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Washington Trust(WASH) - 2024 Q4 - Annual Report
WASHWashington Trust(WASH)2025-02-25 15:20

Financial Position - As of December 31, 2024, Washington Trust had total assets of 6.9billion,totaldepositsof6.9 billion, total deposits of 5.1 billion, and total shareholders' equity of 499.7million[20].−Thetotalloanportfolioamountedto499.7 million[20]. - The total loan portfolio amounted to 5.1 billion, representing 74% of total assets, with commercial loans making up 52% of total loans[21][23]. - Commercial real estate (CRE) loans accounted for 80% of the commercial loan portfolio and 42% of the total loan portfolio as of December 31, 2024[24]. - The residential real estate loan portfolio represented 41% of total loans, with loans originated for sale to the secondary market providing funds for additional lending[27]. - Consumer loans constituted 7% of total loans, with home equity lines and loans representing 94% of the total consumer portfolio[29]. - Washington Trust's investment securities portfolio amounted to 916.3million,or13916.3 million, or 13% of total assets, as of December 31, 2024[33]. - The Bank had advances payable to the Federal Home Loan Bank (FHLB) of 1.1 billion, with available borrowing capacity of 753millionasofDecember31,2024[36].IncomeandProfitability−Adjustednoninterestincomefor2024was753 million as of December 31, 2024[36]. Income and Profitability - Adjusted noninterest income for 2024 was 63.05 million, compared to 56.14millionin2023,reflectinganincreaseofapproximately12.556.14 million in 2023, reflecting an increase of approximately 12.5%[201]. - The adjusted income before income taxes for 2024 was 52.03 million, down from 56.48millionin2023,indicatingadecreaseofabout7.956.48 million in 2023, indicating a decrease of about 7.9%[201]. - The adjusted net income available to common shareholders for 2024 was 40.87 million, compared to 44.84millionin2023,representingadeclineofapproximately8.844.84 million in 2023, representing a decline of approximately 8.8%[204]. - The effective tax rate for 2024 was 27.7%, while the adjusted effective tax rate was 21.5%, showing a significant impact from adjustments[201]. - The company reported a net loss of 28.06 million for 2024, compared to a net income of 48.18millionin2023,indicatingasubstantialdeclineinprofitability[201].−Adjusteddilutedearningspercommonsharefor2024is48.18 million in 2023, indicating a substantial decline in profitability[201]. - Adjusted diluted earnings per common share for 2024 is 2.37, down from 2.63in2023,whilereporteddiluted(loss)earningspercommonshareis(2.63 in 2023, while reported diluted (loss) earnings per common share is (1.63) compared to 2.82in2023[206].−Adjusteddividendpayoutratioincreasedto94.512.82 in 2023[206]. - Adjusted dividend payout ratio increased to 94.51% in 2024 from 85.17% in 2023, while the reported dividend payout ratio is (137.4%) compared to 79.43% in 2023[206]. - Adjusted return on average assets for 2024 is 0.57%, slightly down from 0.64% in 2023, while reported return on average assets is (0.39%) compared to 0.69% in 2023[208]. - Adjusted return on average equity for 2024 is 8.52%, down from 9.85% in 2023, while reported return on average equity is (5.84%) compared to 10.57% in 2023[208]. Regulatory Environment - The Bank is subject to regulation and supervision by the FDIC, RI Division of Banking, and Connecticut Department of Banking[66]. - The Dodd-Frank Act allows state-chartered banks to establish new branches on an interstate basis[72]. - The Bank must obtain prior approval from the RI Division of Banking and the FDIC to acquire another bank or establish a new branch office[72]. - The Federal Reserve may require a banking organization to maintain capital above minimum levels due to financial condition or anticipated growth[78]. - The Bancorp is required to maintain a minimum common equity Tier 1 capital to risk-weighted assets ratio of 4.5%, a minimum Tier 1 capital to risk-weighted assets ratio of 6.0%, and a minimum total capital to risk-weighted assets ratio of 8.0%[81]. - The Bancorp is considered "well capitalized" under the FDIC's prompt corrective action rules if it maintains a total capital to risk-weighted assets ratio of 10.0% or greater[82]. - The Bancorp's ability to pay dividends is restricted if it does not maintain the required capital conservation buffer[87]. - The Federal Reserve may prohibit bank holding companies from paying dividends if such payment is deemed unsafe or unsound, particularly if it exceeds earnings for the period[87]. - The Bank is required to report any cash transactions involving at least 10,000 to the U.S. Treasury under the Bank Secrecy Act[94]. - Financial institutions must file suspicious activity reports for transactions over 5,000thataresuspectedtoinvolveillegalfunds[94].−TheBancorpandtheBankmadeaone−time,permanentelectiontoexcludeAOCIfromcapital[80].−Thecapitaladequacyrulesspecifyminimumamountsofcapitalasapercentageofassetsthatbankingorganizationsmustmaintain[81].−TheBancorp′scurrentlyoutstandingtrustpreferredsecuritiesweregrandfatheredundertheFederalReserve′scapitalrule[81].MarketandEconomicConditions−Thecompanyfacesinflationarypressures,withelevatedinflationlevelscontinuinginto2024andpotentiallyremaininghighin2025,impactingoperationalresults[102].−TheFederalReserveraisedthefederalfundsrateseveraltimesin2023,whichmayaffectthecompany′sloanoriginationvolumeandinterestratespread[102].−Increasedmarketvolatilityandadversechangesinfinancialconditionsmaynegativelyimpactthecompany′sliquidityandcompetitiveposition[110].−Thecompanymayexperiencehigherratesofdefaultinitscommercialloanportfoliocomparedtoresidentialmortgageloansduetoeconomicconditionsandborrowerfinancialhealth[117].−Thecompanyisexposedtocreditandmarketrisksinitsinvestmentsecuritiesportfolio,whichcouldbeadverselyaffectedbyreducedmarketliquidityandincreasedinterestrates[125].