Good morning and welcome to Washington Trust Bancorp, Inc.'s conference call. My name is Melissa. 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. Today's call is being recorded. Now I will turn the call over to Elizabeth B. Eckel, Executive Vice President, Chief Marketing & Corporate Communications Officer. Ms. Eckel.
Thank you, Melissa. Good morning, everyone, and welcome to Washington Trust Bancorp, Inc.'s 2022 second quarter conference call. Joining us for today's call are members of Washington Trust executive team, Ned Handy, Chairman and Chief Executive Officer, Mark Gim, President and Chief Operating Officer, Ron Ohsberg, 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 actual results could differ materially from what is discussed on the call. Our complete safe harbor statement is contained in our earnings press release, which was issued yesterday afternoon, as well as other documents that are filed with the SEC. These materials and other public filings are available on our investor relations website at ir.washtrust.com. Washington Trust trades on NASDAQ under the symbol WASH.
I'm now pleased to introduce today's host, Washington Trust Chairman and CEO, Ned Handy.
Thank you, Beth, and good morning and thank you for joining our second quarter call. We appreciate your time and continued interest in Washington Trust. I'll provide some commentary on the second quarter and our view of the current environment, and then Ron Ohsberg will review our financial performance. After our remarks, Mark Gim and Bill Ray will join us, and we will all answer any questions you may have about the quarter. I'm pleased to report that Washington Trust posted solid second quarter results with net income of $20 million or $1.14 per diluted share, compared with $16 million or $0.94 per diluted share in the prior quarter. In the quarter, our results benefited from interest rate movements, offsetting fee pressure in our wealth and residential mortgage businesses.
While our wealth management net new business and our mortgage portfolio volume were both strong in the quarter, market conditions negatively impacted fee revenues. The fundamentals of our customer-facing businesses are very strong. Continued expense management assisted in the results. The diversity of our revenue streams, combined with credit discipline and strategic balance sheet positioning, enabled us to deliver a strong quarter. Total loans were up 5% in the quarter, primarily due to strong growth in our residential portfolio. Both residential and commercial loan pipelines remain strong. Despite the continued payoff pressure that muted commercial growth in the first half of 2022, we remain confident that we will see mid-single-digit commercial loan growth for the full year. New loan formation has been strong all year, and the commercial pipeline remains near its historic high point.
With expectations that prepayments will moderate with rising rates, we expect to see strong net commercial growth in the second half. Overall, credit has remained very strong. Our commercial loan book has no nonaccruals and virtually zero delinquency at quarter end. Our consumer lending is almost entirely secured by residential properties in nearby markets with excellent asset quality metrics built on sound underwriting standards and practices. Ron will provide some detail on our credit statistics and provide some comments on our provisioning and reserve positioning. While the pandemic is clearly not over, the financial programs designed to help our clients through the most difficult times, like loan deferments and the PPP program, have successfully culminated. We have no loans remaining in deferral status and only 5 PPP loans remaining in the forgiveness process of the nearly 3,000 that were originated between the two phases.
We are proud of our attentive approach to assisting both new and existing customers and feel that our franchise has been strengthened by our comprehensive response. Over the past few years, we have invested in incremental improvements in all of our business units, both in product and process, with an eye towards continuous enhancement of our customers' and employees' experience. We've made appropriate investments in building our capacity to enable a highly productive hybrid work environment, allowing our teams to meet their customers when, how, and where the customers prefer. Our technology investments continue to provide us a firm foundation for growth while continually improving our system resiliency. We are intent on delivering the best balance between digital access and personal service to accommodate our evolving customer requirements. We continue our efforts to be convenient to our customers and will open a branch in Cumberland, Rhode Island in early August.
We opened a commercial lending office in New Haven, Connecticut yesterday. The New Haven office is adjacent to our existing wealth management office, enabling our strategy of relationship building between those two business units to thrive. We will also house some residential mortgage loan officers in that office. Our teams have positioned all of our businesses to weather any current economic challenges and to excel as and when the business climate improves. There are challenges in the current economy. The discouraging impact of inflationary pressures on segments of the population that can least absorb it and the general pressure on consumer spending has negatively impacted GDP growth expectations. The Fed will likely stay aggressive in combating inflation throughout 2022. While there is speculation that we all are already in a recession, there are also signs that a soft landing is still possible.
