Washington Trust(WASH) - 2025 Q2 - Quarterly Report

FORM 10-Q Filing Information Registrant Information This section details Washington Trust Bancorp, Inc.'s SEC filing status, trading symbol, and common stock outstanding as of July 31, 2025 - Registrant is an accelerated filer and not a shell company[3][5] Registrant Information | Metric | Value | | :--- | :--- | | Trading Symbol | WASH | | Exchange | Nasdaq Global Select Market | | Common Stock Outstanding (July 31, 2025) | 19,155,214 shares | Glossary of Acronyms and Terms This section provides definitions for key acronyms and terms used throughout the Quarterly Report on Form 10-Q to ensure clarity and consistent understanding of the financial and operational discussions PART I. Financial Information Item 1. Financial Statements (Unaudited) This section presents the unaudited consolidated financial statements for Washington Trust Bancorp, Inc. and its subsidiaries, including balance sheets, income statements, comprehensive income statements, statements of changes in shareholders' equity, and cash flow statements, along with condensed notes providing further details on accounting policies, financial instruments, and key accounts Consolidated Balance Sheets as of June 30, 2025 and December 31, 2024 This section provides a snapshot of the Corporation's financial position, detailing assets, liabilities, and shareholders' equity at specific reporting dates Consolidated Balance Sheet Highlights (Dollars in thousands) | Item | June 30, 2025 | December 31, 2024 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Total Assets | $6,745,167 | $6,930,647 | ($185,480) | (2.68%) | | Total Loans, Net | $5,099,201 | $5,095,878 | $3,323 | 0.07% | | Available for Sale Debt Securities | $971,341 | $916,305 | $55,036 | 6.01% | | Total Deposits | $5,045,248 | $5,115,800 | ($70,552) | (1.38%) | | FHLB Advances | $1,001,000 | $1,125,000 | ($124,000) | (11.02%) | | Total Shareholders' Equity | $527,519 | $499,728 | $27,791 | 5.56% | Consolidated Statements of Income for the three and six months ended June 30, 2025 and 2024 This section details the Corporation's revenues, expenses, and net income for the three and six months ended June 30, 2025 and 2024, reflecting operational profitability Consolidated Statements of Income Highlights (Dollars in thousands) | Item | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Total Interest and Dividend Income | $78,846 | $85,997 | ($7,151) | (8.32%) | | Total Interest Expense | $41,661 | $54,412 | ($12,751) | (23.43%) | | Net Interest Income | $37,185 | $31,585 | $5,600 | 17.73% | | Provision for Credit Losses | $600 | $500 | $100 | 20.00% | | Total Noninterest Income | $17,078 | $16,660 | $418 | 2.51% | | Total Noninterest Expense | $36,530 | $33,910 | $2,620 | 7.72% | | Net Income | $13,245 | $10,815 | $2,430 | 22.47% | | Basic EPS | $0.69 | $0.63 | $0.06 | 9.52% | | Diluted EPS | $0.68 | $0.63 | $0.05 | 7.94% | Consolidated Statements of Income Highlights (Dollars in thousands) | Item | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Total Interest and Dividend Income | $158,309 | $171,253 | ($12,944) | (7.56%) | | Total Interest Expense | $84,702 | $108,003 | ($23,301) | (21.57%) | | Net Interest Income | $73,607 | $63,250 | $10,357 | 16.37% | | Provision for Credit Losses | $1,800 | $1,200 | $600 | 50.00% | | Total Noninterest Income | $39,721 | $33,823 | $5,898 | 17.44% | | Total Noninterest Expense | $78,726 | $68,273 | $10,453 | 15.31% | | Net Income | $25,424 | $21,751 | $3,673 | 16.89% | | Basic EPS | $1.32 | $1.28 | $0.04 | 3.13% | | Diluted EPS | $1.31 | $1.27 | $0.04 | 3.15% | Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2025 and 2024 This section presents the Corporation's comprehensive income, including net income and other comprehensive income (loss) components, for the three and six months ended June 30, 2025 and 2024 Consolidated Statements of Comprehensive Income Highlights (Dollars in thousands) | Item | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Net Income | $13,245 | $10,815 | $2,430 | 22.47% | | Total Other Comprehensive Income (Loss), net of tax | $3,230 | $2,587 | $643 | 24.85% | | Total Comprehensive Income | $16,475 | $13,402 | $3,073 | 22.93% | Consolidated Statements of Comprehensive Income Highlights (Dollars in thousands) | Item | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Net Income | $25,424 | $21,751 | $3,673 | 