trust Bancorp Q4 2024 Earnings Call Transcript

Presentation

[Operator]

Good morning and welcome to Washington Trust Bancorp, Inc. Conference Call. My name is Lydia and I'll be your operator today.

[Operator]

As a reminder, today's call is being recorded. I'd now like to turn the call over to Sharon Walsh, Senior Vice President, Marketing Strategy and Planning. Please go ahead.

[Sharon Walsh, Senior VP, Director of Marketing Strategy & Planning at Washington Trust Bancorp]

Thank you, Lydia. Good morning and welcome to Washington Trust Bancorp, Inc. Conference call for the Q4 of 2024. Joining us this morning are members of the Washington Trust executive team Ned Handy, Chairman and Chief Executive Officer Mary Nunes, President and Chief Operating Officer Ron Osberg, Senior Executive Vice President, Chief Financial Officer and Treasurer and 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 materially from what is discussed on today's call.

[Sharon Walsh, Senior VP, Director of Marketing Strategy & Planning at Washington Trust Bancorp]

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. Washington Trust trades on NASDAQ under the symbol WASH. I'm now pleased to introduce today's host, Washington Trust Chairman and Chief Executive Officer, Ned Handy. Ned?

[Edward Handy, Chairman & CEO at Washington Trust Bancorp]

Thank you, Sharon. Good morning and thank you for joining our Q4 conference call. We respect and appreciate your time and interest in Washington Trust. I'll briefly comment on the quarter and then Ron will provide more detail on the financial results. After our prepared remarks, Mary and Bill will join us for the Q and A session.

[Edward Handy, Chairman & CEO at Washington Trust Bancorp]

We previously announced the December capital raise of $70,500,000 and subsequent balance sheet repositioning, which entailed selling lower yielding securities and loans and reinvesting into higher yielding securities and paying down expensive wholesale funding. The security sale and reinvestment occurred in the Q4 and the loan sale pricing was locked in the Q4, but the actual sale of the loans occurred last week. The reduction of maturing wholesale funding will occur over the next few months and Ron will provide some detail beyond that. Though this initiative resulted in a loss recognized in the Q4, it will favorably impact future revenues and provide additional capacity for growth and investment. These actions combined with positive organic momentum preceding them have further strengthened our financial foundation allowing us to focus on providing enhanced value for shareholders as well as the customers and communities we serve.

[Edward Handy, Chairman & CEO at Washington Trust Bancorp]

I'd like to take this opportunity to thank our shareholders who showed tremendous support for this strategy. Again, Ron will provide details on the impact. I'm also very pleased to mention that in the Q4, we hired a new Head of Retail Banking. Michelle Kyle, a Rhode Island native joined us from Digital Federal Credit Union, where she led retail branch services, business development and customer experience. We very much look forward to Michelle's impact on our deposit growth strategies.

[Edward Handy, Chairman & CEO at Washington Trust Bancorp]

I'll now turn the call over to Ron for some more detail on the quarter. We'll then be glad to address any questions. Ron?

[Ronald Ohsberg, Senior EVP, CFO & Treasurer at Washington Trust Bancorp]

Thanks, Ned, and good morning, everyone. As Ned said, we reported a net loss of $60,800,000 or $3.46 per share in the 4th quarter. Excluding the balance sheet repositioning asset losses, adjusted net income amounted to $10,400,000 or $0.59 per share. Net interest income was $32,900,000 up by $674,000 or 2%. The margin was 195,000 up by 10 basis points.

[Ronald Ohsberg, Senior EVP, CFO & Treasurer at Washington Trust Bancorp]

This improvement reflected the net effect of lower rates and the partial impact of the balance sheet repositioning on the margin. Adjusted non interest income amounted to $16,000,000 and was modestly down by $229,000 or 1%. Wealth Management revenues were $10,000,000 up by $60,000 or 1%. And spot AUA balances totaled $7,100,000,000 at the end of the year. Mortgage banking revenues totaled $2,800,000 down by $18,000 or 1%.

[Ronald Ohsberg, Senior EVP, CFO & Treasurer at Washington Trust Bancorp]

Turning to non interest expenses. These totaled $34,300,000 and were down by $212,000 or 1%. Salaries and benefits expense was up by $525,000 or 2% reflecting adjustments to performance based compensation accruals. Also advertising and promotion expense decreased by $297,000 in the 4th quarter due to timing. Adjusted income tax expense amounted to $3,200,000 and the adjusted effective tax rate was $23,700,000 for the Q4.