Pent-up consumer demand, strong labor markets, relatively sound corporate balance sheets, combined with remaining ARPA funds available in most municipalities might provide cushioning. Unemployment rates in our markets are matching all-time lows. For example, Rhode Island unemployment levels are significantly favorable to pre-pandemic levels. As supply chain issues and general supply scarcity resolve, the current levels of demand may provide positive momentum as recovery begins. With that, I'll turn the call over to Ron for comments on the second quarter financial results. Ron?
Thank you, Ned. Good morning, everyone, and thank you for joining us on our call today. As Ned mentioned, net income was $20 million or $1.14 per diluted share for the second quarter, and this compared to $16.5 million or $0.94 for the first quarter. Net interest income amounted to $37.5 million, up by $2.4 million or 7% from the preceding quarter. The net interest margin was 2.71, up by 14 basis points. Net interest income benefited from PPP fees, which totaled $323,000 and had a 2 basis point benefit to the margin. This compared to $819,000 and 6 basis points in the first quarter. We do not expect PPP fees to impact the margin in future periods as an immaterial amount of PPP loans remain at June thirtieth.
Prepayment fee income was modest at $62,000 in the second quarter and $76,000 in the preceding quarter, having a 0 basis point impact to the margin. Excluding these, both of these items, the margin increased by 17 basis points from 251 to 268. Average earning assets increased by $25 million. The yield on earning assets was 3.03% for the second quarter, up by 20 basis points. On the funding side, average in-market deposits rose by $151 million, while wholesale funding sources decreased by $82 million. The rate on interest-bearing liabilities increased by 9 basis points to 0.42%. Non-interest income comprised 30% of total revenues in the second quarter and amounted to $15.9 million, down by $1.3 million or 8%.
Wealth management revenues were $10.1 million, down by $465,000 or 4%. This included a decrease in asset-based revenues, which were down by $570,000 or 6% from the preceding quarter. The decrease was partially offset by an increase in transaction-based revenues of $105,000, largely due to higher tax servicing fee income. Tax fees are seasonal and concentrated in the first half of the year. The decrease in asset-based revenues correlated with a decrease in the average balance of assets under administration or AUA, which was down by $490 million or 7%. June 30 end-of-period AUA balances totaled $6.7 billion, down by $843 million or 11% from March 31, largely due to market depreciation.
Net new business was positive and was offset by routine client withdrawals. Our mortgage banking revenues totaled $2.1 million in the second quarter, down by $1.4 million or 41% from the first quarter. Mortgage loans sold totaled $80 million in the second quarter, down by $50 million or 39%. Note, however, that overall loan origination activity was strong and amounted to $350 million in the second quarter, up by $79 million or 29%. A higher percentage of loans are being placed into portfolio, leading to lower sales gains. Market competition has also been compressing the sales yield as expected. Our mortgage origination pipeline at June 30 was $234 million, up by $24 million or 12% from $210 million at the end of March.
Loan-related derivative income was $669,000, up by $368,000 from the preceding quarter, reflecting increased customer swap transactions. Regarding non-interest expenses, these were down by $142,000 or 0.5% from the first quarter. Salaries and employee benefits expense decreased by $621,000 or 3% in the second quarter, reflecting lower payroll taxes and a reduction in share-based compensation expense. In addition, we benefited from higher deferred labor costs, which is a contra expense and which was partially offset by higher mortgage commissions. Advertising and promotion expense was up $373,000 from the preceding quarter, largely due to timing. Income tax expense was $5.3 million for the second quarter. The effective tax rate was 21.1%.
We expect our full-year 2022 effective tax rate to be approximately 21.5%. Now, turning to the balance sheet. Total loans were up by $196 million or 5% from March 31 and by $180 million or 4% from a year ago. Excluding PPP, loans increased by $207 million or 5% from Q1 and were up by $325 million or 8% from Q2 2021. In the second quarter, total commercial loans decreased by $14 million or 1%, which included a reduction in PPP loans of $11 million. Within this category, CRE loans decreased by $19 million. Payments of $121 million were partially offset by new loan volume of $102 million. C&I loans, excluding PPP, increased by $16 million.
Residential loans increased by $188 million or 11% from March 31st. Originations for retention and portfolio were $268 million, up $99 million or 60%. Consumer loans were up by $21 million or 8%, reflecting growth in home equity. Investment securities were up by $12 million or 1% from March 31st. Purchases of debt securities were partially offset by a temporary decline in fair value, as well as routine pay downs in mortgage-backed securities. In-market deposits were down by $178 million or 4%. The decrease was concentrated in rate sensitive institutional money market accounts and included seasonal withdrawals by municipalities in higher ed. In-market deposits were up by $555 million or 14% from a year ago.