16.89% | | Total Other Comprehensive Income (Loss), net of tax | $23,222 | ($5,173) | $28,395 | 548.89% | | Total Comprehensive Income | $48,646 | $16,578 | $32,068 | 193.44% | Consolidated Statements of Changes in Shareholders' Equity for the three and six months ended June 30, 2025 and 2024 This section outlines the changes in the Corporation's shareholders' equity, including net income, other comprehensive income, dividends, and share-based compensation, for the six months ended June 30, 2025 and 2024 Shareholders' Equity Changes (Dollars in thousands) | Item | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Balance at December 31 | $499,728 | $472,686 | | Net income | $25,424 | $21,751 | | Total other comprehensive income (loss), net of tax | $23,222 | ($5,173) | | Cash dividends declared | ($21,918) | ($19,318) | | Share-based compensation | $1,653 | $1,278 | | Treasury stock purchased | ($296) | $— | | Balance at June 30 | $527,519 | $470,957 | Consolidated Statements of Cash Flows for the six months ended June 30, 2025 and 2024 This section summarizes the cash inflows and outflows from operating, investing, and financing activities for the six months ended June 30, 2025 and 2024 Consolidated Statements of Cash Flows Highlights (Six months ended June 30, Dollars in thousands) | Activity | 2025 | 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $19,792 | $13,129 | | Net cash provided by investing activities | $250,966 | $35,797 | | Net cash used in financing activities | ($216,923) | ($31,579) | | Net increase in cash and cash equivalents | $53,835 | $17,347 | | Cash and cash equivalents at end of period | $167,724 | $107,531 | Condensed Notes to Unaudited Consolidated Financial Statements This section provides detailed notes on accounting policies, financial instruments, and key accounts, offering further context to the unaudited consolidated financial statements - The Corporation's financial statements conform to GAAP and banking industry practices, with intercompany balances eliminated. Management considers the Allowance for Credit Losses (ACL) on loans a material estimate susceptible to change[27][28][30] - No material impact is expected from recently issued accounting pronouncements ASU 2023-09 (Income Taxes) and ASU 2024-03 (Expense Disaggregation Disclosures)[31][32] Available for Sale Debt Securities (Dollars in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Amortized Cost | $1,084,845 | $1,049,557 | | Fair Value | $971,341 | $916,305 | | Total Unrealized Losses | ($114,250) | ($133,309) | | Pledged as Collateral | $366,400 | $310,500 | - Management does not intend to sell debt securities in an unrealized loss position and believes losses are due to interest rate changes, not credit quality, thus no ACL was recorded for securities[40] Loan Portfolio Composition (Dollars in thousands) | Loan Class | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Commercial Real Estate | $2,178,925 | $2,154,504 | | Commercial & Industrial | $547,318 | $542,474 | | Residential Real Estate | $2,096,250 | $2,126,171 | | Home Equity | $300,917 | $297,119 | | Other Consumer | $16,850 | $17,570 | | Total Loans | $5,140,260 | $5,137,838 | Past Due Loans (Dollars in thousands) | Category | June 30, 2025 (Total Past Due) | December 31, 2024 (Total Past Due) | | :--- | :--- | :--- | | Commercial | $1,799 | $900 | | Residential Real Estate | $9,772 | $7,741 | | Consumer | $2,464 | $3,341 | | Total Past Due Loans | $14,035 | $11,982 | | Nonaccrual Loans (included in past due) | $8,200 | $6,400 | - Troubled Loan Modifications (TLMs) for the six months ended June 30, 2025, totaled $5.7 million, including a $4.3 million Commercial Real Estate loan with interest rate reduction, maturity extension, and payment delay, and a $1.4 million Residential Real Estate loan with payment delay[61] Allowance for Credit Losses on Loans (Dollars in thousands) | Item | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Beginning Balance | $41,960 | $41,057 (Dec 31, 2023) | | Charge-offs (6 months) | ($3,189) | ($123) | | Recoveries (6 months) | $238 | $44 | | Provision (6 months) | $2,050 | $1,400 | | Ending Balance | $41,059 | $41,960 | - In Q1 2025, sales-leaseback transactions for five branch locations generated a $7.0 million pre-tax net gain and resulted in recording $10.0 million in operating lease ROU assets and liabilities[89] - The Corporation uses derivative financial