WASHINGTON TRUST BANCORP INC
For the period ended Dec 31, 2024. Filed Feb 25, 2025.
View on SEC.govAbout this filing
A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2024 · Filed Feb 25, 2025
WASH$38.62-0.1%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-K
Period ended 2023-12-31; filed 2024-02-26.
0000737468-24-000012
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-K
Period ended 2024-12-31; filed 2025-02-25.
0000737468-25-000007
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 285 previous paragraphs and 309 current paragraphs.
142 unchanged; 99 reworded; 64 added; 34 removed; 10 previous and 4 current paragraphs rearranged.
Tables are not compared: 37 previous and 40 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (64)
Current report
Non-GAAP Financial Measures and Reconciliation to GAAP
Current report
In addition to evaluating the Corporation’s results of operations in accordance with GAAP, management supplements this evaluation with an analysis of certain non-GAAP financial measures, such as adjusted noninterest income, adjusted income before income taxes, adjusted income tax expense, adjusted effective tax rate, adjusted net income, adjusted net income available to common shareholders, adjusted diluted earnings per common share, adjusted dividend payout ratio, adjusted return on average assets and adjusted return on average equity.
Current report
We believe these non-GAAP financial measures are utilized by regulators and market analysts to evaluate the Corporation’s results of operations and financial condition, and therefore such information is useful to investors. In addition, these non-GAAP financial measures remove the impact of infrequent items that may obscure trends in the Corporation’s underlying performance. These disclosures should not be viewed as a substitute for financial results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures, which may be presented by other companies. Because non-GAAP financial measures are not standardized, it may not be possible to compare these financial measures with other companies' non-GAAP financial measures having the same or similar names.
Current report
Each presentation below reconciles the “as reported” GAAP measure to the adjusted non-GAAP measure.
Current report
The following table presents adjusted noninterest income, adjusted income before income taxes, adjusted income tax expense, adjusted effective tax rate, adjusted net income, and adjusted net income available to common shareholders:
Current report
(1)Calculated as income tax expense (benefit) divided by income (loss) before income taxes.
Current report
(2)Calculated as income tax expense (benefit), adjusted for the tax impact of the adjustments as outlined in the table above, divided by income (loss) before income taxes, adjusted for the pre-tax impact of the adjustments as outlined in the table above.
Current report
The following table presents adjusted diluted earnings per common share and adjusted dividend payout ratio:
Current report
(1)Net income (loss) available to common shareholders divided by weighted average diluted common and potential shares outstanding.
Current report
(2)Net income (loss) available to common shareholders, adjusted for the after-tax impact of adjustments as outlined in the table above, divided by weighted average diluted common and potential shares outstanding.
Current report
(3)Cash dividends declared per share divided by diluted earnings (loss) per common share.
Current report
(4)Cash dividends declared per share divided by diluted earnings (loss) per common share, adjusted for the after-tax impact of adjustments as outlined in the table above.
Current report
The following table presents adjusted return on average assets and adjusted return on average equity:
Current report
(1)Net income (income) loss divided by total average assets.
Current report
(2)Net income (loss), adjusted for the after-tax impact of adjustments as outlined in the table above, divided by total average assets.
Current report
(3)Net income (loss) available to common shareholders divided by total average equity.
Current report
(4)Net income (loss) available to common shareholders, adjusted for the after-tax impact of adjustments as outlined in the table above, divided by total average equity.
Current report
Common Stock Issued in Public Offering and Balance Sheet Repositioning Transactions
Current report
On December 16, 2024, the Corporation completed an underwritten public offering of 2,198,528 shares of its common stock at a public offering price of $34.00 per share, and disclosed that the use of proceeds was expected to include investments in the Bank and Bank balance sheet optimization strategies involving the sale of lower-yielding loans and securities, the purchase of debt securities with current market yields, and the repayment of wholesale funding balances. The net proceeds received from the offering, after deducting underwriting discounts and commissions and operating expenses payable by the Corporation, were $70.5 million.
Current report
On December 20, 2024, the Corporation announced the execution of balance sheet repositioning transactions to support continued organic growth and capital generation. The Bank sold available for sale debt securities with an amortized cost balance of $409.5 million (fair value of $378.4 million) and a weighted average yield of 2.65% and reinvested $378.4 million into purchases of available for sale debt securities with a weighted average yield of 5.30%. The sale of debt securities resulted in a net pre-tax realized loss of $31.0 million (after-tax of $23.5 million) that was recognized in the fourth quarter of 2024.
Current report
In addition, pursuant to the terms of a sales agreement effective December 30, 2024, the Bank committed to sell residential mortgage loans with an amortized cost balance of $344.6 million and a weighted average rate of approximately 3.02%. These loans were reclassified to held for sale and written down to a fair value of $281.7 million, resulting in a net pre-tax loss of $62.9 million (after-tax of $47.7 million) that was recognized in the fourth quarter of 2024. The sale of these loans was completed on January 24, 2025. The net proceeds received from the equity offering and the loan sale were used to pay down wholesale funding balances in December 2024 and the first quarter of 2025.
Current report
In 2024, a net loss of $28.1 million was recognized, compared to net income of $48.2 million in 2023. As further described under the caption “Overview” above, balance sheet repositioning transactions were executed that impacted the 2024 results. In addition, income of $2.1 million associated with a litigation settlement was recognized in the first quarter of 2024 and a net gain of $988 thousand was recognized on the sale of a bank-owned operations facility in the second quarter of 2024. In 2023, a state legislative tax change resulted in a net reduction in income tax expense of $3.3 million. Excluding these items, adjusted net income (non-GAAP) in 2024 was $40.9 million, compared to $44.9 million in 2023, down by $4.1 million, or 9%. This decrease was primarily attributable to a decline in net interest income and a relatively modest increase in noninterest expenses, partially offset by higher wealth management revenues and mortgage banking revenues.
Current report
-38- interest-bearing deposits in 2024 was 2.96%, up by 62 basis points from 2.34% in 2023. The average balance of noninterest-bearing demand deposits for 2024 decreased by $113.6 million, or 15%, from the average balance in 2023.
Current report
The provision for credit losses in 2024 reflected specific reserve allocations on individually analyzed nonaccrual commercial loans, as well as the impact of continued, yet subsiding, slowdown in prepayment speeds. This was partially offset by relatively stable to improving forecasted economic conditions in 2024 and a decline in loan balances that was concentrated in residential real estate and also included the reclassification of loans from portfolio to held for sale.
