Good morning and welcome to Washington Trust Bancorp, Inc.'s 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. Participants interested in asking a question at the end of the call should press star one to get in the queue. As a reminder, today's call is being recorded. I'd now like to turn the call over to Elizabeth Eckel, Executive Vice President, Chief Marketing and Corporate Communications Officer. Please go ahead. Thank you, Lydia. Good morning and welcome to Washington Trust Bancorp, Inc.'s conference call for the second quarter of 2024. Joining us this morning are members of Washington Trust's executive team, Ned Handy, Chairman and Chief Executive Officer, Mary Noons, President and Chief Operating Officer, Ron Ohsberg, Senior Executive Vice President, Chief Financial Officer and Treasurer, and Bill Wray, Senior Executive Vice President and Chief Risk Officer. Please note that today's presentation may contain forward-looking statements, and 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. 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? Thank you, Beth. Good morning and thank you for joining our second quarter conference call. We appreciate your time and interest in Washington Trust. I'll provide brief comments, and then Ron Ohsberg will offer more detail regarding our second quarter performance. After our prepared remarks, Mary Noons and Bill Wray will join us for the Q&A session. We continue to prioritize building balance sheet strength, managing credit, controlling expenses, and positioning to be opportunistic for earnings growth as the economy and interest rates allow. Capital ratios improved somewhat in the quarter as we de-emphasized asset growth and stabilized earnings in the quarter. Credit remains strong, and expenses are down quarter over quarter. We've introduced new deposit growth-oriented tools to enhance our customers' experience in online account opening, bank switching, and to reward our customers for referrals. We look forward to opening a new branch in the Olneyville section of Providence next month. Other than this branch, we have no other planned branch expansion at this time. In recent years, we shifted much of our operations to the cloud, allowing us to make a strategic decision to sell our operations center and consolidate team members into existing offices. We continue to review every owned or leased space for optimization of our occupancy efficiency. With continued pressure on the margin, our fee-based businesses, wealth, and mortgage performed well and generated higher revenues in the quarter. Again, continued expense discipline and our diversified revenue base contributed nicely to this quarter's results. I'll now turn the call over to Ron for some more detail on the quarter, and then we'll be glad to address any questions. Ron? Yep. Thanks, Ned, and good morning, everyone. Second quarter net income was $10.8 million or 63 cents per share. Net interest income was $31.6 million, and the margin was 1.83%. Average earning assets increased by $7 million and had a yield of 4.97%, up by four basis points. On the funding side, average in-market interest-bearing deposits increased by $36 million, and average wholesale funding decreased by $25 million. The rate on interest-bearing liabilities increased by five basis points to 3.68%. Prepayment fee income was $46,000 in the second quarter and $20,000 in the first quarter, neither with any impact to the margin. Non-interest income comprised 35% of revenue and amounted to $16.7 million, down by $503,000, or 3% from Q1. Included in the second quarter was a $988,000 gain on the sale of our operations center, while the first quarter included $2.1 million in settlement income. Excluding these items, non-interest income was up by $609,000, or 4%. Wealth management revenues were $9.7 million, up by $340,000, or 4%. This included an increase of $190,000 in seasonal transaction-based revenues, largely tax servicing, as well as an increase of $150,000 in asset-based revenues, which correlated to an increase of 1% in average AUA balances. Mortgage banking revenues totaled $2.8 million, up by $255,000, or 10%. Realized gains were $2.2 million, up by 39%. Turning to expenses, non-interest expenses were down $453,000, or 1% from Q1. Salaries expense decreased by $515,000, or 2%, reflecting lower staffing levels and payroll tax expense, partially offset by higher mortgage commissions. In the second quarter, the effective tax rate was 21.8%. We estimate our full year 2024 effective tax rate will be 21.2%. Turning to the balance sheet, total loans were down by $56 million, or 1%, from March 31st. In the second quarter, total commercial loans decreased by $22 million, or 1%, and residential loans decreased by $27 million, also 1%. In-market deposits, which exclude wholesale broker time deposits, were seasonally down by $37 million from March 31st. Wholesale broker deposits were down by $355 million, and Federal Home Loan Bank borrowings were up by $310 million from March 31st, reflecting a shift in wholesale funding mix based on pricing. Our loan-to-deposit ratio increased in the quarter due to the reduction in broker deposits. We have since replenished broker deposits in the third quarter. Turning to asset quality, these metrics remain solid. Non-accrual loans were 54 basis points, and past due loans were 21 basis points as a percentage of total loans. The allowance totaled $42.4 million, or 75 basis points of total loans, and provided NPL coverage of 139%. We had net charge-offs of $27,000 in the second quarter and $79,000 year-to-date. At this point, I will turn the call back to Ned. Thank you, Ron. I know you're all busy this morning, so we will go right ahead and turn it to questions. So, Lydia, if you'd open the lines. Thank you. Please press star followed by the number one if you'd like to ask a question, and ensure your device is unmuted locally when it's your turn to speak. Our first question today comes from Mark Fitzgibbon with Piper Sandler. Please go ahead. Your line is open. Hey, guys. Good morning. Good morning, Mark. It looked like you, good