instruments, including interest rate swaps and collars, to manage interest rate risk and accommodate customer needs. Derivatives are measured at fair value, with cash flow hedges impacting OCI and fair value hedges impacting earnings[93][95][96] Derivative Instruments Notional Amounts and Fair Values (Dollars in thousands) | Category | Notional (June 30, 2025) | Derivative Assets (June 30, 2025) | Derivative Liabilities (June 30, 2025) | | :--- | :--- | :--- | :--- | | Cash Flow Hedging Instruments | $220,000 | $279 | $1,074 | | Fair Value Hedging Instruments | $100,000 | $179 | $— | | Non-Hedging Instruments | $2,072,756 | $38,933 | $40,067 | | Total Net Derivatives | | $33,628 | $34,664 | - Mortgage loans held for sale under the fair value option increased mortgage banking revenues by $292 thousand (3 months) and $517 thousand (6 months) in 2025, compared to decreases in 2024[109] Deposit Summary (Dollars in thousands) | Deposit Type | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Noninterest-bearing demand deposits | $646,584 | $661,776 | | Interest-bearing demand deposits | $668,483 | $592,904 | | NOW accounts | $680,246 | $692,812 | | Money market accounts | $1,147,792 | $1,154,745 | | Savings accounts | $693,055 | $523,915 | | Time deposits | $1,209,088 | $1,489,648 | | Total Deposits | $5,045,248 | $5,115,800 | - FHLB advances decreased by $124.0 million to $1.0 billion at June 30, 2025, from $1.125 billion at December 31, 2024. The Bank had $987.1 million in available borrowing capacity with the FHLB at June 30, 2025[129][130] - The Board adopted a 2025 Repurchase Program on May 15, 2025, authorizing the repurchase of up to 850,000 shares. 10,000 shares were repurchased in Q2 2025 at an average price of $29.56[133] Regulatory Capital Ratios (June 30, 2025) | Ratio | Corporation | Bank | | :--- | :--- | :--- | | Total Capital (to Risk-Weighted Assets) | 13.06% | 12.96% | | Tier 1 Capital (to Risk-Weighted Assets) | 12.17% | 12.07% | | Common Equity Tier 1 Capital (to Risk-Weighted Assets) | 11.71% | 12.07% | | Tier 1 Capital (to Average Assets) (Leverage Ratio) | 8.66% | 8.58% | All ratios exceed 'well capitalized' minimums. - The Corporation's capital levels exceeded minimum regulatory requirements plus the 2.50% capital conservation buffer at June 30, 2025[135] - A substantial portion of the Corporation's revenues are excluded from ASC 606 scope, with wealth management, card interchange fees, and service charges on deposit accounts being key revenue streams within ASC 606[139][140][142] - In Q1 2025, the qualified pension plan liability was settled, resulting in a $6.4 million pre-tax non-cash pension settlement charge recognized in noninterest expenses. Remaining surplus assets of $10.3 million are expected to fund future 401(k) contributions[148] - The Corporation operates through two reportable business segments: Commercial Banking and Wealth Management Services. Commercial Banking includes lending, deposit generation, and investment activities, while Wealth Management Services offers investment management, financial planning, and trust services[151][153][154] Net Income by Business Segment (Dollars in thousands) | Segment | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Commercial Banking | $11,510 | $8,475 | $23,474 | $16,073 | | Wealth Management Services | $1,735 | $2,340 | $1,950 | $5,678 | | Consolidated Total | $13,245 | $10,815 | $25,424 | $21,751 | Earnings Per Common Share (EPS) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Basic EPS | $0.69 | $0.63 | $1.32 | $1.28 | | Diluted EPS | $0.68 | $0.63 | $1.31 | $1.27 | Off-Balance Sheet Financial Instruments (Dollars in thousands) | Instrument | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Commitments to extend credit | $965,716 | $968,858 | | Standby letters of credit | $8,776 | $12,455 | | ACL on Unfunded Commitments (6 months) | $1,190 | $1,440 | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the Corporation's financial performance, condition, and risk management, including operating results, balance sheet changes, liquidity, capital, and critical accounting policies Forward-Looking Statements This section highlights that the report contains forward-looking statements subject to various risks and uncertainties that could cause actual results to differ materially - The report contains forward-looking statements that involve known and unknown risks and