[Ronald Ohsberg, Senior EVP, CFO & Treasurer at Washington Trust Bancorp]

We expect the full year 2025 effective tax rate to be about 22.5 Turning to the balance sheet, total loans were down by $377,000,000 or 7%. Residential loans decreased by $403,000,000 or 16% largely due to the reclassification of $345,000,000 to loans held for sale. Total commercial loans increased by $29,000,000 or 1%. End market deposits were up $26,000,000 or 1% and brokered deposits were down $82,000,000 and FHLB borrowings were down by 175,000,000 dollars Our loan to deposits ratio decreased from 106.2 to 105.5. Our asset and credit quality metrics remain solid.

[Ronald Ohsberg, Senior EVP, CFO & Treasurer at Washington Trust Bancorp]

Non accruing loans were 45 basis points at the end of the year compared to 56 basis points at September 30 and past due loans were 23 basis points compared to 37 at September 30. The allowance totaled $42,000,000 or 82 percent of total loans and provided NPL coverage of 180%. The 4th quarter provision for credit losses was $1,000,000 We had net charge offs of $1,900,000 in the 4th quarter $2,000,000 for the full year of 2024. This time, I'll turn the call back to Ned.

[Edward Handy, Chairman & CEO at Washington Trust Bancorp]

Thanks Ron. And now Lydia, we can take questions.

[Operator]

Thank We have a question from Laurie Hunsicker with Seaport Research Partners. Your line is open. Please go ahead.

[Laurie Hunsicker, Senior Equity Research Analyst at Seaport Research Partners]

Yes, hi. Thanks. Good morning, Ned and Mary and Ron and Bill and Karen. So hoping, Ron, that you can start with margin and just really help us think about all of the moving parts, especially because some of this obviously isn't even reflected now until the end of January. So maybe if you could help us quantify it in terms of basis points, the impact on different items, if you have a December spot margin and then also forward looking the impact in terms of the pay down of wholesale funding balances and how you're thinking about that, especially in light of your loan to deposit ratio, how do you think about CDs, etcetera.

[Laurie Hunsicker, Senior Equity Research Analyst at Seaport Research Partners]

So anything you can help us think about on margin? And then also, I just wanted to clarify your swap expiration was supposed to be a 12 basis point pickup starting at the beginning of May. Just wanted to check on that too. So anything you can help us with in margin would be great.

[Ronald Ohsberg, Senior EVP, CFO & Treasurer at Washington Trust Bancorp]

Yes. So Laurie, just on that swap piece, that's May of 2026.

[Laurie Hunsicker, Senior Equity Research Analyst at Seaport Research Partners]

And is that May 1?

[Ronald Ohsberg, Senior EVP, CFO & Treasurer at Washington Trust Bancorp]

Yes.

[Laurie Hunsicker, Senior Equity Research Analyst at Seaport Research Partners]

Okay. And that's still 12 basis points?

[Ronald Ohsberg, Senior EVP, CFO & Treasurer at Washington Trust Bancorp]

Yes. What we published hasn't changed.

[Laurie Hunsicker, Senior Equity Research Analyst at Seaport Research Partners]

Perfect.

[Ronald Ohsberg, Senior EVP, CFO & Treasurer at Washington Trust Bancorp]

So, yes, so the balance sheet repositioning will be very impactful to 2025. We're projecting a NIM of between $230,000,000 $235,000,000 for the Q1. That will increase over the course of the year to about $245,000,000 to $250,000,000 in the Q4. Over that span, we expect our average earning assets to be in the $6,300,000,000 to $6,400,000,000 range after the settlement of the loans which we sold on Friday. So that will bring our earning asset balances down somewhat.

[Ronald Ohsberg, Senior EVP, CFO & Treasurer at Washington Trust Bancorp]

And the expectation is that we will be paying down primarily FHLB funding over the next couple of months. The spot margin for December was 2.07.

[Laurie Hunsicker, Senior Equity Research Analyst at Seaport Research Partners]

Okay. And then just how are you thinking about deposits and CDs and repricing there?

[Ronald Ohsberg, Senior EVP, CFO & Treasurer at Washington Trust Bancorp]

Yes. So the Fed's cut four times and we will continue to see included this is included in the numbers I just gave you, but we still have some short term maturing wholesale funding brokered CDs over the next few months that will reprice on that. And also our regular retail CDs will be repricing down. I know you've asked about brokered CDs in the past. We will use those when it makes sense to.