Current report
Noninterest income amounted to a net loss of $27.8 million in 2024, compared to income of $56.1 million in 2023. Noninterest income in 2024 was impacted by the recognition of $93.9 million in net realized losses on securities and net losses on the sale of portfolio loans associated with balance sheet repositioning transactions. In addition, other income in 2024 included income of $2.1 million associated with a litigation settlement and a net gain of $988 thousand recognized on the sale of a bank-owned operations facility. Excluding the impact of these transactions, adjusted noninterest income (non-GAAP) was $63.1 million in 2024, compared to $56.1 million in 2023, up by $6.9 million, or 12.3%.
Current report
Wealth management revenues represent our largest source of noninterest income. A substantial portion of wealth
Current report
Mortgage banking revenues increased by $4.3 million, or 65%, in 2024. The increase in mortgage banking revenues was mainly attributable to increases in both sales volume and sales yield.
Current report
Other income was up by $3.2 million, or 242%, from 2023, primarily due to the receipt of income associated with a litigation settlement and the net gain on the sale of a bank-owned operations facility as mentioned above.
Current report
In 2024, the Corporation recognized an income tax benefit of $10.8 million, compared to income tax expense of $8.3 million in 2023. The effective tax rate for 2024 was 27.7%, compared to a rate 14.7% for 2023. The year over year comparisons include the impact of the balance sheet repositioning transactions, litigation settlement income and net gain on sale of a bank-owned operations facility in 2024, as well as a net tax expense reduction associated with a state tax legislative change and valuation allowance adjustment in 2023. Excluding these items, the adjusted effective income tax rate (non-GAAP) increased to 21.5% in 2024 from 20.5% in 2023, reflecting changes in state tax expense, lower levels of income from BOLI and tax-exempt income, and higher excess tax expense associated with the settlement of share-based awards.
Current report
The provision for credit losses decreased by $800 thousand, or 25%, from 2023. See additional discussion under the caption “Provision for Credit Losses.”
Current report
Noninterest income derived from the Commercial Banking segment was a loss of $69.6 million, compared to income of $20.0 million in 2023. Noninterest income in 2024 included net losses recognized on balance sheet repositioning transactions, as well as a net gain recognized on the sale of a bank-owned operations facility. Excluding these items, the year over year change in Commercial Banking noninterest reflected higher mortgage banking revenues that was partially offset by lower loan related derivative income. See additional discussion under the caption “Noninterest Income” above.
Current report
Wealth Management Services
Current report
As further disclosed under the caption “Overview,” in December 2024, the Corporation completed an equity offering and announced a subsequent balance sheet repositioning involving the sale of lower-yielding residential mortgage loans and debt securities, the purchase of debt securities with current market yields, and the repayment of wholesale funding balances.
Current report
Mortgage loans held for sale at lower of cost or market totaled $281.7 million at December 31, 2024, as loans with an amortized cost balance of $344.6 million that were held in portfolio were reclassified to held for sale as part of the balance sheet repositioning transactions. These loans were written down to their fair value.
Current report
The securities portfolio decreased by $84.1 million, or 8%, from the end of 2023, reflecting routine pay-downs on mortgage-backed securities and a decrease in fair value of available for sale securities due to changes in market interest rates.
Current report
Total loans decreased by $509.9 million, or 9%, from the balance at December 31, 2023, largely reflecting a decrease in the residential real estate loan portfolio, which included the reclassification of loans to held for sale associated with the balance sheet repositioning transactions.
Current report
Total deposit balances decreased by $232.4 million, or 4%, from the end of 2023, reflecting a decrease in wholesale brokered time deposits that was partially offset by in-market deposit growth. FHLB advances decreased by $65.0 million, or 5%, from December 31, 2023. Both FHLB and wholesale brokered time deposits decreased in 2024, reflecting less need for wholesale funding and the use of net proceeds received from December 2024 equity offering to pay down balances.
Current report
As part of the December 2024 balance sheet repositioning transactions, the Bank sold available for sale debt securities with an amortized cost balance of $409.5 million (fair value of $378.4 million) and a weighted average yield of 2.65% and reinvested $378.4 million into purchases of available for sale debt securities with a weighted average yield of 5.30%. These sales resulted in a net realized pre-tax loss of $31.0 million that was recognized in December 2024.
Current report
The carrying value of the securities portfolio decreased by $84.1 million, or 8%, from the end of 2023. The decrease included $72.1 million of routine pay-downs and maturities of mortgage-backed securities, as well as a temporary decline in the fair value of available for sale debt securities.
Current report
Total loans amounted to $5.1 billion at December 31, 2024, down by $509.9 million, or 9%, from the end of 2023. This decline largely reflected a decrease in the residential real estate loan portfolio, which included the reclassification of $344.6 million of loans to held for sale associated with the balance sheet repositioning transactions.
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Removed paragraphs (34)
Previous report
Net income totaled $48.2 million in 2023, down by 33% from the $71.7 million reported in 2022. Results in 2023 were impacted by steep increases in market interest rates and declines in wealth management and mortgage banking revenues.
Previous report
The decline in net interest income in 2023 was driven by increased funding costs, which offset the benefit of higher yields on, and growth in, average interest-earning asset balances. The decline in noninterest income reflected lower wealth management asset-based revenues and lower average AUA balances, attributable to client asset outflows concentrated in the fourth quarter of 2022. The decline in noninterest income also reflected lower mortgage banking revenues, as higher market interest rates have dampened mortgage activity. The provision for credit losses reflected loan growth and slowdown of loan prepayment speeds, changes in asset and credit quality, and reflected our estimate of forecasted economic conditions. The increase in noninterest expenses reflected higher FDIC deposit insurance costs and increases in various categories of noninterest expenses, partially offset by a decrease in salaries and employee benefits. Income tax expense declined in 2023, largely reflecting a lower level of pre-tax income and a net $3.3 million reduction of income tax expense resulting from the revaluation of the Corporation’s net deferred tax assets.
Previous report
The negative provision in 2022 reflected low loss rates and strong asset and credit quality that more than offset negative trends in economic forecasts and loan growth that was concentrated in residential real estate loans.
Previous report
AUA and related asset-based revenues were adversely impacted by client withdrawals associated with the departure of four client-facing advisors at the end of the third quarter of 2022. These four advisors were associated with approximately $1.0 billion of AUA as of September 30, 2022. Through December 31, 2023, cumulative client asset withdrawals associated with the departure of the advisors amounted to $675 million, of which $71 million was withdrawn in 2023 and $604 million was withdrawn in the fourth quarter of 2022. The cumulative withdrawals reduced wealth management revenues by approximately $3.8 million in 2023. While there were cost savings in salaries and employee benefits expense associated with the departure of these advisors, they were partially offset by a higher level of legal expenses also associated with this matter.