Wholesale broker deposits were up by $57 million in the second quarter, and FHLB borrowings were up by $273 million. Total shareholders equity amounted to $477 million at June 30, down by $37 million from the end of Q1. This was largely due to a temporary decrease in the fair value of available for sale securities. In the second quarter, we repurchased 175,000 shares at an average price of $48.93, and a total cost of $8.6 million under our stock repurchase program. Including third quarter repurchases, we are at a total of 194,000 shares at an average price of $48.82 for a total of $9.5 million. We do not expect to go much higher than that.
Washington Trust remains well capitalized. Our second quarter dividend declaration of $0.54 per share was paid on July 8. Regarding asset quality, non-accruing loans were 0.28% of total loans compared to 0.29% at March 31. Past due loans were 0.19% of total loans compared to 0.16%. At June 30, virtually all of these loans were residential and home equity. The allowance for credit losses on loans totaled $36.3 million or 81 basis points of total loans and provided NPL coverage of 293%. This compared to $39.2 million or 92 basis points at March 31. The second quarter provision for credit losses was -$3 million compared to a $100,000 positive provision in the preceding quarter.
This reflects continued low loss rates, solid asset and credit quality metrics, as well as our current estimate of forecasted economic conditions. We had net recoveries of $10,000 in Q2 compared to net recoveries of $148,000 in Q1. This concludes my prepared remarks, and at this time, I will turn the call back to Ned.
Thank you, Ron, and we will now gladly take questions.
Thank you. If you would like to ask a question, we invite you to press star followed by the number one on your telephone keypads. If you change your mind or feel that your question has already been answered, you can press star followed by two to withdraw your question. We'll be taking our first question today from Mark Fitzgibbon of Piper Sandler. Mark, over to you.
Good morning, and thank you for taking my question.
Good morning, Mark.
Ron, I apologize. I missed part of your comments on the capital stuff, so I'll just ask it. I know that AOCI was a big factor, and it's obviously temporary. With the TCE ratio, you know, below 7% now, I guess I'm curious how will you be comfortable taking that?
Thanks, Mark. You know, we view unrealized losses on investment securities that result from higher interest rates as having a transitory effect on GAAP capital. You know, that's why regulatory capital ratios allow for an AOCI opt out for these unrealized losses. You know, we view capital adequacy through a regulatory capital lens because we have the ability and intent to hold those securities until maturity and thus avoid losses. Our position on that is we're not overly concerned about this temporary impact on GAAP capital.
I guess I'm curious then, why not, you know, categorize them as held to maturity if you intend to hold them to maturity?
Yeah. I know some banks are doing that, and we feel like that's a, you know, it's an accounting exercise, and it doesn't really affect how we run the business. We've elected to not do that.
Okay. This isn't gonna really affect your expectations for balance sheet growth at all?
No. We believe our capital is more than adequate to support growth.
Okay. I saw that you guys bought back some stock during the quarter. I guess I'm just wondering if you could kind of help us understand the math, you know, how it makes sense buying back shares at, you know, north of 2x tangible book value. You know, how do you kind of look at the buyback?
Sure. Yeah. Mark, you, we're very focused on shareholder return. I guess I have a couple of points to make about that. First, our regulatory capital has been building steadily throughout the COVID period. Total risk-based capital grew from 13.51% at December 31st, 2020 to 14.15% in March 2022. That's just in excess of what we believe we need to run and grow the business. The next thing that we do is we evaluate our options to deploy excess capital. Our preference is organic growth, and we will continue to pursue that in accordance with our disciplined approach. You know, the more, the better, you know, assuming our discipline.
Earnings have been growing faster than the balance sheet and thus generating additional capital, you know, which is really not a bad problem to have. The next thing we will look at is prudent dividend payouts. Our dividend payout ratio is typically in the 50% range. Backing out this quarter's reserve release, it was about 53%. That's a substantial payout. It's near the upper end of what we believe to be prudent. Also provides a dividend yield of 4.3%. Finally, we consider share repurchases with which we just returned $9.5 million to our investors, which is an amount in excess of our second quarter dividend. Channeling that level of return through regular dividend increases is really not feasible given our existing payout ratio.
We consider a special dividend to be inferior to repurchases because the special dividend, you know, lacks tax optionality to our investors, as well as the lack of an EPS benefit. The last point I would make about these repurchases is our average purchase price was $48.82, which was at a 20% discount to where we were trading in January. We feel comfortable that this is an appropriate and prudent technique to return capital to shareholders.