uncertainties, which could cause actual results to differ materially from anticipated outcomes. Factors include changes in economic conditions, interest rates, loan demand, market volatility, regulatory changes, and operational risks[177][179] Non-GAAP Financial Measures and Reconciliation to GAAP This section explains the use of non-GAAP financial measures by management to evaluate performance, providing reconciliations to comparable GAAP measures - Management uses non-GAAP financial measures (e.g., adjusted net income, adjusted EPS, adjusted return on assets/equity) to evaluate performance, believing they are useful to investors and regulators by removing the impact of infrequent items. These measures are not GAAP substitutes and may not be comparable to other companies'[180][181] Adjusted Net Income (Non-GAAP, Dollars in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Net income, as reported | $13,245 | $10,815 | $25,424 | $21,751 | | Less: total adjustments, after-tax | $— | $739 | $417 | $2,309 | | Adjusted net income (non-GAAP) | $13,245 | $10,076 | $25,007 | $19,442 | | Adjusted diluted EPS (non-GAAP) | $0.68 | $0.59 | $1.29 | $1.14 | | Adjusted return on average assets (non-GAAP) | 0.80% | 0.56% | 0.75% | 0.54% | | Adjusted return on average equity (non-GAAP) | 10.14% | 8.79% | 9.73% | 8.38% | Overview This section provides a general description of Washington Trust Bancorp, Inc.'s financial services, primary income sources, and key operating expenses - Washington Trust Bancorp, Inc. provides a full range of financial services, including commercial, residential, and consumer lending, deposit products, and wealth management services across Rhode Island, Massachusetts, and Connecticut[191] - Net interest income is the largest source of operating income, supplemented by noninterest income from wealth management, mortgage banking, and deposit services. Key expenses include salaries, outsourced services, and occupancy costs[192][193] Risk Management This section describes the Corporation's comprehensive Enterprise Risk Management program, overseen by the Board of Directors, to identify, measure, monitor, and control material risks - The Corporation employs a comprehensive Enterprise Risk Management (ERM) program, overseen by the Board of Directors, to identify, measure, monitor, and control material risks including credit, interest rate, liquidity, price, compliance, strategic, reputation, and operational risks[194][195] - The ERM program utilizes a 'three lines of defense' strategy: business units manage initial risks, corporate functions provide policy and oversight, and Internal Audit offers independent assurance to the Board[204] Results of Operations This section analyzes the Corporation's financial performance, including net income, net interest income, noninterest income, and expenses, for the reporting periods Summary of Consolidated Operations (Dollars in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Net interest income | $37,185 | $31,585 | $5,600 | 18% | | Noninterest income | $17,078 | $16,660 | $418 | 3% | | Total revenues | $54,263 | $48,245 | $6,018 | 12% | | Provision for credit losses | $600 | $500 | $100 | 20% | | Noninterest expense | $36,530 | $33,910 | $2,620 | 8% | | Net income | $13,245 | $10,815 | $2,430 | 22% | | Adjusted net income (non-GAAP) | $13,245 | $10,076 | $3,169 | 31% | - Net income for Q2 2025 increased by 22% to $13.2 million, and year-to-date net income increased by 17% to $25.4 million, driven largely by increases in net interest income and impacted by infrequent transactions like a $7.0 million gain on sales-leaseback and a $6.4 million pension settlement charge in Q1 2025[206][208] Net Interest Income and Margin (FTE Basis, Dollars in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | FTE Net Interest Income | $37,402 | $31,812 | $74,029 | $63,699 | | Net Interest Margin | 2.36% | 1.83% | 2.32% | 1.84% | | Interest Rate Spread | 1.87% | 1.29% | 1.83% | 1.29% | - The improvement in net interest income and NIM largely reflects benefits from balance sheet repositioning transactions in December 2024, including the sale of lower-yielding debt securities and residential real estate loans, reinvestment into higher-yielding securities, and pay-down of higher-cost FHLB advances and wholesale brokered time deposits[215][217] Provision for Credit Losses (Dollars in thousands) | Item | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Provision for credit losses on loans | $650 | $500 | $2,050 | $1,400 | | Provision for credit losses on unfunded commitments | ($50) | $— | ($250) | ($200) | | Total Provision for Credit Losses | $600 | $500 | $1,800 | $1,200 | | Net Charge-offs (3 months) | $647 | $27 | | | | Net Charge-offs (6 months) | | | $3,000 | $79 | | ACL on loans to total loans | 0.80% | | 0.80% | | Noninterest Income (Dollars in thousands) | Item | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Wealth management revenues | $10,120 | $9,678 | $20,011 | $19,016 | | Mortgage banking revenues | $3,034 | $2,761 | $5,338 | $5,267 | | Card interchange fees | $1,247 | $1,275 | $2,756 | $2,420 | | Loan related derivative income | $676 | $49 | $777 | $333 | | Gain on sale of bank-owned properties, net | $— | $988 | $6,994 | $988 | | Total Noninterest Income | $17,078 | $16,660 | $39,721 | $33,823 | | Adjusted Noninterest Income (non-GAAP) | $17,078 | $15,672 | $32,727 | $30,735 | - Wealth management revenues increased due to higher asset-based revenues, with average AUA balances up 3% (3 months) and 4% (6 months) YoY. End-of-period AUA was $7.2 billion at June 30, 2025, up 1% from December 31, 2024, reflecting net investment appreciation partially offset by client outflows[236][237] Noninterest Expense (Dollars in thousands) | Item | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Salaries and employee benefits | $23,025 | $21,260 | $45,447 | $43,035 | | Outsourced services | $4,404 | $4,096 | $8,750 | $7,876 | | Net occupancy | $2,662 | $2,397 | $5,403 | $4,958 | | Pension plan settlement charge | $— | $— | $6,436 | $— | | Total Noninterest Expense | $36,530 | $33,910 | $78,726 | $68,273 | | Adjusted Noninterest Expense (non-GAAP) | $36,530 | $33,910 | $72,290 | $68,273 | - Salaries and employee benefits increased due to lower performance-based compensation in 2024 and lower staffing levels in 2025. Outsourced services and net occupancy expenses also rose, with the latter reflecting additional lease expense from Q1 2025 sales-leaseback transactions[244][245][246] Income Tax Rates | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Effective income tax rate | 22.7% | 21.8% | 22.5% | 21.2% | | Adjusted effective income tax rate (non-GAAP) | 22.7% | 21.6% | 22.4% | 20.7% | | Blended statutory rate | 25.3% | 25.5% | 25.3% | 25.5% | - The effective income tax rate increased due to higher state tax expense and a greater proportion of taxable income. Net deferred tax assets decreased to $40.5 million at June 30, 2025, from $63.0 million at December 31, 2024, partly due to the realization of a deferred tax asset from loan reclassification and sale[249][250] - Commercial Banking net income increased by 36% (3 months) and 46% (6 months) YoY, benefiting from balance sheet repositioning. Wealth Management Services net income decreased by 26% (3 months) and 66% (6 months) YoY, impacted by a Q1 2024 litigation settlement and a Q1 2025 pension settlement charge[252][257] Financial Condition This section analyzes the Corporation's balance sheet, including assets, liabilities, equity, loan portfolio composition, asset quality, and the allowance for credit losses Selected Financial Condition Data (Dollars in thousands) | Item | June 30, 2025 | December 31, 2024 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Total Assets | $6,745,167 | $6,930,647 | ($185,480) | (3%) | | Available for sale debt securities | $971,341 | $916,305 | $55,036 | 6% | | Total Loans | $5,140,260 | $5,137,838 | $2,422 | 0.05% | | Total Deposits | $5,045,248 | $5,115,800 | ($70,552) | (1%) | | FHLB advances | $1,001,000 | $1,125,000 | ($124,000) | (11%) | | Total Shareholders' Equity | $527,519 | $499,728 | $27,791 | 6% | - The securities portfolio increased by $55.0 million (6%) to $971.3 million at June 30, 2025, primarily due to purchases of U.S. government agency mortgage-backed securities and an increase in fair value, partially offset by routine pay-downs[265][266] - Net unrealized losses on available for sale debt securities decreased to $113.5 million at June 30, 2025, from $133.3 million at December 31, 2024, mainly concentrated in U.S. government agency mortgage-backed securities and attributed to market interest rate changes[267] - Total loans increased marginally by $2.4 million (0.05%) to $5.14 billion at June 30, 2025. Commercial loans constitute 53% of the portfolio, with