Previous report
Mortgage banking revenues decreased by $2.1 million, or 24%, in 2023. The decline in mortgage banking revenues was mainly attributable to a decline in sales volume and a reduction in the sales yield. Residential real estate loan origination, refinancing and sales activity decreased in response to increases in market interest rates and changes in the housing markets. Mortgage banking revenues were also impacted by changes in the fair value of mortgage loans held for sale and forward loan commitments, which are primarily based on current market prices in the secondary market and correlate to changes in the size of the mortgage pipeline.
Previous report
Net occupancy expense for 2023 increased by $510 thousand, or 6%, from 2022 primarily due to branch expansion. Equipment expense for 2023 increased by $521 thousand, or 14%, from 2022, largely reflecting depreciation associated with branch and office equipment purchases.
Previous report
In October 2023, the Commonwealth of Massachusetts enacted into law a tax bill changing how corporations calculate their Massachusetts taxable income effective on January 1, 2025. As required, the Corporation revalued its deferred tax assets and liabilities and in the fourth quarter of 2023. The revaluation of our net deferred tax assets is subject to further guidance and interpretation of the law that may be issued.
Previous report
Income tax expense in 2023 was reduced by a net $3.3 million adjustment associated with the revaluation of the Corporation's net deferred tax assets due to the enactment of tax legislation mentioned above, and a valuation allowance that reflected management’s estimate regarding the realizability of a portion of the Corporation’s state deferred tax assets, largely associated with state net operating loss carryforwards.
Previous report
A provision for credit losses of $3.2 million was recognized in earnings in 2023, compared to a negative provision for credit losses (or a benefit) of $1.3 million in 2022. See additional discussion under the caption “Provision for Credit Losses.”
Previous report
Noninterest income derived from the Commercial Banking segment decreased by $3.1 million, or 13%, from 2022, largely reflecting lower mortgage banking revenues and lower loan related derivative income, partially offset by higher BOLI income. See additional discussion under the caption “Noninterest Income” above.
Previous report
Total assets amounted to $7.2 billion at December 31, 2023, up by $542.8 million, or 8%, from the end of 2022 due to loan growth.
Previous report
Cash and due from banks declined by $28.7 million, or 25%, from the end of 2022, reflecting lower cash balances on deposit at correspondent banks and a reduction in cash collateral pledged to derivative counterparties.
Previous report
Total loans increased by $537.6 million, or 11%, from the balance at December 31, 2022, with growth in the residential real estate and CRE portfolios.
Previous report
Total deposits increased by $329.2 million, or 7%, from the end of 2022, largely reflecting an increase in wholesale brokered time deposits. FHLB advances increased by $210.0 million, or 21%, from December 31, 2022. The increase in wholesale brokered time deposits and FHLB advances reflected higher levels of wholesale funding being utilized to fund balance sheet growth.
Previous report
The securities portfolio increased by $6.5 million, or 1%, from the end of 2022. This included purchases of U.S. government agency and U.S. government-sponsored debt securities, including mortgage-backed securities, totaling $60.2 million, with a weighted average yield of 4.98% and an increase of $20.2 million (pretax) in the fair value of available for sale securities. These were partially offset by $72.5 million of routine pay-downs on mortgage-backed securities.
Previous report
Total loans amounted to $5.6 billion at December 31, 2023, up by $537.6 million, or 11%, from the end of 2022, largely reflecting growth in both the residential real estate and CRE portfolios.
Previous report
CRE loans totaled $2.1 billion at December 31, 2023, up by $277.1 million, or 15%, from the balance at December 31, 2022.
Previous report
The decline in C&I balances reflected payments of $87.3 million and reclassifications to CRE of $14.7 million, partially offset by loan originations and advances of approximately $50.7 million.
Previous report
The residential real estate loan portfolio represented 46% of total loans at December 31, 2023, compared to 45% of total loans at December 31, 2022.
Previous report
Residential real estate loans held in portfolio amounted to $2.6 billion at December 31, 2023, up by $281.5 million, or 12%, from the balance at December 31, 2022. A large proportion of loan origination activity was originated for portfolio.
Previous report
Total nonaccrual loans increased by $31.8 million from the end of 2022.
Previous report
A positive provision for credit losses (or a charge) of $3.2 million was recognized in earnings in 2023. This reflected loan growth and slowdown of loan prepayment speeds, changes in asset and credit quality, and our current estimate of forecasted economic conditions. Econometric factors have been stable to improving in 2023 with our forecast reflecting a lower probability of a recession.
Previous report
Total deposits amounted to $5.3 billion at December 31, 2023, up by $329.2 million, or 7%, from December 31, 2022, largely reflecting increases in wholesale brokered time deposits.
Previous report
Wholesale brokered deposits increased by $295.9 million, or 83%, from December 31, 2022, as higher levels were utilized to fund balance sheet growth.
Previous report
-59- associated with the annual remeasurement of pension plan liabilities. The overall change in total shareholders’ equity also included reductions of $38.3 million for dividend declarations and a $6.6 million increase in treasury stock balances.
Previous report
The change in treasury stock balances included the repurchase of 200,000 shares in January and February at an average price of $43.70 and a total cost of $8.8 million, under the 2023 Repurchase Program. The IRA was signed into law in 2022 and imposed an excise tax of 1% on share repurchases made by the Corporation, net of shares issued, effective in 2023. At December 31, 2023, the Corporation recognized a $73 thousand excise tax liability, which was included in other liabilities, attributable to shares repurchased in 2023, with a corresponding offset to treasury stock on the Consolidated Balance Sheet.
Previous report
The Corporation declared dividends of $2.24 per share in 2023, representing an increase of 6 cents per share, or 3%, over last year. The dividend payout ratio (dividends declared per share to diluted earnings per share) was 79.4% in 2023, compared to 53.0% in 2022.
Previous report
As of December 31, 2023, the ALCO estimates that negative exposure of net interest income in Year 1 to falling rates as compared to an unchanged rate scenario results from a more rapid decline in earning asset yields compared to rates paid on deposits. If market interest rates were to fall and remain lower for a sustained period, certain savings and time deposit rates could decline more slowly and by a lesser amount than other market interest rates. For simulation purposes, deposit rate changes are anticipated to lag behind other market interest rates in both timing and magnitude. Asset yields would likely decline more rapidly than deposit costs as holdings mature or reprice, since cash flow from mortgage-related prepayments and redemption of callable securities would increase as market interest rates fall. The negative exposure in down rate scenarios reflects the insensitivity of certain deposit rates to market interest rate declines as they approach their floors. The positive exposure to falling rates in Year 2 is attributable to continued downward repricing of liabilities as time deposits and wholesale funding are replaced with lower rates as they mature.