Okay. I wondered if you could help us think about the provision. I guess I'm curious, are we getting close to the end of the line with reserve releases given that loan growth is starting to pick up here and your reserve ratios are starting to come down to a probably more-
No
peer-like level?
I mean, Look, we maintain a level of reserves commensurate with our best estimate of credit risk in accordance with GAAP. The provision going forward will be dependent on loan growth, economic outlook, and historical loss rates. We expect mid-single digit loan growth and credit to remain stable at this time. We're obviously monitoring economic data and geopolitical events as well as inflation and the Fed's policy response and how these might affect credit quality. I mean, every quarter, we assess where we think we are from a risk perspective and that led to the reversal this quarter, Mark. I guess I would just follow that up by saying that since the onset of COVID, we've added about $12.4 million of reserves.
Cumulatively, we've now reversed $7.8 million of that, so we're still, you know, higher by $4.6 million versus our pre-pandemic level. No crystal ball as to where things are headed, but we think that this is the right level of reserves for us right now.
I guess where I'm headed with it, Ron, is, you know, I know you're everybody's kind of boxed in a little bit with CECL, but you know, you grew loans a pretty good chunk here, and it's just hard to imagine that you view the economic environment as better today than it was three months ago.
Yeah
I'm just wondering what kind of flexibility you have within the accounting rules to be able to resume provisioning?
Yeah, you know, Mark, a very healthy percentage of our allowance is qualitative in nature. You know, our historical loss rates are extremely low. You can tell by our experience, you know, year to date net recoveries. We assess the risk that we have in our portfolio and we establish a corresponding reserve.
Okay, great. Just last question, your thoughts on the margin. I heard your comments about PPP and I know you had about $1 million in prepayment penalty income in the quarter. You know, the core margin.
Yeah
Going forward, any thoughts would be helpful. Thank you.
Sure. Yeah. We see some continued margin expansion. I think that there is a lot of, you know, uncertainty as to the direction that the Fed is actually going to go, especially, you know, considering they're talking about rate cuts in the first quarter of next year. I'll give you some guidance just for the third quarter. We think that the margin will expand to 2.75%-2.80%. Just one more follow-up on the credit piece, Mark. Yes, we did have some pretty decent loan growth, but it was residential. You know, that's a relatively lower credit risk asset versus commercial.
Thank you.
Yeah. Thank you.
Thank you, Mark. Our next question today comes from Damon DelMonte of KBW. Damon, over to you.
Hey, good morning, guys. Hope everybody's doing well today. Just to follow up on the margin.
Good evening.
Morning. Just to follow up on the margin question that Mark had just asked. Ron, are you saying 2.75%-2.80% off of the reported 2.71% this quarter, or is it off of the core level when you exclude the-
That's core.
prepayment income in PP? That's off the core. Okay.
Yeah, I would call that core. We don't think and we're not gonna get any more help on the margin from PPP. Yeah.
Got it. Okay. Excuse me, just to kind of, you know, continue with the discussion on the reserve level. I think the initial commentary was that, you know, pipelines remain strong and you expect the pace of pay downs to slow here in the back half of the year, which gives you confidence on that mid-single digit growth for the year. How do we think about the provision expense if you start to add some, you know, higher risk loans?
Yeah
...in the commercial side versus the, you know, the lower risk residential mortgages that you added this quarter?
Sure. Yeah. That, you know, increase in the loan portfolio will increase the provision. You know, commercial's been, you know, it's been a headwind for us. You know, our origination volume has been quite good, and payoffs continue to be high. The pipeline's very large. Ned, you can comment on this, but it's-
You know, we expect some of that to show up on the balance sheet, and you know, we'll increase provisions accordingly.
Yeah. I would just add.
Great.
I mean, all things being.
Damon, I was just gonna comment on the pipeline just to fill in the blanks. I mean, the commercial pipeline is at an all-time high. It's close to $400 million, which is, you know, kind of twice normal size. So we've got a lot of activity going on. Payoffs have continued to be an issue in the first half, but we think that should regulate a little bit with rising rates, so we still expect to see decent growth and yeah, all other things being equal, I think the reserves will reflect growth rates.
Got it. Okay. If we wanted to try to like, you know, estimate a level going forward, you know, would you say like a 1% reserve on net growth would be reasonable?
Yeah. If you wanna model that's fine. I mean, that might be a little high, but.