CRE loans at $2.2 billion (up 1%) and C&I loans at $547.3 million (up 1%). Residential real estate loans remained at 41% of total loans, decreasing by $29.9 million (1%)[268][269][274][283][289] - The CRE office loan segment totaled $274.7 million (13% of CRE loans) at June 30, 2025, with 98% on accruing status and 85% pass-rated. Multi-family loans, the largest CRE segment, totaled $629.2 million (29% of CRE loans) and were 100% pass-rated and current[280][281] - Nonperforming assets increased to $26.1 million (0.39% of total assets) at June 30, 2025, from $23.3 million (0.34%) at December 31, 2024. This was driven by a $9.2 million increase in nonaccrual C&I loans (primarily one relationship in Chapter 11 bankruptcy), partially offset by a $5.8 million decline in nonaccrual CRE loans due to charge-offs and payoffs[304][308][309] - Past due loans (30+ days) increased by $2.1 million to $14.0 million, largely due to residential mortgage loans. Potential problem loans identified by management increased to $29.2 million, primarily consisting of two current CRE office loans in Massachusetts[313][318] - The Allowance for Credit Losses (ACL) on loans decreased by $901 thousand (2%) to $41.1 million, representing 0.80% of total loans at June 30, 2025, down from 0.82% at December 31, 2024. Net charge-offs for the six months ended June 30, 2025, totaled $3.0 million, reflecting partial charge-offs on two CRE office loans[325][327] Sources of Funds This section examines the Corporation's funding sources, including changes in deposits and FHLB advances, and their impact on liquidity - Total deposits decreased by $70.6 million (1%) to $5.0 billion at June 30, 2025, primarily due to a $295.7 million (99%) decline in wholesale brokered time deposits. This was partially offset by a $225.2 million (5%) increase in in-market deposits, driven by growth in savings and interest-bearing demand deposits[335][336] - FHLB advances decreased by $124.0 million (11%) to $1.0 billion at June 30, 2025. The reduction in both FHLB advances and wholesale brokered time deposits reflects increased in-market deposits, redeployment of cash from balance sheet repositioning, and liquidity management activities[339][340] Liquidity and Capital Resources This section discusses the Corporation's liquidity position, including primary and contingent sources, and its capital adequacy, highlighting regulatory compliance - The Corporation's primary liquidity source is in-market deposits (74% of average assets). Contingent liquidity, including FHLB and FRBB borrowing capacity and unencumbered securities, totaled $1.78 billion at June 30, 2025, covering 164.9% of uninsured deposits after exclusions[341][344] - Total shareholders' equity increased by $27.8 million to $527.5 million at June 30, 2025, driven by net income and a $23.2 million improvement in Accumulated Other Comprehensive Loss (AOCL), partially offset by $21.9 million in dividend declarations. The total equity to total assets ratio improved to 7.82%[350][352] - The Corporation and the Bank remain 'well capitalized,' with a total risk-based capital ratio of 13.06% at June 30, 2025, exceeding regulatory minimums[352] Asset/Liability Management and Interest Rate Risk This section details the Corporation's strategies for managing interest rate risk through income simulation and monitoring the market value of debt securities - The ALCO manages interest rate risk using income simulation to assess the effect of interest rate shifts on net interest income over 12-month and 13-24 month horizons. As of June 30, 2025, simulations indicated exposure to changing interest rates remained within established tolerance levels[354][358] Estimated Change in Net Interest Income from Unchanged Rate Scenario | Rate Shift | Months 1 - 12 (June 30, 2025) | Months 13 - 24 (June 30, 2025) | | :--- | :--- | :--- | | 100 bps decrease | (2.01%) | (2.10%) | | 200 bps decrease | (3.74%) | (4.29%) | | 300 bps decrease | (5.63%) | (7.26%) | | 100 bps increase | 0.69% | (0.74%) | | 200 bps increase | 2.03% | (0.65%) | | 300 bps increase | 3.35% | (0.98%) | - The Corporation monitors potential changes in the market value of available-for-sale debt securities due to interest rate changes to assess capital position exposure. For example, a 100 basis point rate decrease would increase market value by $54.9 million, while a 200 basis point increase would decrease it by $124.9 