Previous report
As of December 31, 2023, the positive exposure of net interest income in Year 1 to rising rates as compared to an unchanged rate scenario results from a more rapid projected relative rate of increase in asset yields than funding costs over the near term. For simulation purposes, deposit rate changes are anticipated to lag behind other market interest rates in both timing and magnitude. The negative exposure to rising rates in Year 2 is due to a higher level of longer-term fixed rate assets, as well as larger proportion of wholesale funds to total sources of funds. Fixed rate assets would not reprice upward in a rising rate environment. Wholesale funds generally would reprice more quickly and by a greater amount than the repricing of in-market deposits in response to changes in market interest rates. As market rates increase, ALCO modeling assumes that deposits shift from lower cost to higher cost deposits. This assumption reflects historical operating conditions in rising rate cycles. Although asset yields would increase in a rising interest rate environment, the cumulative impact of relative growth in rate-sensitive higher cost deposit categories and wholesale funds suggests that the increase in the Corporation’s cost of funds could result in a relative decline in net interest income in Year 2 compared to an unchanged rate scenario.
Previous report
-61- modeling assumes a static balance sheet, with the exception of certain modeled deposit mix shifts from low cost savings deposits to higher cost time deposits in rising rate scenarios as noted above.
Previous report
-62- hikes, as the increases in the level of inflation experienced in recent years has been somewhat mitigated. If the Federal Reserve decides to reduce its Federal Funds target rate, variable-rate assets would likely reprice downward more rapidly than interest-bearing liabilities.
Previous report
LIBOR Transition
Previous report
LIBOR was used extensively as a benchmark for various commercial and financial contracts, including loans, securities, funding sources, interest rate swaps and other derivatives. The ICE Benchmark Administration, the authorized and regulated administrator of LIBOR, ended publication of remaining LIBOR tenors on June 30, 2023. Financial services regulators and industry groups collaborated to develop alternate reference rate indices or reference rates, such as SOFR. SOFR is a backward-looking secured rate as opposed to a forward-looking unsecured rate.
Previous report
We identified all LIBOR-related contracts and determined which ones would require language to incorporate an alternative reference rate. We ceased offering new loan contracts that referenced LIBOR, and processed modifications on loans that referenced LIBOR to transition them to a new reference rate. For derivative contracts, the International Swap Dealers Association (commonly known as "ISDA") developed fallback language for swap agreements and established a protocol to allow counterparties to modify legacy trades to include the new fallback language. In 2023, the Corporation completed the transition of all contracts (including commercial loans, loan related derivatives, cash flow hedging instruments, and junior subordinated debentures) that previously referenced LIBOR to a new reference rate, primarily SOFR.
Reworded paragraphs (99)
Previous wording
We continue to leverage our strong regional brand to build market share and remain steadfast in our commitment to provide superior service. We believe the key to future growth is providing customers with convenient in-person service and digital banking solutions. In April 2023, we opened a new full-service branch in Barrington, Rhode Island and in January 2024, we opened a new full-service branch in Smithfield, Rhode Island. We plan to open another branch in the Olneyville section of Providence in mid-2024.
Current wording
We continue to leverage our strong regional brand to build market share and remain steadfast in our commitment to provide superior service. We believe the key to future growth is providing customers with convenient in-person service and digital banking solutions. In January 2024, we opened a new full-service branch in Smithfield, Rhode Island and in September 2024, we opened a new full-service branch in the Olneyville section of Providence.
Previous wording
Credit risk represents the possibility that borrowers or other counterparties may not repay loans or other contractual obligations according to their terms due to changes in the financial capacity, ability and willingness of such borrowers or counterparties to meet their obligations. In some cases, the collateral securing the payment of the loans may be sufficient to assure repayment, but in other cases the Corporation may experience significant credit losses which could have an adverse effect on its operating results. The Corporation makes various assumptions and judgments about the collectability of its loan portfolio, including the creditworthiness of its borrowers and counterparties and the value of the real estate and other assets serving as collateral for the repayment of loans. Credit risk also exists with respect to investment securities. For further discussion regarding the credit risk and the credit quality of the Corporation’s loan portfolio, see Notes 4 and 5 to the Consolidated Financial Statements. For further discussion regarding credit risk associated with unfunded commitments, see Note 21 to the Consolidated Financial Statements. For further discussion regarding the Corporation’s securities portfolio, see Note 3 to the Consolidated Financial Statements.
Current wording
Credit risk represents the possibility that borrowers or other counterparties may not repay loans or other contractual obligations according to their terms due to changes in the financial capacity, ability and willingness of such borrowers or counterparties to meet their obligations. In some cases, the collateral securing the payment of the loans may be sufficient to assure repayment, but in other cases the Corporation may experience significant credit losses which could have an adverse effect on its operating results. The Corporation makes various assumptions and judgments about the collectability of its loan portfolio, including the creditworthiness of its borrowers and counterparties and the value of the real estate and other assets serving as collateral for the repayment of loans. Credit risk also exists with respect to investment securities. For further
Previous wording
The risk to earnings arising from movements in interest rates. Interest rate risk arises from differences between the timing of rate changes and the timing of cash flows. It exists because the repricing frequency and magnitude of interest-earning assets and interest-bearing liabilities are not identical. See the “Asset/Liability Management and Interest Rate Risk” section below for additional disclosure.
Current wording
Interest rate risk is the risk of loss to earnings due to movements in interest rates. Interest rate risk arises from differences between the timing of rate changes and the timing of cash flows. It exists because the repricing frequency and magnitude of interest-earning assets and interest-bearing liabilities are not identical. See the “Asset/Liability Management and Interest Rate Risk” section below for additional disclosure.
Previous wording
Compliance risk represents the risk of regulatory sanctions or financial loss resulting from the failure to comply with laws, rules and regulations and standards of good banking practice. Activities which may expose the Corporation to compliance risk include, but are not limited to, those dealing with the prevention of money laundering, privacy and data protection, adherence to all applicable laws and regulations and employment and tax matters.
Current wording
Compliance risk represents the risk of regulatory sanctions or financial loss resulting from the failure to comply with laws, rules, and regulations and standards of good banking practice. Activities that may expose the Corporation to compliance risk include, but are not limited to, those dealing with the prevention of money laundering, privacy and data protection, adherence to all applicable laws and regulations and employment and tax matters.
Previous wording
The following table presents average balance and interest rate information. Tax-exempt income is converted to an FTE basis using the statutory federal income tax rate adjusted for applicable state income taxes net of the related federal tax benefit. Unrealized gains (losses) on available for sale securities and changes in fair value on mortgage loans held for sale are excluded from the average balance and yield calculations. Nonaccrual loans, as well as interest recognized on these loans, are included in amounts presented for loans.