[Ronald Ohsberg, Senior EVP, CFO & Treasurer at Washington Trust Bancorp]

Right now brokered CDs are somewhat more expensive than FHLB and when that reverses, then we'll rely a little more heavily on that. But the trend on wholesale funding is to be paying it down anyway.

[Laurie Hunsicker, Senior Equity Research Analyst at Seaport Research Partners]

Okay. Okay. And then on capital, I just want to clarify the 2,199,000 dollars share issuance in December, does that include the issue?

[Edward Handy, Chairman & CEO at Washington Trust Bancorp]

Say that again, Lauren?

[Laurie Hunsicker, Senior Equity Research Analyst at Seaport Research Partners]

Is the issue already in the numbers?

[Edward Handy, Chairman & CEO at Washington Trust Bancorp]

The green I'm sorry, Laura.

[Laurie Hunsicker, Senior Equity Research Analyst at Seaport Research Partners]

Definitely include the issue.

[Edward Handy, Chairman & CEO at Washington Trust Bancorp]

Yes. The additional green shoe. That would include the ship size.

[Edward Handy, Chairman & CEO at Washington Trust Bancorp]

Yes. Yes. I'm sorry, I couldn't hear

[Edward Handy, Chairman & CEO at Washington Trust Bancorp]

you clearly.

[Edward Handy, Chairman & CEO at Washington Trust Bancorp]

But yes.

[Laurie Hunsicker, Senior Equity Research Analyst at Seaport Research Partners]

Perfect. Okay.

[Laurie Hunsicker, Senior Equity Research Analyst at Seaport Research Partners]

That's all the questions as of December 31. Okay. And then, Ned, just a question for you on dividend. Obviously, it's looking substantially more safe. Can you just comment on that and target payout ratio, how you're thinking about that?

[Edward Handy, Chairman & CEO at Washington Trust Bancorp]

Yes. We're not it's

[Edward Handy, Chairman & CEO at Washington Trust Bancorp]

an important part of this trend. Go ahead, Rob.

[Ronald Ohsberg, Senior EVP, CFO & Treasurer at Washington Trust Bancorp]

Yes. So we're not planning on making any changes to the dividend lowering.

[Laurie Hunsicker, Senior Equity Research Analyst at Seaport Research Partners]

Perfect. Okay.

[Ronald Ohsberg, Senior EVP, CFO & Treasurer at Washington Trust Bancorp]

But the coverage ratio is

[Ronald Ohsberg, Senior EVP, CFO & Treasurer at Washington Trust Bancorp]

obviously better.

[Laurie Hunsicker, Senior Equity Research Analyst at Seaport Research Partners]

Right. Much better. Okay. Just wanted to hear it from you. Okay.

[Laurie Hunsicker, Senior Equity Research Analyst at Seaport Research Partners]

Credit, can you just help us think about a couple of things, I guess with respect to office, the $10,500,000 resolution, that's awesome. You stated that was coming, it came. How much in charge offs was that this quarter? And any color you can give us there? And then I guess more broadly, the $3,300,000 that's new to non accruals, is that a Class B office?

[Laurie Hunsicker, Senior Equity Research Analyst at Seaport Research Partners]

I'm just looking at that line item above your chart, but just wanted a little color on those two things.

[Ronald Ohsberg, Senior EVP, CFO & Treasurer at Washington Trust Bancorp]

Bill, do you want to take that?

[William Wray, Senior EVP & Chief Risk Officer at Washington Trust Bancorp]

This is Bill.

[William Wray, Senior EVP & Chief Risk Officer at Washington Trust Bancorp]

Yes, I can jump

[William Wray, Senior EVP & Chief Risk Officer at Washington Trust Bancorp]

in. The charge off was about the nonaccrual resolution was about half of the total. And so the other one you talked about that came in is actually under agreement to be resolved probably, I would guess late this quarter but more likely next quarter. So again, with all of these, we're paying a lot of attention. We're looking for expeditious resolution.

[William Wray, Senior EVP & Chief Risk Officer at Washington Trust Bancorp]

So we're hoping to continue to keep these numbers at these low levels.

[Laurie Hunsicker, Senior Equity Research Analyst at Seaport Research Partners]

Okay, great. And the $3,300,000 that was in office. Is that correct?