morning, Ned. It looked like you replaced $300 million or so of broker deposits with FHLB Advances. And I know, Ron, you had said that you replaced those subsequently. But what was the rough difference in rate between the broker deposits and the FHLB Advances? Yeah. And, Mark, it could be 10-15 basis points. I mean, we look at those as pretty much interchangeable sources of funding. So whichever is cheaper is where we tend to go. The loan-to-deposit ratio, because of that movement, is starting to creep up a little bit. I think it was 113%. How high are you willing to let that go? Yeah. It's back down to 107 right now after we added those deposits back. So listen, we don't want the ratio to be any higher than it is now, to be honest. I mean, we're trying to bring deposits in just like everyone else. We de-emphasize asset growth, Mark. I think you saw loans down in the quarter. We'd love to be at 100% or below, but that's a challenge as it is for a lot of folks. Deposit growth continues to be our number one priority, and we're focused on that both in our cash management area and, obviously, in the retail side of the bank. I think where we are now is we're comfortable with it, but we'd like to maintain or reduce. Okay. And then you had, again, a bit of an outflow in the wealth management business. I think it was $163 million. Any more departures of relationship people in the wealth management business recently? Hi, Mark. This is Mary Noons, and I'll take that question. We did have departures of two advisors, and we had an unfortunate, unexpected death of one of our advisors. The departures were unrelated. One was in the first quarter. One was in the second quarter. So there's no trend on that. This was in the Rhode Island offices where there are team-based approaches, so we've had minimal outflow attributed to that. We really just had. We've looked very deeply into the outflow composition, and we're not seeing any trends on this. It just was some client deaths that resulted in the estates being closed out and some other client expenses at higher levels than we've seen. But we're keeping a very close eye on that. Okay. And then, Ron, I wondered if you could share with us some thoughts on sort of the outlook for the NIM, assuming maybe one Fed cut in September, and also outlook for expenses in the third quarter? Yeah. So I'm only going to go out one quarter on the NIM, and we think NIM in Q3 will be pretty much in line with Q2. I don't think, at this point, anyone really knows what the Fed is going to do and when they do start to reduce rates. As you know, we have a large commercial loan book of one-month SOFR. So out of the gate, we'll probably see net interest income come down a little bit as we let our funding start to reprice. So I think it could be a little choppy for a couple of quarters, depending on how many rate cuts come through and the timing of those. Overall, lower rates are beneficial to us. Most of our funding is short-term. Most of that maturity funding is short-term, and we have a lot of money markets that can be repriced down as well. So not giving any fourth-quarter guidance yet, but we think Q3 will be in line with Q2. Okay. Great. And then lastly, and I know you built capital a little bit this quarter, but what are your thoughts on sort of the current capital position? Would you contemplate raising some capital given the more challenging environment? Do you have a target for the CET1 or some other capital ratio? Yeah. I mean, if you look back, we've had sequential improvements in our regulatory capital ratios now for three or four quarters. We've slowed down the asset growth, as Ned mentioned. We're going to continue on that trajectory, expecting to improve capital on a quarter basis from this point forward. Yeah. We'd like to see—I mean, I would personally like to see us get our total risk-based capital up to about 12%. It's going to take a little bit of time to get there. Thank you. Thanks, Mark. Mark, you asked about expenses. We're expecting Q3 to be about $35 million. Mortgage commissions will be a little higher. Advertising will be a little higher in the quarter. Then we expect expenses to come down a bit in the fourth quarter. Thank you. Our next question is from Damon DelMonte with KBW. Please go ahead. Your line is open. Hey. Good morning, everyone. I hope everybody's doing well, and thanks for taking my questions here. Just to follow up on the expenses, you mentioned earlier that you, and we saw this quarter with the realized gain on the sale of the operations center. Are you expecting any material cost savings related to that, and how does that figure into the outlook? Yeah. That's already incorporated, and now I'm thinking off the top of my head. I think it's about $200,000-$300,000 of expenses annually, but that's already baked in. Okay. Got it. Okay. And then with regards to your outlook for credit, I mean, things continue to trend pretty favorably there. Low charge-offs, and obviously, the provision remains on the lower side given the slower loan growth. Are there any areas of the portfolio where you're seeing some signs of stress, particularly in the commercial real estate side? Yeah. Bill, you want to take that one? Sure. I think the one everyone pays attention to is office. We pay attention to office a lot. We, essentially, in the next couple of years have about a dozen maturities, each of which we know—we don't even think of them as on a portfolio basis. But we're not seeing any trends anywhere else in the portfolio. And even within office, we're kind of handling them one at a time. And a couple of them are going to limp their way forward, but we think we understand the issues. We understand the assets and the borrowers, and we don't see any particular adverse trends that aren't already reflected in our accounting. Got it. Okay. That's helpful. Thank you. And then just on fee income, I guess, I think, Ron, you alluded to a little bit higher comp related to mortgage banking here in the third quarter. I guess, how are you thinking about overall fee income in the back half of the year? Do