Current wording
The following table presents daily average balance, interest, and yield/rate information, as well as net interest margin on an FTE basis. Tax-exempt income is converted to an FTE basis using the statutory federal income tax rate adjusted for applicable state income taxes net of the related federal tax benefit. Unrealized gains (losses) on available for sale securities, changes in fair value on mortgage loans held for sale, and basis adjustments associated with fair value hedges are excluded from the average balance and yield calculations. Nonaccrual loans, as well as interest recognized on these loans, are included in amounts presented for loans.
Previous wording
Net interest income, the primary source of our operating income, totaled $137.1 million and $156.0 million, respectively, for 2023 and 2022. Net interest income is affected by the level of and changes in interest rates, and changes in the amount and composition of interest-earning assets and interest-bearing liabilities. Prepayment penalty income associated with loan payoffs is included in net interest income.
Current wording
Net interest income, the primary source of our operating income, totaled $128.4 million and $137.1 million, respectively, for 2024 and 2023. Net interest income is affected by the level of and changes in interest rates, and changes in the amount and composition of interest-earning assets and interest-bearing liabilities. Prepayment penalty income associated with loan payoffs is included in net interest income.
Previous wording
Net interest income includes the periodic recognition of prepayment penalty fee income associated with commercial loan payoffs. Prepayment penalty fee income amounted to $272 thousand (or 1 basis point benefit to NIM) and $183 thousand (or no basis point benefit to NIM), respectively, in 2023 and 2022.
Current wording
Net interest income includes the periodic recognition of prepayment penalty fee income associated with commercial loan payoffs. Prepayment penalty fee income amounted to $70 thousand (or 0 basis point benefit to NIM) and $272 thousand (or 1 basis point benefit to NIM), respectively, in 2024 and 2023.
Previous wording
The analysis of net interest income, NIM and the yield on loans is also impacted by changes in the level of net amortization of premiums and discounts on securities and loans, which is included in interest income. Changes in market interest rates affect the level of loan prepayments and the receipt of payments on mortgage-backed securities. Prepayment speeds generally decrease as market interest rates rise and increase as market interest rates decline. Changes in prepayment speeds could increase or decrease the level of net amortization of premiums and discounts, thereby affecting interest income. Additionally, as PPP loans were forgiven by the SBA, related unamortized net fee balances were accelerated and amortized, increasing net interest income.
Current wording
The analysis of net interest income, NIM and the yield on loans is also impacted by changes in the level of net amortization of premiums and discounts on securities and loans, which is included in interest income. Changes in market interest rates affect the level of loan prepayments and the receipt of payments on mortgage-backed securities. Prepayment speeds generally decrease as market interest rates rise and increase as market interest rates decline. Changes in prepayment speeds could increase or decrease the level of net amortization of premiums and discounts, thereby affecting interest income. As noted in the Consolidated Statements of Cash Flows, net amortization of premiums and discounts on securities and loans (a net reduction to net interest income) amounted to $1.3 million in 2024, compared to $1.4 million in 2023.
Previous wording
FTE net interest income in 2023 amounted to $138.0 million, down by $19.1 million, or 12%, from 2022. Growth in average interest-earning assets, net of increased average interest-bearing liability balances, contributed $544 thousand of net interest income in 2023. Increases in funding costs outpaced increases in asset yields, reducing net interest income by $19.7 million. See additional discussion regarding interest rate sensitivity under the caption “Asset/Liability Management and Interest Rate Risk.”
Current wording
FTE net interest income in 2024 amounted to $129.4 million, down by $8.7 million, or 6%, from 2023. Increases in average interest-bearing liability balances, net of increases in average interest-earning assets, reduced net interest income by $4.4 million in 2024. Increases in funding costs outpaced increases in asset yields, reducing net interest income by $4.3 million. See additional discussion regarding interest rate sensitivity under the caption “Asset/Liability Management and Interest Rate Risk.”
Previous wording
NIM was 2.05% in 2023, down by 64 basis points from 2.69% in 2022. While NIM benefited from higher market interest rate on loans, it was adversely impacted by a higher cost of funds.
Current wording
NIM was 1.87% in 2024, down by 18 basis points from 2.05% in 2023. While NIM benefited from higher market interest rates on loans, it was adversely impacted by a higher cost of funds.
Previous wording
Total average securities for 2023 increased by $63.7 million, or 6%, from the average balance for 2022, due to purchases of debt securities. The FTE rate of return on securities was 2.45% in 2023, up by 50 basis points from 1.95% in 2022, reflecting the impact of higher market interest rates in 2023.
Current wording
Total average securities for 2024 decreased by $66.8 million, or 6%, from the average balance for 2023, primarily due to routine pay downs. The FTE rate of return on securities was 2.49% in 2024, up by 4 basis points from 2.45% in 2023.
Previous wording
Total average loan balances increased by $840.3 million, or 18%, from the average balance for 2022. This reflected growth in average residential real estate and CRE loans. The yield on total loans in 2023 was 5.03%, up by 128 basis points from 3.75% in 2022, reflecting higher market interest rates in 2023.
Current wording
Total average loan balances increased by $195.9 million, or 4%, from the average balance for 2023. This reflected growth in average CRE and residential real estate loans. The yield on total loans in 2024 was 5.37%, up by 34 basis points from 5.03% in 2023, reflecting higher market interest rates in 2024.
Previous wording
Higher levels of wholesale funding were used in 2023 to fund balance sheet growth. The average balance of FHLB advances for 2023 increased by $642.5 million, or 155%, compared to the average balance for 2022. Due to increases in market rates, the average rate paid on such advances in 2023 was 4.69%, up 186 basis points from 2.83% in 2022. Included in total average interest-bearing deposits were wholesale brokered deposits, which increased by $199.6 million, or 49%, from 2022. The average rate paid on wholesale brokered deposits in 2023 was 4.76%, up by 372 basis points from 1.04% in 2022.
Current wording
The Bank utilizes FHLB advances and brokered time deposits as wholesale funding sources. The average balance of FHLB advances for 2024 increased by $255.7 million, or 24%, compared to the average balance for 2023. Due to increases in market rates, the average rate paid on such advances in 2024 was 4.92%, up 23 basis points from 4.69% in 2023. Included in total average interest-bearing deposits were wholesale brokered deposits, which decreased by $101.8 million, or 17%, from 2023. The average rate paid on wholesale brokered deposits in 2024 was 5.22%, up by 46 basis points from 4.76% in 2023.
Previous wording
As market interest rates rose, deposit balances shifted from lower cost deposits to higher cost deposits. Average in-market interest-bearing deposits, which excludes wholesale brokered deposits, increased by $210.2 million, or 6%, from the average balance in 2022, with increases in time deposits and interest-bearing demand deposits. The average rate paid on in-market interest-bearing deposits in 2023 was 2.34%, up by 175 basis points from 0.59% in 2022. The average balance of noninterest-bearing demand deposits for 2023 decreased by $145.3 million, or 16%, from the average balance in 2022.