[William Wray, Senior EVP & Chief Risk Officer at Washington Trust Bancorp]

Yes. That's the one that's under agreement.

[Laurie Hunsicker, Senior Equity Research Analyst at Seaport Research Partners]

That's under agreement. Okay. Okay, great. And then just 2 more office questions. The, what is your overall office reserve now?

[Laurie Hunsicker, Senior Equity Research Analyst at Seaport Research Partners]

And then also, do you have any kind of a refresh on the leasing that $20,500,000 lab, which had gone sort of from 0 to I had in my notes 52% as of last quarter. Do you have a refresh on that number? Thanks.

[William Wray, Senior EVP & Chief Risk Officer at Washington Trust Bancorp]

Sure. The first one, we don't carry a specific reserve against office. We don't manage it as a segment because it doesn't work under CECL. We don't have enough data to drive it. But our CRE segment, which includes office, I think has I'm just guessing here about 125 basis points of reserve.

[William Wray, Senior EVP & Chief Risk Officer at Washington Trust Bancorp]

And then we use the way we manage office within that is we use call factors to reflect the fact that appraisals and other things are definitely under stress. So that's again no specific office reserve, but our CRE segment is very adequately reserved. And then your other question was on the large lab space, which is now more than 50% occupied. Leasing activity has been slow this quarter. They're starting to see it pick up already for 2025 though.

[William Wray, Senior EVP & Chief Risk Officer at Washington Trust Bancorp]

So we feel there, especially with the significant investment.

[Laurie Hunsicker, Senior Equity Research Analyst at Seaport Research Partners]

Great. Thank you.

[Operator]

Thank you. We have a question from Damon Jamon with KBW. Please go ahead. Your line is open.

[Damon Delmonte, Managing Director at Keefe, Bruyette & Woods (KBW)]

Hey, good morning, everyone. Hope you're all doing well. Sorry, I thought I had queued in, and I was wondering why I wasn't being called on, but apparently I didn't queue in. So in any event, thanks for all the color on the outlook for the margin and the expected impact from the restructuring. That was very helpful.

[Damon Delmonte, Managing Director at Keefe, Bruyette & Woods (KBW)]

Just kind of wondering what your thoughts are now that that's behind you as far as like loan growth and opportunities, now that you've kind of freed up some capacity on the balance sheet and some restrain on the margin, do you feel like loan growth kind of going forward could kind of go back to what we've seen in years past? Or you think it's still more of a kind of a conservative approach for a few more quarters?

[Edward Handy, Chairman & CEO at Washington Trust Bancorp]

Yes. It's a great question, Damon. So we're building back the pipeline. In 2024, we purposely kind of slowed down the loan growth side of things. And so the pipeline is coming back.

[Edward Handy, Chairman & CEO at Washington Trust Bancorp]

We're seeing opportunity. We're kind of thinking about lowish 3% -ish loan growth over the period on the commercial side. We'd like to lean that towards C and I. The pipeline right now is lean towards C and I. We've got the CRE concentration limit that we're aware of.

[Edward Handy, Chairman & CEO at Washington Trust Bancorp]

We're not there's no issue there, but it's over 350 and so we need to be careful on that front. We are still out looking at real estate deals. We're seeing opportunity. The pricing is decent. The structure is good.

[Edward Handy, Chairman & CEO at Washington Trust Bancorp]

So we're calibrating the growth there, wanting to make loans, wanting to again focus on C and I because it tends to bring more deposits with it. Our priority is on the funding side of things and making sure we fund loan growth appropriately. It's an interesting interest rate environment to figure out. We're seeing more fixed rate requests as people are wondering about the longer term picture of rates. And so it's an interesting environment, but there is opportunity and we think there might be upside opportunity to our current sight line, but the current sight line is kind of 3% on the commercial side.

[Edward Handy, Chairman & CEO at Washington Trust Bancorp]

Resi, I should let Mary talk about, but resi, we've been sort of running off the existing portfolio and then tilting the resi operation towards sales. So we're still thinking kind of 75% of the volume will be sold, so that side of the balance sheet won't grow. And Ron, I think we're actually we're thinking that we'd have mild reduction in the portfolio over the next couple of quarters, correct?

[Ronald Ohsberg, Senior EVP, CFO & Treasurer at Washington Trust Bancorp]

Yes, that's right.

