What changed in this filing

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Item 1. Business

2024-02-26 compared with 2023-02-23 · 45 added, 40 removed, 363 unchanged (19% of the section changed)

34 unchanged sentences

A portion of the Bank’s C&I loan portfolio is also collateralized by real estate.

C&I loans also include PPP loans that are fully guaranteed by the U.S.

government, tax-exempt loans made to states and political subdivisions, as well as industrial development or

revenue bonds issued through quasi-public corporations for the benefit of a private or non-profit entity where that entity rather than the governmental entity is obligated to pay the debt service.

C&I loans also include tax-exempt loans made to states and political subdivisions, as well as industrial development or revenue bonds issued through quasi-public corporations for

the benefit of a private or non-profit entity where that entity rather than the governmental entity is obligated to pay the debt service.

At December 31, 2023, C&I loans represented 22% of the total commercial loan portfolio and 11% of the total loan portfolio.

42 unchanged sentences

As a member of the FHLB, the Bank must own a minimum amount of FHLB stock, calculated periodically based primarily on its level of borrowings from the FHLB.

At December 31, 2022, the Bank had advances payable to the FHLB of $980.0 million.

At December 31, 2023, the Bank had advances payable to the FHLB of $1.2 billion.

As of December 31, 2023, the Bank had access to a $40.0 million unused line of credit with the FHLB.

The Bank had remaining available borrowing capacity with the FHLB of $668.3 million at December 31, 2022.

Additionally, the Bank had a standby letter of credit with the FHLB of $65.0 million at December 31, 2023.

This standby letter of credit collateralizes an institutional deposit.

The Bank had remaining available borrowing capacity with the FHLB of $1.1 billion at December 31, 2023.

The Bank pledges certain qualified investment securities and loans as collateral to the FHLB.

5 unchanged sentences

holistic financial planning services;

personal trust and estate services, including services as trustee, personal representative, custodian and guardian;

personal trust and estate services, including services as trustee, personal representative and custodian;

settlement of decedents’ estates;

7 unchanged sentences

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, such as commissions and other service fees that are not primarily derived from the value of assets.

Wealth management revenues also include “transaction-based” revenues that are not primarily derived from the value of assets.

At December 31, 2023, the Bancorp’s principal subsidiary is the Bank.

1 unchanged sentence

See Note 13 to the Consolidated Financial Statements for additional information.

In the fourth quarter of 2022, Weston Securities Corporation, formerly a subsidiary of the Bancorp, was dissolved and its net assets were transferred to the Bancorp though a return of capital.

The following is a description of Bancorp’s principal subsidiary:

12 unchanged sentences

Washington Trust’s primary deposit gathering area consists of the communities that are served by its branch network.

As of December 31, 2022, the Bank had 10 branch offices located in southern Rhode Island (Washington County), 14 branch offices located in the greater Providence area in Rhode Island and 1 branch office located in southeastern Connecticut.

In August 2022, we opened a new full-service branch in Cumberland, Rhode Island.

In addition, we announced that we submitted applications to establish a branch office in three northern Rhode Island locations in 2023 to further expand our branch footprint and serve the broader Rhode Island community.

The three branch offices will be located in Barrington, Providence and Smithfield, Rhode Island and are subject to federal, state, local, and regulatory approvals.

As of December 31, 2023, the Bank had 10 branch offices located in southern Rhode Island (Washington County), 15 branch offices located in the greater Providence area in Rhode Island and one branch office located in southeastern Connecticut.

As noted above, Washington Trust’s lending activities are conducted primarily in southern New England and, to a lesser extent, other states.

In addition to branch offices, the Bank has a commercial lending office at its main office and in the financial district of Providence, Rhode Island.

In addition, in July 2022, the Bank opened a new commercial lending office in New Haven, Connecticut.

Washington Trust also has 6 residential mortgage lending offices located in eastern Massachusetts (Sharon, Burlington, Braintree and Wellesley);

Washington Trust provides commercial, residential and consumer lending services from its branch locations and other offices.

The Bank has commercial lending offices at its main office, in the financial district of Providence, Rhode Island, in Warwick, Rhode Island, and in New Haven, Connecticut.

Washington Trust has residential mortgage lending offices located in eastern Massachusetts (Sharon, Burlington, Braintree and Wellesley);

in Glastonbury, Connecticut;

and in Warwick, Rhode Island.

and in Rhode Island (Westerly and Warwick).

Washington Trust provides wealth management services from its offices located in Westerly, Narragansett and Providence, Rhode Island;

4 unchanged sentences

The primary factors in competing are interest rates, financing terms, fees charged, products offered, personalized customer service, online and mobile access to accounts and convenience of branch locations, ATMs and branch hours.