Okay. All right. Fair enough. Then, I believe you guys said you just opened an office in New Haven, Connecticut, a loan production office. Can you just talk a little bit about the staffing of that? Did you know, do you have people from Rhode Island that are now working out of New Haven, or did you hire some local lenders in the greater New Haven area? What's the staffing situation with that?
Yeah. It's a combination of both. It's 1,400 feet. It's not too giant, and it's adjacent to our wealth office in downtown New Haven, and we've got a couple of lenders that are on the ground there. We've got actually three people that are actually on the ground in Connecticut fully. We still have some Westerly-based lenders that do business in Connecticut, but we're also interviewing and look to fill a few more seats. We expect there'll be, you know, 5 or 6 commercial lenders. We'll have some resi lenders in that office from time to time out of the Glastonbury office.
Yeah, we think it's a, you know, putting our feet down in the marketplace and having some permanence there will help with growth.
Okay. Great. Just one final question on the outlook for mortgage banking income. You know, obviously down a decent amount this quarter, but you also portfolio a lot of loans. I understand the dynamics of what's happening in the market, but, you know, how is your pipeline looking, especially with your exposure to the Greater Boston area and some of the more affluent areas in Connecticut? Do you think you've kind of bottomed at this like $2.1 million level, or do you think that there's still, you know, some headwinds ahead?
Mark, do you want me to start on that one or?
Damon, Cam, I'll. Yeah.
Okay.
I'll take part of that and then turn it back to you, Ron.
Yeah.
As you saw during the second quarter, our total portfolio origination volumes were very strong. The majority of it was destined for portfolio as opposed to pipeline. Part of that, Damon, is due to a shift in mix. As adjustable rate loans have become more attractive than fixed rate loans, there's less of a saleable market for conforming and certainly less of a saleable market for jumbo ARM loans. Short duration, high quality loans we've tended to put in portfolio. I think we feel like we're kind of approaching a floor level in terms of conventional refinanceable saleable agency mortgage loans. There's always gonna be a certain amount of that.
It's hard to predict any further ahead than two, three, but I think it feels safe to say we're approaching a kind of trough point in terms of refinanceable loan volume and associated sales gains going into Q3. We do think, though, that unlike some lenders who may be focused exclusively on the originate to sell, the ability to originate high quality loans in what is still a very strong housing market in Massachusetts, Connecticut, Rhode Island, with low risk weights for portfolio is definitely a source of growth that we're happy to see going. Ron, I don't know if you have anything to add.
Yeah. I mean, I guess I would just say, Damon, that, you know, industry-wide, I think the MBA was expecting, you know, a 2% decrease in origination volume. You know, ours went up, you know, on a linked quarter basis. Ours was up 29%. You know, we're quite pleased with that level of activity. Just given the pipeline's a little bigger at the end of June than it was in March, we think some of that will carry over into Q3. You know, Q3 probably looks like it's a little better than Q2 from a, you know, revenue standpoint. You know, we've seen a huge shift in the mix from originated for sale to originated for portfolio.
Yeah, I think some of that will carry over into Q3, and I don't think we can really see out further than that.
Got it. Okay. Fair enough. That's all that I had. Thank you very much.
Yeah. Thanks, Damon.
Thanks, Damon.
Thank you, Damon. Our next question today comes from Laurie Hunsicker of Compass Point. Laurie, over to you.
Great. Hi, thanks. Good morning.
Good morning.
Just wanted to go back to credit, and certainly your credit is very pristine. You all give a lot of details, and we appreciate that. If you had a just sort of a peg ratio on where your reserves to loans would be, you know, obviously we saw linked quarter you went from 92 basis points down to 81. Just looking at where you were in 2019, pre-pandemic you were sitting at 69 basis points. Can you just help us think about, you know, and I realize there's a lot of things that go into that, but can you help us think about where you would like to see that right now, knowing everything that you know, just how you think about that?
Yeah. I would say, and I don't want this to sound flip, I would say we're right where we should be based on, you know, our interpretation of what we think our credit risk is. You know, there isn't any target ratio. It depends on the size of the portfolio and the dynamics within it, and our assessment is what it is right now at, you know, 81-82 basis points.
Okay. Can you give me a quick refresh, I guess, Ron Ohsberg, this is to you or Bill Ray, on the office book and your leverage lending book. Can you just remind us where you are in those two categories and what you're seeing and how you're thinking about that? Thanks.
Yeah. Bill, did you have something on that?