Current wording
As market interest rates rose, deposit balances shifted from lower cost deposits to higher cost deposits. Average in-market interest-bearing deposits, which excludes wholesale brokered deposits, increased by $132.9 million, or 3%, from the average balance in 2023, with increases in time deposits and interest-bearing demand deposits. The average rate paid on in-market
Previous wording
The provision recognized in 2023 reflected loan growth and slowdown of loan prepayment speeds, changes in asset and credit quality, and our current estimate of forecasted economic conditions. Econometric factors have been stable to improving in 2023 with our forecast reflecting a lower probability of a recession.
Current wording
The provision recognized in 2023 reflected loan growth and slowdown of loan prepayment speeds, changes in asset and credit quality, and our estimate of forecasted economic conditions. Econometric factors were stable to improving in 2023, with our forecast reflecting a lower probability of a recession.
Previous wording
Net charge-offs totaled $520 thousand, or 0.01% of average loans, in 2023, compared to net recoveries of $368 thousand, or 0.01% of average loans, in 2022.
Current wording
Net charge-offs totaled $2.0 million, or 0.04% of average loans, in 2024, compared to net charge-offs of $520 thousand, or 0.01% of average loans, in 2023.
Previous wording
The ACL on loans was $41.1 million, or 0.73% of total loans, at December 31, 2023, compared to $38.0 million, or 0.74% of total loans, at December 31, 2022. See additional discussion under the caption “Asset Quality” for further information on the ACL on loans.
Current wording
The ACL on loans was $42.0 million, or 0.82% of total loans, at December 31, 2024, compared to $41.1 million, or 0.73% of total loans, at December 31, 2023.
Previous wording
Revenue from wealth management services represented 63% of total noninterest income in 2023, compared to 62% in 2022. A substantial portion of wealth management revenues is dependent on the value of wealth management AUA and is closely tied to the performance of the financial markets. This portion of wealth management revenues is referred to as “asset-based” and includes trust and investment management fees. Wealth management revenues also include “transaction-based” revenues that are not primarily derived from the value of assets.
Current wording
-40- management revenues is dependent on the value of wealth management AUA and is closely tied to the performance of the financial markets. This portion of wealth management revenues is referred to as “asset-based” and includes trust and investment management fees. Wealth management revenues also include “transaction-based” revenues that are not primarily derived from the value of assets.
Previous wording
Wealth management revenues for 2023 decreased by $3.2 million, or 8%, from 2022, reflecting a decrease in asset-based revenues. The change in asset-based revenues correlated with the decrease in average AUA balances in 2023. The average balance of AUA in 2023 decreased by 9% from the average balance in 2022.
Current wording
Wealth management revenues for 2024 increased by $3.5 million, or 10%, from 2023, reflecting an increase in asset-based revenues. The change in asset-based revenues correlated with the increase in average AUA balances in 2024. The average balance of AUA in 2024 increased by 10% from the average balance in 2023.
Previous wording
The end of period AUA balance amounted to $6.6 billion at December 31, 2023, up by $626.4 million, or 11%, from December 31, 2022, reflecting net investment appreciation and income. The following table presents the changes in wealth management AUA balances:
Current wording
The end of period AUA balance amounted to $7.1 billion at December 31, 2024, up by $489.4 million, or 7%, from December 31, 2023. The following table presents the changes in wealth management AUA balances:
Previous wording
Mortgage banking revenues represented 12% of total noninterest income in 2023, compared to 14% for 2022. These revenues are dependent on mortgage origination volume and are sensitive to interest rates and the condition of housing markets. The composition of mortgage banking revenues and the volume of loans sold to the secondary market are shown in the following table:
Current wording
Mortgage banking revenues are dependent on mortgage origination volume and are sensitive to interest rates and the condition of housing markets. While loan origination and refinancing activities decreased in response to increases in market interest rates, a larger proportion of loans were originated for sale in 2024. The composition of mortgage banking revenues and the volume of loans sold to the secondary market are shown in the following table:
Previous wording
Loan related derivative income from interest rate swap contracts with commercial borrowers decreased by $1.4 million, or 50%, in 2023, reflecting a decline in volume.
Current wording
Loan related derivative income from interest rate swap contracts with commercial borrowers decreased by $923 thousand, or 66%, in 2024, reflecting a decline in volume.
Previous wording
Income from BOLI was up by $897 thousand, or 35%, from 2022, reflecting the recognition of $658 thousand in non-taxable income in 2023 associated with the receipt of life insurance proceeds.
Current wording
Income from BOLI was down by $447 thousand, or 13%, from 2023, reflecting the recognition of $658 thousand in non-taxable income in 2023 associated with the receipt of life insurance proceeds.
Previous wording
Salaries and employee benefits expense, the largest component of noninterest expense, for 2023 decreased by $1.3 million, or 2%, from 2022, largely reflecting adjustments to performance-based compensation accruals, partially offset by annual merit increases and higher staffing levels.
Current wording
Salaries and employee benefits expense, the largest component of noninterest expense, increased by $3.8 million, or 5%, from 2023. This included higher performance-based incentive compensation, merit increases, and lower staffing levels.
Previous wording
Outsourced services expense for 2023 increased by $784 thousand, or 6%, from 2022 due to changes to and expansion of services provided by third-party vendors.
Current wording
Outsourced services expense increased by $1.7 million, or 12%, from 2023. Equipment expense decreased by $480 thousand, or 11%, from 2023. Both the increase in outsourced services expense and decline in equipment expense reflected changes to and expansion of services, including software as a service, that are provided by third-party vendors, as well as volume-related increases in third-party costs.
Previous wording
Legal, audit and professional fees for 2023 increased by $764 thousand, or 24%, from 2022, reflecting higher legal expenses.
Current wording
Legal, audit and professional fees decreased by $763 thousand, or 20%, in 2024, reflecting lower legal fees.
Previous wording
FDIC deposit insurance costs for the 2023 increased by $3.0 million, or 177%, from 2022, reflecting an increase in the FDIC’s deposit assessment rate and the impact of growth in assets.
Current wording
FDIC deposit insurance costs for the 2024 increased by $846 thousand, or 18%, from 2023, reflecting the impact of increases in average assets from a year ago and a higher FDIC deposit assessment rate.
Previous wording
Other expenses for 2023 increased by $664 thousand, or 7% from 2022. This increase was largely due to higher charitable contribution expense as a $1.0 million contribution was made to Washington Trust’s charitable foundation in 2023, compared to $600 thousand contribution made in the prior year.