Competition comes from commercial banks, credit unions, savings institutions and internet banks, as well as other non-bank institutions.

Competition comes from commercial banks, credit unions, savings institutions and non-bank lenders.

Washington Trust faces strong competition from larger institutions with relatively greater resources, broader product lines and larger delivery systems.

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However, we also see the value in bringing new perspectives to our team through external hires, and always seek to hire the best and brightest employees who share our commitment to providing a superior customer experience with each interaction.

Attracting and retaining top talent continues to be challenging, and an important

tool in our human capital strategy is the availability of a remote or hybrid scheduling option for many of our team members.

Attracting and retaining top talent continues to be challenging, and an important tool in our human capital strategy is the availability of a remote or hybrid scheduling option for many of our team members.

To ensure human connectivity, continued collaboration and team engagement, we have adopted a philosophy of “intentional presence” regardless of an individual's physical location.

2 unchanged sentences

We evaluate compensation in relation to market trends and internal pay equity to ensure that we are providing fair and competitive pay;

promote and recognize employees for their work successes;

promote and recognize employees for their work

provide training and professional development opportunities for employees to enhance their skills;

42 unchanged sentences

Under the BHCA, as amended by the Dodd-Frank Act, the Bancorp is required to serve as a source of financial strength for the Bank.

This support may be required at times when the Bancorp may not have the resources to provide support to the Bank.

This support may be required at times when the Bancorp may not have the resources to

provide support to the Bank.

In the event of a bank holding company’s bankruptcy, any commitment by the bank holding company to a federal bank regulatory agency to maintain the capital of a bank subsidiary will be assumed by the bankruptcy trustee and entitled to a priority of payment.

14 unchanged sentences

In addition, the BHCA prohibits any company from acquiring control of a bank or bank holding company without first having obtained the approval of the Federal Reserve.

trustees of the bank or bank holding company, or the Federal Reserve has determined, after notice and opportunity for hearing, that the company has the power to exercise a controlling influence over the management or policies of the bank or bank holding company.

Among other circumstances, under the BHCA, a company has control of a bank or bank holding company if the company owns, controls or holds with power to vote 25% or more of a class of voting securities of the bank or bank holding company, controls in any manner the election of a majority of directors or trustees of the bank or bank holding company, or the Federal Reserve has determined, after notice and opportunity for hearing, that the company has the power to exercise a controlling influence over the management or policies of the bank or bank holding company.

The Federal Reserve has established presumptions of control under which the acquisition of control of 5% or more of a class of voting securities of a bank holding company, together with other factors enumerated by the Federal Reserve, could constitute the acquisition of control of a bank holding company for purposes of the BHCA.

18 unchanged sentences

The FDIC has the authority to adjust deposit insurance assessment rates at any time.

In addition, under the FDIA, the FDIC may terminate deposit insurance, among other circumstances, upon a finding that the institution has engaged in unsafe and unsound practices, is in an unsafe or unsound condition to continue operations, or has violated any applicable law, regulation, rule, order or condition imposed by the FDIC.

The FDIC is also required to recover losses to its Deposit Insurance Fund arising from the use of the systemic risk exception invoked on March 12, 2023, by the Secretary of the Treasury, acting on the recommendation of the Board of Directors of the FDIC and the Federal Reserve, and after consultation with the President, to allow the FDIC to complete its resolution of both Silicon Valley Bank and Signature Bank in a manner that fully protected depositors.

The FDIC is required to recover such losses through one or more special assessments on insured depository institution, depository institution holding companies (with the concurrence of the Secretary of the Treasury with respect to holding companies), or both, as the FDIC determines appropriate.

On November 16, 2023, the FDIC approved a final rule to implement a special assessment to recover such losses.

Under the final rule, each insured depository institution’s assessment base for the special assessment is generally equal to estimated uninsured deposits as reported in the Consolidated Report of Condition and Income (Call Report) or Report of Assets and Liabilities of U.S.

Branches and Agencies of Foreign Banks (FFIEC 002) as of December 31, 2022, after applying the $5 billion deduction.

The Bank had total reported uninsured deposits as of December 31, 2022 of less than $5 billion, and therefore the Bank is not required to pay any such special assessment.

For 2023, the FDIC insurance expense for the Bank was $4.7 million.

Acquisitions and Branching.

5 unchanged sentences

Further, the GLBA permits national banks and state banks, to the extent permitted under state law, to engage via financial subsidiaries in certain activities that are permissible for subsidiaries of a financial holding company.