−AdowngradeofU.S.governmentagencysecuritiescouldmateriallyimpactthecompany′soperations,earnings,andfinancialcondition[126].StrategicInitiatives−Thecompanyhasadoptedassetandliabilitymanagementpoliciestomitigateadverseeffectsofinterestratechangesonnetinterestincome[106].−Thecompanyreliesonthird−partyvendorsforkeybusinessinfrastructure,andanyissueswiththesevendorscouldadverselyaffectservicedelivery[134].−Thecompanycompeteswithbothfinancialandnon−financialservicesfirms,andemergingtechnologiesmayintensifycompetitioninthefinancialservicesindustry[142].−Thecorporation′sstrategyfocusesonleveragingitsregionalbrandtobuildmarketshareandenhancecustomerservicethroughbothin−personanddigitalbankingsolutions[212].−TheBankagreedtoprovide5,000 that are suspected to involve illegal funds[94]. - The Bancorp and the Bank made a one-time, permanent election to exclude AOCI from capital[80]. - The capital adequacy rules specify minimum amounts of capital as a percentage of assets that banking organizations must maintain[81]. - The Bancorp's currently outstanding trust preferred securities were grandfathered under the Federal Reserve's capital rule[81]. Market and Economic Conditions - The company faces inflationary pressures, with elevated inflation levels continuing into 2024 and potentially remaining high in 2025, impacting operational results[102]. - The Federal Reserve raised the federal funds rate several times in 2023, which may affect the company's loan origination volume and interest rate spread[102]. - Increased market volatility and adverse changes in financial conditions may negatively impact the company's liquidity and competitive position[110]. - The company may experience higher rates of default in its commercial loan portfolio compared to residential mortgage loans due to economic conditions and borrower financial health[117]. - The company is exposed to credit and market risks in its investment securities portfolio, which could be adversely affected by reduced market liquidity and increased interest rates[125]. - A downgrade of U.S. government agency securities could materially impact the company's operations, earnings, and financial condition[126]. Strategic Initiatives - The company has adopted asset and liability management policies to mitigate adverse effects of interest rate changes on net interest income[106]. - The company relies on third-party vendors for key business infrastructure, and any issues with these vendors could adversely affect service delivery[134]. - The company competes with both financial and non-financial services firms, and emerging technologies may intensify competition in the financial services industry[142]. - The corporation's strategy focuses on leveraging its regional brand to build market share and enhance customer service through both in-person and digital banking solutions[212]. - The Bank agreed to provide 7.0 million in loan subsidies over a five-year period to increase home mortgage loans, home improvement loans, and home refinance loans in specific census tracts in Rhode Island[160]. - The Bank committed to 2.0millionforfocusedcommunityoutreachandmarketingeffortsoverafive−yearperiod,consistentwithhistoricalspendinglevels[160].−TheBankplanstoopentwofull−servicebranchesinspecificcensustractsinRhodeIsland,includinganewbranchinOlneyville[160].−Thecorporationcompletedapublicofferingof2,198,528sharesat2.0 million for focused community outreach and marketing efforts over a five-year period, consistent with historical spending levels[160]. - The Bank plans to open two full-service branches in specific census tracts in Rhode Island, including a new branch in Olneyville[160]. - The corporation completed a public offering of 2,198,528 shares at 34.00 per share, raising net proceeds of 70.5millionforinvestmentsandbalancesheetoptimization[214].−Thecorporationsoldavailableforsaledebtsecuritieswithanamortizedcostof70.5 million for investments and balance sheet optimization[214]. - The corporation sold available for sale debt securities with an amortized cost of 409.5 million, realizing a net pre-tax loss of 31.0million,andreinvested31.0 million, and reinvested 378.4 million into higher-yielding securities[215]. - The corporation committed to sell residential mortgage loans with an amortized cost of 344.6million,resultinginanetpre−taxlossof344.6 million, resulting in a net pre-tax loss of 62.9 million recognized in Q4 2024[216]. - The corporation's risk management program includes oversight of credit risk, interest rate risk, liquidity risk, and operational risk to ensure informed decision-making[218]. Operational Risks - The company faces significant cybersecurity risks that could disrupt operations and damage customer trust[133]. - The company has implemented comprehensive cybersecurity measures, including regular assessments and third-party audits, to mitigate risks associated with cybersecurity threats[165]. - The Audit Committee oversees the cybersecurity program, receiving regular reports on the status of control environments and material security risks[175]. - The Bank may face significant legal risks from regulatory investigations and private actions, which could result in financial liability and reputational damage[162]. - Changes in tax laws and regulations could adversely impact the Bank's financial statements and effective income tax rate[148]. - The Bank's ability to raise additional capital may be affected by market conditions and financial performance, which could lead to regulatory restrictions[151]. - The Bank's stock price and trading volume can be volatile, influenced by various factors including operating results and market conditions[150]. - The Bank's wealth management business is subject to extensive regulation, which could limit activities and impose fines[157]. - The Bank's operations may be adversely affected by natural disasters, acts of terrorism, and other external events, impacting financial condition and results[144].