[Edward Handy, Chairman & CEO at Washington Trust Bancorp]

In the resi portfolio.

[Damon Delmonte, Managing Director at Keefe, Bruyette & Woods (KBW)]

Got it.

[Edward Handy, Chairman & CEO at Washington Trust Bancorp]

Hope that helps, David.

[Damon Delmonte, Managing Director at Keefe, Bruyette & Woods (KBW)]

It does. It does. Yes. Okay, perfect. And then with regards to expenses, Ron, I mean, how are you kind of thinking about it from like the year over year perspective of growth?

[Damon Delmonte, Managing Director at Keefe, Bruyette & Woods (KBW)]

If you're at $137,000,000 for $24,000,000 I mean, is it reasonable for kind of 2% to 4% type of growth over the next year?

[Ronald Ohsberg, Senior EVP, CFO & Treasurer at Washington Trust Bancorp]

Yes. So, yes, with regard to guidance for the rest of the year, let me bring revenue in there as well. So, so for wealth, as you know that largely tracks what the market does. We're assuming about a 5% increase in wealth revenue year over year. Mortgage largely dependent on market conditions and what origination volume could be.

[Ronald Ohsberg, Senior EVP, CFO & Treasurer at Washington Trust Bancorp]

But we are projecting call it a 5% to 10% revenue growth on the mortgage line. We do need to reset expectations around salaries and benefits run rate. So in addition to annual merit raises which you kind of just referred to, we are also restoring our incentive comp to normal after 2 years of substantially reduced levels. And we're also making some people investments that we've been holding off on. We've reduced our headcount by about 40 people over the past 2 years.

[Ronald Ohsberg, Senior EVP, CFO & Treasurer at Washington Trust Bancorp]

So we're going to do some reinvestment back there. Mortgage commissions will also track the mortgage gains and those are seasonally concentrated in the second and third quarter. So all in, we're looking at an increase to our run rate on salaries and benefits and projecting call it $23,500,000 per quarter. All of our other expenses are estimated about $13,500,000 per quarter. So increased NIM, increased fee revenue, but we are also seeing an expense increase.

[Damon Delmonte, Managing Director at Keefe, Bruyette & Woods (KBW)]

Got it. Okay. So add those 2, it's like, yes, 37. Okay. All right.

[Damon Delmonte, Managing Director at Keefe, Bruyette & Woods (KBW)]

So that makes sense. So I mean, yes, you're getting the relief on the top side. So you can reinvest it into the rest of the franchise after taking a more conservative approach the last couple of years. Okay, makes sense. I guess that probably covers it, because I was going to ask about the fee income as well and you kind of trumped me on that and gave me some insight on that.

[Damon Delmonte, Managing Director at Keefe, Bruyette & Woods (KBW)]

So, yes, I think that's it. Everything else has been asked and answered. So thank you very much for the color and insight today.

[Ronald Ohsberg, Senior EVP, CFO & Treasurer at Washington Trust Bancorp]

Great. Thank you, Damon.

[Edward Handy, Chairman & CEO at Washington Trust Bancorp]

Thanks, Damon. Appreciate it.

[Operator]

Thank you. We have no further questions in the queue. So I'll turn the call back over to Ned Handy for any closing comments.

[Edward Handy, Chairman & CEO at Washington Trust Bancorp]

Thanks, Lydia. And thank you for joining us today. I hope we've presented a clear picture of our current state, the positive impact of the Q4 capital raise and our plans going forward. I'd also like to note that on August 22, 2025, Washington Trust will celebrate our 200 and 25th year. And as we mark this occasion, we're focused on continuing our legacy of making a meaningful difference in the places we live and work and enhancing value for our shareholders, our customers, employees and the communities we serve.

[Edward Handy, Chairman & CEO at Washington Trust Bancorp]

So, we appreciate your time very much today and look forward to speaking with you again soon. Have a great day everybody.

[Operator]

This concludes our call. Thank you very much for joining. You may now disconnect your line.

Participants

Executives

• Sharon Walsh, Senior VP, Director of Marketing Strategy & Planning
• Edward Handy, Chairman & CEO
• Ronald Ohsberg, Senior EVP, CFO & Treasurer
• William Wray, Senior EVP & Chief Risk Officer

Analysts

• Laurie Hunsicker, Senior Equity Research Analyst at Seaport Research Partners
• Damon Delmonte, Managing Director at Keefe, Bruyette & Woods (KBW)