In order to form a financial subsidiary, a state-chartered bank must be “well capitalized,” and such banks must comply with certain capital deduction, risk management and affiliate transaction rules, among other requirements.

In order to form a financial subsidiary, a state-chartered bank must be “well

capitalized,” and such banks must comply with certain capital deduction, risk management and affiliate transaction rules, among other requirements.

Brokered Deposits.

The FDIA and FDIC regulations generally limit the ability of an insured depository institution to accept, renew or roll over any brokered deposit unless the institution’s capital category is “well capitalized” or, with the FDIC’s approval, “adequately capitalized.” Depository institutions that have brokered deposits in excess of 10% of total assets may be subject to increased FDIC deposit insurance premium assessments.

However, for institutions that are well capitalized and have a CAMELS composite rating of 1 or 2, reciprocal deposits are deducted from brokered deposits.

Section 202 of the

Economic Growth Act, which was enacted in 2018, amends the FDIA to exempt a capped amount of reciprocal deposits from treatment as brokered deposits for certain insured depository institutions.

The FDIA and FDIC regulations generally limit the ability of an insured depository institution to accept, renew or roll over any brokered deposit unless the institution’s capital category is “well capitalized” or, with the FDIC’s approval, “adequately capitalized.” Certain depository institutions that have brokered deposits in excess of 10% of total assets may be subject to increased FDIC deposit insurance premium assessments.

However, for institutions that are well capitalized and have a CAMELS composite rating of 1 or 2, reciprocal deposits are deducted from brokered deposits, and established small banks (generally those with less than $10 billion in assets) are not subject to a brokered deposit adjustment.

Section 202 of the Economic Growth Act, which was enacted in 2018, amends the FDIA to exempt a capped amount of reciprocal deposits from treatment as brokered deposits for certain insured depository institutions.

Community Reinvestment Act.

5 unchanged sentences

Failure of an institution to receive at least a “satisfactory” rating could inhibit the Bank or the Bancorp from undertaking certain activities, including engaging in activities permitted as a financial holding company under GLBA and acquisitions of other financial institutions.

The Bank has achieved a rating of “satisfactory” on its most recent examination dated July 29, 2019.

Rhode Island and Connecticut also have enacted substantially similar community reinvestment requirements.

On October 23, 2023, the FDIC approved changes to its CRA regulations, maintaining the existing CRA ratings (outstanding, satisfactory, needs to improve, and substantial noncompliance) but modifying the evaluation framework to replace the existing tests generally applicable to banks with at least $2 billion in assets (the lending, investment, and services tests) with four new tests and associated performance metrics.

The new CRA regulations will become effective on January 1, 2026.

The Bank has achieved a rating of “satisfactory” on its most recent examination dated December 5, 2022.

Lending Restrictions.

13 unchanged sentences

The sum of Tier 1 and Tier 2 capital less certain required deductions represents qualifying total risk-based capital.

Prior to the effectiveness of certain provisions of the Dodd-Frank Act, bank holding companies were permitted to include trust preferred securities and cumulative perpetual preferred stock in Tier 1 capital, subject to limitations.

Prior to the effectiveness of certain provisions of the Dodd-Frank

Act, bank holding companies were permitted to include trust preferred securities and cumulative perpetual preferred stock in Tier 1 capital, subject to limitations.

However, the Federal Reserve’s capital rule applicable to bank holding companies permanently grandfathers non-qualifying capital instruments, including trust preferred securities, issued before May 19, 2010 by depository institution holding companies with less than $15 billion in total assets as of December 31, 2009, subject to a limit of 25% of Tier 1 capital.

5 unchanged sentences

Assets and off-balance sheet credit equivalents are assigned one of several categories of risk weights based primarily on relative risk.

Under the Federal Reserve’s rules applicable to the Bancorp and the FDIC’s capital rules applicable to the Bank, the Bancorp and the Bank are each required to maintain a minimum common

equity Tier 1 capital to risk-weighted assets ratio of 4.5%, a minimum Tier 1 capital to risk-weighted assets ratio of 6.0%, a minimum total capital to risk-weighted assets ratio of 8.0% and a minimum leverage ratio requirement of 4.0%.

Under the Federal Reserve’s rules applicable to the Bancorp and the FDIC’s capital rules applicable to the Bank, the Bancorp and the Bank are each required to maintain a minimum common equity Tier 1 capital to risk-weighted assets ratio of 4.5%, a minimum Tier 1 capital to risk-weighted assets ratio of 6.0%, a minimum total capital to risk-weighted assets ratio of 8.0% and a minimum leverage ratio requirement of 4.0%.