you feel has the impact from the lost AUM and the wealth management kind of been reflected in the fees, or should we expect some bit of a decline there? Yeah. Our wealth income largely depends on markets. Out of the gate, I would expect Q3 to look somewhat similar to Q2 in terms of wealth revenue. We expect mortgage to be up maybe, mortgage revenue to be up maybe 5%-10% just on higher volume in the third quarter. And we did, Damon. This is Mary. We did implement a fee increase that should start to be reflecting in the numbers for third and fourth quarter. On the wealth side. On the wealth side. Got it. Okay. Well, great. That's all that I had. Thank you very much. Thanks, Damon. Our next question today comes from Laurie Hunsicker with Seaport Research. Your line is open. Yeah. Hi. Good morning. Good morning. I'm hoping we can just go back to wealth management. The two advisors that departed, how much did they actually manage? Well, they managed as a team. So they were advisors as part of a trust officer and portfolio manager and associate team. I don't have the numbers relevant to their portfolios, but I will say that the runoff has been minimal, and it's because of that approach. It's very unlike the departures that had happened in our Wellesley area. So we're confident that that's not going to be a big contributor on any runoff. Got it. And then just. Laurie, we've actually, Mary talked about the 2 departures and the 1 unexpected death. We have actually added 2 investment advisors in the course of the first 2 quarters as well. We're kind of net down 1. Gotcha. And then just, Mary, just to frame that, the $163 million of client outflows in Q2, how much was related to those two advisors? I mean, I know you said minimal, but it was just one of the larger quarters we've seen. So I'm just trying to understand that. Yeah. Yeah. So, Laurie, that number's really net of three things, right? We don't usually get into this level of detail, but you get new business, you got lost business, and you've got routine flows where clients are living their lives and spending their money. So in the second quarter, I will just say that new business and lost business was a net zero. Okay. That's helpful. Okay. None of those, yeah, everything's kind of ordinary. Gotcha. Okay. And then just going back to non-interest income, kind of along the lines of Damon's question, but maybe just thinking more top-level, because I know, obviously, the June has the tax prep in it for stripping out some of the noise, the sale of facilities, etc. How do you think about where that overall number is looking like for 3Q, netting everything out? Is $15.5 million a good number, or how should we be thinking about that? For total non-interest income? For total noninterest income, yeah. Yeah. Like I said, I think wealth will track in Q3 close to Q2, and we expect mortgage to be up about 5%-10%. Okay. And then do you need? We're not doing much of anything on the swap side because we're not originating those types of loans right now, so. Got it. Okay. So that'll be close to this level as well. Okay. Got it. That's super helpful. And then in terms of sale of other facilities, can you help us think about that a little bit? What else is there potentially to sell? Are you expecting more gains as we look toward the back half of this year? Yeah. No. I mean, we have considered from time to time doing some sale-leasebacks, so we could implement that. We have no specific plan to do that at the moment, but that could generate some gains for us at some point. There are no other kind of excess facilities that we have right now that we're intending to dispose of. Got it. Got it. Okay. And then just last question on office. And I realize you may not be able to provide all this detail, and I certainly appreciate all the color that you put in the release, but the $18.4 million that currently is on non-accrual Class B, can you just give us a refresh on that in terms of vacancy and any movement, what you're thinking about there? Sure. I'll take that, Laurie. This is Bill. That's two properties, one of which is 50% vacant, the other which is only tenanted with streetfront retail right now. The latter property, there looks like there's some resolution potential, but again, we never want to count it till it's over. So there's some movement on that. We feel good about both properties, not the fact that they're non-accrual, but that they're stable to improving. So that's where they stand. Okay. And those are both the office buildings are located suburban Connecticut. Is that correct? No. One is suburban Connecticut, and the other is Boston, Boston Metro. And I do want to point out, we have no delinquencies. So even these properties that are on non-accrual continue to perform. So they're performing non-performers, to use the old phrase. Yeah. Got it. Got it. Okay. And then I know 32% of your book is coming due in the next two years, but how does that look if we look the next sort of one, two, three quarters? Where are we with maturity around that? Actually, they're mostly the properties we just talked about, the couple of non-accruals. So there's not much in the next couple of quarters in it, those. But let me talk about maturities for a minute. Frankly, we view office properties as essentially a life sentence. There's no magic exit market out there. So we look at each one of them, assuming we're going to be with it to maturity and beyond. And so that's kind of how we manage the credit and work with the sponsor. If rates go down and there appears to be a refinance market out there at some point, that would be great. But our assumption is we have to stay the course with the sponsors on these. Got it. Okay. Got it. That's helpful. Thank you very much. Thanks, Laurie. 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. Well, thank you all for joining us today. We certainly appreciate your time and your interest in Washington Trust, and we look forward to speaking to you all again soon. So have a great day, everybody. This concludes today's call. 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