Current wording
Other expenses for 2024 decreased by $1.8 million, or 17%, from 2023. In 2023, a charitable contribution expense as a $1.0 million contribution was made to Washington Trust’s charitable foundation. There was no such expense in 2024.
Previous wording
The effective tax rates differed from the federal rate of 21%, primarily due to benefits of state tax changes, tax-exempt income, income from BOLI, and federal tax credits partially offset by the establishment of the valuation allowance pertaining to state deferred tax assets. Excluding the net $3.3 million adjustment, the effective tax rate for 2023 would have been 20.4%, down from 21.4% in 2022, reflecting a lower proportion of taxable income to pre-tax book income.
Current wording
The effective tax rates differed from the federal rate of 21%, primarily due to state income tax benefits, tax-exempt income, income from BOLI, and federal tax credits. The blended statutory rates include the federal income tax rate of 21% and a blended state income tax rate net of a federal tax benefit.
Previous wording
The Corporation’s net deferred tax assets amounted to $53.8 million at December 31, 2023, compared to $56.4 million at December 31, 2022. Net deferred tax assets decreased by $2.6 million during 2023, including the establishment of the valuation allowance, as mentioned above. Management’s assessment considered the Corporation’s forecasted future taxable income, existing taxable temporary differences along with tax planning strategies. Management believes deferred tax assets, net of the valuation allowance, are more-likely-than-not to be realized.
Current wording
The Corporation’s net deferred tax assets amounted to $63.0 million at December 31, 2024, compared to $53.8 million at December 31, 2023. This increase included the establishment of a deferred tax asset associated with the loans that were reclassified to held for sale and written down to fair value in December 2024, as part of the balance sheet repositioning transactions. This deferred tax asset was realized in January 2025 when the loan sale was completed. Management’s assessment considered the Corporation’s forecasted future taxable income, existing taxable temporary differences along with tax planning strategies. Management believes deferred tax assets, net of the valuation allowance, are more-likely-than-not to be realized.
Previous wording
Net interest income for the Commercial Banking segment decreased by $19.0 million, or 12%, from 2022. Net interest income was adversely impacted by increases in funding costs, but this was partially offset by growth in and higher yields on average interest-earning assets.
Current wording
Net interest income for the Commercial Banking segment decreased by $8.6 million, or 6%, from 2023. Net interest income was adversely impacted by higher rates paid on, and increases in, average interest-bearing liability balances, which offset the benefit of higher yields on, and increases in, average interest-earning asset balances.
Previous wording
Commercial Banking noninterest expenses were up by $6.0 million, or 6%, from 2022, with the largest increases in FDIC deposit insurance costs, outsourced services, net occupancy expense, equipment expense and legal expense. See additional disclosure under the caption “Noninterest Expense” above.
Current wording
Commercial Banking noninterest expenses were up by $5.8 million, or 6%, from 2023, largely reflecting increases in salaries and employee benefits expense, outsourced services, and FDIC deposit insurance costs. See additional disclosure under the caption “Noninterest Expense” above.
Previous wording
Noninterest income for the Wealth Management Services segment decreased by $3.4 million, or 9%, compared to 2022, due to a decrease in asset-based revenues. See further discussion of wealth management revenues under the caption “Noninterest Income” above.
Current wording
Noninterest income for the Wealth Management Services segment was $41.8 million, up by $5.7 million, or 16%, from 2023, reflecting an increase in asset-based revenues, as well as the receipt of income associated with a litigation settlement. See further discussion of wealth management revenues under the caption “Noninterest Income” above.
Previous wording
Noninterest expenses for the Wealth Management Services segment decreased by $1.2 million, or 4%, compared to 2022, largely reflecting a decrease in salaries and employee benefits expense, partially offset by higher legal expenses. See additional discussion under the caption “Noninterest Expense” above.
Current wording
Noninterest expenses for the Wealth Management Services segment decreased by $2.3 million, or 8%, compared to 2023, largely reflecting decreases in salaries and employee benefits expense, legal fees, and other expenses. See additional discussion under the caption “Noninterest Expense” above.
Previous wording
Shareholders’ equity increased by $19.0 million, or 4%, from the end of 2022, as net income and a net increase in the AOCL component of shareholders’ equity was partially offset by dividend declarations and changes in treasury stock balances.
Current wording
Shareholders’ equity increased by $27.0 million, or 6%, from the end of 2023, as the net capital raised from the equity offering of $70.5 million and a net increase in the AOCL component of shareholders’ equity were partially offset by a net loss and dividend declarations.
Previous wording
The securities portfolio represented 14% of total assets at December 31, 2023, compared to 15% of total assets at December 31, 2022. The largest component of the securities portfolio is mortgage-backed securities, all of which are issued by U.S. government agencies or U.S. government-sponsored enterprises.
Current wording
The securities portfolio represented 13% of total assets at December 31, 2024, compared to 14% of total assets at December 31, 2023. The largest component of the securities portfolio is mortgage-backed securities, all of which are issued by U.S. government agencies or U.S. government-sponsored enterprises.
Previous wording
As of December 31, 2023, the carrying amount of available for sale debt securities included net unrealized losses of $152.2 million, compared to net unrealized losses of $172.4 million as of December 31, 2022. The net unrealized losses were concentrated in obligations of U.S. government agencies and U.S. government-sponsored enterprises, including mortgage-backed securities, and primarily attributable to relative changes in market interest rates since the time of purchase. See Note 3 to the Consolidated Financial Statements for additional information.
Current wording
As of December 31, 2024, the carrying amount of available for sale debt securities included net unrealized losses of $133.3 million, compared to net unrealized losses of $152.2 million as of December 31, 2023. The decline in unrealized losses in 2024 reflected the impact of the sales of securities mentioned above, as well as net of changes in the fair value of securities. The net unrealized losses at December 31, 2024 and 2023 were concentrated mortgage-backed securities issued by U.S. government agencies and U.S. government-sponsored enterprises and were primarily attributable to relative changes in market interest rates since the time of purchase. See Note 3 to the Consolidated Financial Statements for additional information.
Previous wording
The Bank is a member of the FHLB, which is a cooperative that provides services to its member banking institutions. The primary reason for the Bank’s membership is to gain access to a reliable source of wholesale funding in order to manage interest rate risk. The purchase of FHLB stock is a requirement for a member to gain access to funding. The Bank purchases FHLB stock in proportion to the volume of funding received and views the purchases as a necessary long-term investment for the purposes of balance sheet liquidity and not for investment return. The Bank’s investment in FHLB stock totaled $51.9 million at December 31, 2023, compared to $43.5 million at December 31, 2022. See Note 1 to the Consolidated Financial Statements for additional information.
