Five Questions With: Joseph J. MarcAurele

Joseph J. MarcAurele is the chairman and CEO of Washington Trust Bancorp Inc. / COURTESY WASHINGTON TRUST BANCORP INC.
Joseph J. MarcAurele is the chairman and CEO of Washington Trust Bancorp Inc. / COURTESY WASHINGTON TRUST BANCORP INC.

Joseph J. MarcAurele is the chairman and CEO of Washington Trust Bancorp Inc. The company last week released second-quarter financial results showing a slight profit drop of 3.9 percent to $11.1 million compared with the same period last year. MarcAurele talked with Providence Business News about what he’s seeing on the company’s balance sheet and how it’s reflective of the regional, national and international economies.
PBN: What can you tell our readers about the company’s second-quarter results?
MARCAURELE:
We had a decent quarter. A lot of time in our business there’s a certain amount of noise in the second quarter, but we feel like we’re positioned to do pretty well in the next couple quarters. Our deposit business tends to be a little bit cyclical. We have a large book of educational, governmental and municipal deposits in our mix, so a lot of the time in the summer months, obviously, the schools have not yet collected tuition and municipalities are between tax months, so they run their balances down and come back in the third quarter. Obviously, the positive highlights for the quarter were the mortgage loan revenues. Our residential mortgage pipeline is at well over $230 million and that’s an absolute all-time high. The longtime low interest rates have been very beneficial to our residential mortgage business and that’s the reason why last quarter we opened a new residential mortgage-lending office in Wellesley, Mass. That’s a great market for us and we feel as if that business will continue to grow.
PBN: What would you say was most challenging about the second quarter?
MARCAURELE:
I think it was combination of continued compression of our net interest margin, which all banks are going through. One of the things that happened with the Brexit debacle was … long-term interest rates compressed, so our ability to increase our spread on longer-term loans or securities is compressed. Every time loan rates go down, it compresses your margin, which for every bank is their largest source of income. We’re fortunate that we have a large wealth-management business and residential-mortgage business and over the last three to four years we’ve expanded that. We’re a little bit different than other community banks because we have more diverse revenue streams and are not totally dependent on our net interest margin.
PBN: Is the uncertainty in the foreign markets affecting your wealth-management business?
MARCAURELE:
Actually, the equities market in this country, which is primarily where our investors invest, has done particularly well. So the only thing we see out of Brexit is on the absolute yield on bonds that people might have in their portfolios. We, like everybody else, have a mix of stocks and bonds, so it’s challenging to get yields on the bonds.
PBN: Is the strength in your loan book a sign of the low-interest market, or a strengthening economy?
MARCAURELE:
I think it’s a little bit of both. The low interest rates help a lot, but the unemployment rate in Rhode Island the last time I checked was about 5.5 percent, so things are clearly getting better. If you look at the greater Boston market, and we’ve been in that market for a while, you could argue it didn’t really go through a recession. Connecticut has its challenges from a budgetary perspective, but the areas that we’re in … are pretty good markets.
PBN: What are your thoughts regarding the Fed raising interest rates in 2016?
MARCAURELE:
I would say earlier in the year the Fed was signaling two to three rate increases, but now I don’t expect short interest rates to go up [this year], and I don’t think we can plan on that happening. They would help margins, but as we continue to run our business, we need to not think about rates as one of the things that will come to the rescue. You can’t run your business with the expectation that you’ll survive on the increased rates.

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