Additionally, these rules require an institution to establish a capital conservation buffer of common equity Tier 1 capital in an amount above the minimum risk-based capital requirements for “adequately capitalized” institutions of more than 2.5% of total risk weighted assets, or face restrictions on the ability to pay dividends, pay discretionary bonuses, and to engage in share repurchases.

18 unchanged sentences

In addition, the federal banking agencies adopted regulations that authorize, but do not require, an agency to order an institution that has been given notice by an agency that it is not satisfying any of such safety and soundness standards to submit a compliance plan.

If, after being so notified, an institution fails to submit an acceptable compliance plan or fails in any material respect to implement an acceptable compliance plan, the agency must issue an order directing action to correct the deficiency and may issue an order restricting asset growth, requiring an institution to increase its ratio of tangible equity to assets or directing other actions of the types to which an undercapitalized institution is subject under the “prompt corrective action” provisions of the FDIA.

If, after being so notified, an institution fails to submit an acceptable compliance plan or fails in any material respect to implement an acceptable compliance plan, the

agency must issue an order directing action to correct the deficiency and may issue an order restricting asset growth, requiring an institution to increase its ratio of tangible equity to assets or directing other actions of the types to which an undercapitalized institution is subject under the “prompt corrective action” provisions of the FDIA.

See “-Regulatory Capital Requirements” above.

6 unchanged sentences

The Federal Reserve has the authority to prohibit bank holding companies from paying dividends if such payment is deemed to be an unsafe or unsound practice.

The Federal Reserve has indicated generally that it may be an unsafe or unsound practice for bank holding companies to pay dividends unless the bank holding company’s net income over the preceding year is sufficient to fund the dividends and the expected rate of earnings retention is consistent with the organization’s capital needs, asset quality and overall financial condition.

The Federal Reserve has indicated generally that it may be an unsafe or unsound practice for bank holding companies to pay a dividend that exceeds earnings for the period for which the dividend is being paid.

Further, under the Federal Reserve’s capital rules, the Bancorp’s ability to pay dividends is restricted if it does not maintain the required capital conservation buffer.

17 unchanged sentences

Consumer Protection Regulation

The Bancorp and the Bank are subject to federal and state laws designed to protect consumers and prohibit unfair or deceptive business practices including the Equal Credit Opportunity Act, Fair Housing Act, Home Ownership Protection Act, Fair Credit Reporting Act, as amended by the FACT Act, the GLBA, the TILA, the CRA, the Home Mortgage Disclosure Act, Real Estate Settlement Procedures Act, National Flood Insurance Act and various state law counterparts.

Act, Real Estate Settlement Procedures Act, National Flood Insurance Act and various state law counterparts.

These laws and regulations mandate certain disclosure requirements and regulate the manner in which financial institutions must interact with customers when taking deposits, making loans, collecting loans and providing other services.

3 unchanged sentences

The Dodd-Frank Act prescribes certain standards that mortgage lenders must consider before making a residential mortgage loan, including verifying a borrower’s ability to repay such mortgage loan and allows borrowers to assert violations of certain provisions of the TILA as a defense to foreclosure proceedings.

Additionally, the CFPB’s qualified mortgage rule, requires creditors, such as Washington Trust, to make a reasonable good faith determination of a consumer's ability to repay any

consumer credit transaction secured by a dwelling.

Additionally, the CFPB’s qualified mortgage rule, requires creditors, such as Washington Trust, to make a reasonable good faith determination of a consumer's ability to repay any consumer credit transaction secured by a dwelling.

The Economic Growth Act included provisions that ease certain requirements related to residential mortgage transactions for certain institutions with less than $10 billion in total consolidated assets.

23 unchanged sentences

These sanctions, which are administered by OFAC, take many different forms.

Generally, however, they contain one or more of the following elements:

however, they contain one or more of the following elements:

(i) restrictions on trade with or investment in a sanctioned country, including prohibitions against direct or indirect imports from and exports to a sanctioned country and prohibitions on “U.S.

16 unchanged sentences

Mortgage Lending.

WTMC, formed in 2012, is a mortgage banking subsidiary of the Bank and licensed to do business in Rhode Island, Massachusetts, Connecticut and New Hampshire.

WTMC is a mortgage banking subsidiary of the Bank and licensed to do business in Rhode Island, Massachusetts, Connecticut and New Hampshire.

WTMC is subject to the regulation, supervision and examination by the banking divisions in each of these states.

6 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business