Current wording
The Bank is a member of the FHLB, which is a cooperative that provides services to its member banking institutions. The primary reason for the Bank’s membership is to gain access to a reliable source of wholesale funding in order to manage interest rate risk. The purchase of FHLB stock is a requirement for a member to gain access to funding. The Bank purchases FHLB stock in proportion to the volume of funding received and views the purchases as a necessary long-term investment for the purposes of balance sheet liquidity and not for investment return. The Bank’s investment in FHLB stock totaled $49.8 million at December 31, 2024, compared to $51.9 million at December 31, 2023. See Note 1 to the Consolidated Financial Statements for additional information.
Previous wording
(3)Residential real estate consists of mortgage and homeowner construction loans secured by one- to four-family residential properties.
Current wording
(3)Residential real estate consists of mortgage and homeowner construction loans secured by one- to four-family residential properties. Also, includes a $1.5 million negative basis adjustment associated with fair value hedges at December 31, 2024. See Note 9 to the Consolidated Financial Statements for additional disclosure.
Previous wording
-45- particular period. In other circumstances, a loan, or a portion of a loan, may not be repaid due to the borrower’s inability to satisfy the contractual terms of the loan.
Current wording
-47- particular period. In other circumstances, a loan, or a portion of a loan, may not be repaid due to the borrower’s inability to satisfy the contractual terms of the loan.
Showing the first 40 of 99 pairs. Open the source sections for the rest.
Rearranged current paragraphs (4)
Current report — wording carried from elsewhere
-34- discussion regarding the credit risk and the credit quality of the Corporation’s loan portfolio, see Notes 4 and 5 to the Consolidated Financial Statements. For further discussion regarding credit risk associated with unfunded commitments, see Note 21 to the Consolidated Financial Statements. For further discussion regarding the Corporation’s securities portfolio, see Note 3 to the Consolidated Financial Statements.
Current report — wording carried from elsewhere
See additional discussion under the caption “Asset Quality” for further information on the ACL on loans.
Current report — wording carried from elsewhere
-51- serviced for others, which are not included in the Consolidated Balance Sheets, amounted to $1.4 billion at December 31, 2024, compared to $1.5 billion at December 31, 2023.
Current report — wording carried from elsewhere
-62- month horizon. The simulations assume that the size and general composition of the Corporation’s balance sheet remain static over the simulation horizons, with the exception of certain deposit mix shifts from low-cost savings to higher-cost time deposits in selected interest rate scenarios. The simulations at December 31, 2024 incorporated the reclassification of residential mortgage loans from portfolio to held for sale and the sale of these loans completing in January 2025. The simulations at December 31, 2024 assume the proceeds from the sale of loans are used to pay down maturing wholesale funding balances. Additionally, the simulations take into account the specific repricing, maturity, call options, and prepayment characteristics of differing financial instruments that may vary under different interest rate scenarios. Mortgage-backed securities and residential real estate loans involve a level of risk that unforeseen changes in prepayment speeds may cause related cash flows to vary significantly in differing rate environments. Such changes could affect the level of reinvestment risk associated with cash flow from these instruments, as well as their market value. Changes in prepayment speeds could also increase or decrease the amortization of premium or accretion of discounts related to such instruments, thereby affecting interest income. The characteristics of financial instrument classes are reviewed periodically by the ALCO to ensure their accuracy and consistency.
Rearranged previous paragraphs (10)
Previous report — wording carried elsewhere
As noted in the Consolidated Statements of Cash Flows, net amortization of premiums and discounts on securities and loans (a net reduction to net interest income) amounted to $1.4 million in 2023, compared to $2.9 million in 2022. This included no accelerated amortization of net deferred fee balances on PPP loans forgiven by the SBA in 2023, compared to $1.2 million (or 2 basis points benefit to NIM) in 2022.
Previous report — wording carried elsewhere
BOLI amounted to $103.7 million and $102.2 million, respectively, at December 31, 2023 and 2022. BOLI provides a means to mitigate increasing employee benefit costs. The Corporation expects to benefit from the BOLI contracts as a result of the tax-free growth in cash surrender value and death benefits that are expected to be generated over time. The purchase of the
Previous report — wording carried elsewhere
December 31, 2023 were four loans purchased for portfolio and serviced by others amounting to $1.2 million. Management monitors the collection efforts of its third-party servicers as part of its assessment of the collectability of nonperforming loans.
Previous report — wording carried elsewhere
For residential real estate loans and real estate collateral dependent consumer loans that are in the process of collection, valuations are obtained from independent appraisal firms with values determined on an “as is” basis.
Previous report — wording carried elsewhere
For additional information regarding FHLB advances see Note 13 to the Consolidated Financial Statements.
Previous report — wording carried elsewhere
-60- as parallel changes in interest rates of up to 400 basis points. Because income simulations assume that the Corporation’s balance sheet will remain static over the simulation horizon, the results do not reflect adjustments in strategy that the ALCO could implement in response to rate shifts.
Previous report — wording carried elsewhere
It should also be noted that the static balance sheet assumption does not necessarily reflect the Corporation’s expectation for future balance sheet growth, which is a function of the business environment and customer behavior.
Previous report — wording carried elsewhere
Mortgage-backed securities and residential real estate loans involve a level of risk that unforeseen changes in prepayment speeds may cause related cash flows to vary significantly in differing rate environments. Such changes could affect the level of reinvestment risk associated with cash flow from these instruments, as well as their market value. Changes in prepayment speeds could also increase or decrease the amortization of premium or accretion of discounts related to such instruments, thereby affecting interest income.
Previous report — wording carried elsewhere
The ACL for pooled loans is measured utilizing a DCF methodology to estimate credit losses for each pooled portfolio segment. The methodology incorporates a probability of default and loss given default framework. Loss given default is estimated based on historical credit loss experience. Probability of default is estimated using a regression model that incorporates econometric factors. Management utilizes forecasted econometric factors with a one-year reasonable and supportable forecast period and one-year straight-line reversion period in order to estimate the probability of default for each loan portfolio segment. The DCF methodology combines the probability of default, the loss given default, prepayment speeds and remaining life of the loan to estimate a reserve for each loan. The sum of all the loan level reserves are aggregated for each portfolio segment and a loss rate factor is derived. Quantitative loss factors for pooled loans are also supplemented by certain qualitative risk factors reflecting management’s view of how losses may vary from those represented by quantitative loss rates.
Previous report — wording carried elsewhere
The ACL for individually analyzed loans is measured using a DCF method based upon the loan’s contractual effective interest rate, or at the loan’s observable market price, or, if the loan was collateral dependent, at the fair value of the collateral.