million as of June 30, 2025[365][367] Critical Accounting Policies and Estimates This section identifies the Allowance for Credit Losses (ACL) on loans as a critical accounting policy involving significant estimation uncertainty - Management considers the accounting policy related to the Allowance for Credit Losses (ACL) on loans to be a critical accounting policy, involving significant estimation uncertainty. No material changes have occurred in critical accounting policies since the December 31, 2024 Annual Report on Form 10-K[368][369] Recently Issued Accounting Pronouncements This section directs readers to Note 2 for details on recently issued accounting pronouncements and their expected impact on the Corporation's financial statements - Refer to Note 2 of the Unaudited Consolidated Financial Statements for details on recently issued accounting pronouncements and their expected impact on the Corporation's financial statements[370] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section refers to the detailed market risk disclosures, specifically interest rate risk, within Management's Discussion and Analysis - Quantitative and qualitative disclosures about market risk are integrated into Item 2, specifically under the 'Asset/Liability Management and Interest Rate Risk' section[371] Item 4. Controls and Procedures This section confirms the effectiveness of the Corporation's disclosure controls and procedures and notes revisions to internal controls over financial reporting due to a new accounting system - The Corporation's disclosure controls and procedures were evaluated and deemed effective as of June 30, 2025, ensuring timely and accurate reporting[372] - Internal controls over financial reporting were revised and evaluated as effective following the implementation of a new wealth management and trust accounting system during Q2 2025[373] PART II. Other Information Item 1. Legal Proceedings The Corporation is involved in various routine legal claims and proceedings, but management believes their ultimate disposition will not materially affect the consolidated financial position or results of operations - Management believes that the ultimate disposition of current legal proceedings will not materially affect the Corporation's consolidated financial position or results of operations[374] Item 1A. Risk Factors There have been no material changes to the risk factors previously disclosed in the Annual Report on Form 10-K for the fiscal year ended December 31, 2024 - No material changes to the risk factors previously described in the Annual Report on Form 10-K for December 31, 2024, have occurred[375] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The Corporation repurchased 10,000 shares of common stock in May 2025 under its 2025 Repurchase Program, which authorizes the repurchase of up to 850,000 shares by May 15, 2026 Share Repurchase Activity (Q2 2025) | Period | Total Shares Purchased | Average Price Paid per Share | Shares Purchased under Publicly Announced Plans | Maximum Shares Remaining Under Plans | | :--- | :--- | :--- | :--- | :--- | | May 1 - 31, 2025 | 10,000 | $29.56 | 10,000 | 840,000 | | Total (Q2 2025) | 10,000 | $29.56 | 10,000 | 840,000 | - The 2025 Repurchase Program, adopted on May 15, 2025, authorizes the repurchase of up to 850,000 shares (approximately 4% of outstanding common stock) and expires on May 15, 2026[376] Item 5. Other Information No Rule 10b5-1 or non-Rule 10b5-1 trading arrangements were adopted, terminated, or modified by the Corporation's directors or officers during the three months ended June 30, 2025 - No insider trading arrangements (Rule 10b5-1 or non-Rule 10b5-1) were adopted, terminated, or modified by directors or officers during Q2 2025[377] Item 6. Exhibits This section lists the exhibits filed as part of the Form 10-Q, including certifications from the CEO and CFO, and the Inline XBRL formatted financial statements - Exhibits include CEO and CFO certifications (31.1, 31.2, 32.1) and Inline XBRL formatted financial statements (101, 104)[378] Signatures The report is duly signed by key executives of Washington Trust Bancorp, Inc., confirming compliance with Securities Exchange Act requirements - The report is signed by Edward O. Handy III (Chairman and CEO), Ronald S. Ohsberg (SEVP, CFO, and Treasurer), and Maria N. Janes (EVP, Chief Accounting Officer, and Controller) on August 6, 2025[383]