Ron, may I please answer on that?
This is Bill Ray. Okay. Yeah.
Yeah. We have about $227 million of office. It's all pass rated, so none of it is even special mention or classified. It's all performing, no delinquencies. A refreshed weighted average loan to value on that is 68%, so that reflects any, you know, sort of the pandemic effects on office. The weighted average debt service coverage is about 1.50. The nice thing about our office portfolio is it's mostly kind of decentralized, low-rise, suburban oriented. We don't do big floor plate, high-rise, center city stuff, which is where some of the big issues might be with lease rollovers.
That said, of the $227 million, we think about 20% of it is on the higher risk side because it might be single tenant, it might have some upcoming rollover risk, it might have a vacancy or repositioning that's going on. Again, all performing, nothing delinquent, all pass rated. Our thinking is about $44 million of that is the kind of stuff we keep an eye on. What we'll do in a case like that is we'll do a targeted credit review, look at those loans, and make sure they're getting the kind of scrutiny that they deserve. That's an overview of our office portfolio. Was there anything else you wanted to know about that, Laurie?
No, just, do you have a refresh on your leverage lending book?
Yes. We don't really do leveraged lending. In our entire commercial portfolio, we have one loan that would be classified as highly leveraged, meaning a leverage of 3x or greater. That's $1.65 million, and it's part of a much larger, much more well-secured relationship related to a recent M&A deal. That's 0.2% of our risk-based capital because we do measure our concentration there. Again, it's almost nonexistent, which is one of the reasons we feel very good about our credit status.
That's helpful. Super helpful. Okay, great. Last question, Ron. Can you help us think about expense guide, how we should be looking at it for next year? Thanks.
I'm not ready to talk about 2023. I would say, when you think about expenses, we have a lot of variable costs that kind of run through our expense base tied to fees, you know, particularly on the mortgage side. Excluding that kind of variable cost component year-over-year 2022 versus 2021 and excluding the, you know, the prepayment expenses that we incurred last year, looking at a 5%-6% year-over-year increase. When you layer on those variable type costs such as mortgage commissions and deferred labor and overtime and incentives and those kinds of things, kind of brings year-over-year to about break even.
Sorry. Break even in terms of?
Yeah. Our total expense base, including variable, which is declining, will be break even, 2022 versus 2021.
Got it.
Flat.
I'm following you. Great.
Flat. Yeah.
Okay. Great. Thanks for taking my questions.
Sure.
Thank you, Laurie. We'll take our last question today, which is a follow-up from Mark Fitzgibbon of Piper Sandler. Mark, back to you.
Hey, guys. Thanks. Just one additional question, maybe for Mark. Given the downdraft in the markets we had sort of in the first half of this year, I was curious what customer behavior looks like in the wealth management business. Are those customers sort of reshuffling assets, staying put, or are they adding risk, taking risk off? Thank you.
It's a good question, Mark. We haven't seen very much customer concern about being invested. On a core basis, as Ron mentioned his opening comments, net new customer flows were strong, and particularly in relationships where we have more than one component of business with a customer. For example, commercial financing in the past leading to wealth management with
Issues like, say, business succession. Pipeline flows have been good, and we feel confident about that. Behaviorally, I think customers are not really pushing a panic button. We haven't seen as much money in motion due to concerns about returns or the way money is being managed compared to, say, 2008, 2010. I think, you know, we're obviously in a correction phase for financial markets, a lot of that around the Fed and the potential of a future recession if the Fed overshoots or doesn't manage inflation correctly. It feels like while customers are taking a little bit of risk appetite off the table, there's not been a real wholesale change, and part of that is due to how we advise people to manage money, which is the way we manage the company for the long run.
I guess I would say, you know, caution around the path of equity markets over the next 18-24 months, but we're not seeing people head for total safety in bonds or cash.
Thank you.
Does that answer the question?
It does. Thank you.
Okay.
Thank you, Mark. As that was our final question today, I would like to turn the call back to Ned Handy. Ned, back to you.
Thanks very much, and thank you all for joining us. We do appreciate you taking the time with us this morning to understand our positioning. We had a strong quarter, and we think our balance sheet and capital position and credit quality remain strong and that our diversified business model will continue to be supportive. Before closing, I wanted to once again thank all our employees for their consistent care and concern for each other and for our customer base. We've got a great team, and they're doing a wonderful job in difficult times. Thank you all. Have a great day.
This concludes the call today. We thank you all for joining. You may now disconnect.