What changed in this filing

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Item 1A. Risk Factors

2024-02-26 compared with 2023-02-23 · 42 added, 37 removed, 314 unchanged (20% of the section changed)

10 unchanged sentences

There can be no assurance that economic conditions will not worsen.

Unfavorable or uncertain economic conditions can be caused by declines in economic growth, business activity, or investor or business confidence, limitations on the availability of or increases in the cost of credit and capital, increases in inflation or interest rates, the timing and impact of changing governmental policies, natural disasters, climate change, epidemics, the COVID-19 pandemic and future pandemics, terrorist attacks, acts of war, or a combination of these or other factors.

Unfavorable or uncertain economic conditions can be caused by declines in economic growth, business activity, or investor or business confidence, limitations on the availability of or increases in the cost of credit and capital, increases in inflation or interest rates, the timing and impact of changing governmental policies, natural disasters, climate change, epidemics, pandemics, terrorist attacks, acts of war, or a combination of these or other factors.

A worsening of business and economic conditions could have adverse effects on our business, including the following:

19 unchanged sentences

Inflationary pressures and rising prices may affect our results of operations and financial condition.

Inflation rose sharply at the end of 2021 and throughout 2022.

Inflationary pressures are currently expected to remain elevated throughout 2023.

Inflation continued at elevated levels in 2023.

Inflationary pressures, including the impact of recent increases in inflation, may remain elevated in 2024.

Small to medium-sized businesses may be impacted more during periods of high inflation as they are not able to leverage economies of scale to mitigate cost pressures compared to larger businesses.

6 unchanged sentences

These rates are highly sensitive to many factors beyond our control, including general economic conditions, both domestic and foreign, and the monetary and fiscal policies of various governmental and regulatory authorities.

When interest rates increase, as they have over the past year, loan prepayments generally decline and depositors may shift funds from accounts that have a comparatively lower cost, such as regular savings accounts, to accounts with a higher cost, such as certificates of deposit.

When interest rates increase, loan prepayments generally decline and depositors may shift funds from accounts that have a comparatively lower cost, such as regular savings accounts, to accounts with a higher cost, such as certificates of deposit.

In addition, wholesale funds may reprice more quickly and by a greater amount than the repricing of in-market deposits.

When interest rates decrease, loan prepayments and the receipt of payments on mortgage-backed securities generally increase, and may result in the proceeds having to be reinvested at a lower rate than the loan or mortgage-backed security being prepaid.

Changes in interest rates can also affect the value of loans and investment

Changes in interest rates can also affect the value of loans and investment securities.

Fixed-rate investment securities, mortgage-backed securities and mortgage loans typically decline in value as interest rates rise.

25 unchanged sentences

These loans may lack standardized terms and may include a balloon payment feature.

The ability of a borrower to make or refinance a balloon payment may be affected by a number of factors, including the financial condition of the borrower, prevailing economic conditions, interest rates, and collateral values.

Repayment of these loans is generally more dependent on the economy and the successful operation of a business.

Additionally, the COVID-19 pandemic has had a potentially long-term negative impact on certain commercial real estate properties due to the risk that tenants may reduce the office space they lease as some portion of the workforce continues to work remotely on a hybrid or full-time basis.

Because of the risks associated with commercial loans, we may experience higher rates of default than if our portfolio were more heavily weighted toward residential mortgage loans.

2 unchanged sentences

When we make loans, we sometimes obtain liens, such as real estate mortgages or other asset pledges, to provide us with a security interest in collateral.

If there is a loan default, we may seek to foreclose upon collateral and enforce the security

interests to obtain repayment and eliminate or mitigate our loss.

If there is a loan default, we may seek to foreclose upon collateral and enforce the security interests to obtain repayment and eliminate or mitigate our loss.

Drafting errors, recording errors, other defects or imperfections in the security interests granted to us and/or changes in law may render liens granted to the us unenforceable.

39 unchanged sentences

The valuation and liquidity of our securities could be adversely impacted by reduced market liquidity, increased normal bid-asked spreads and increased uncertainty of market participants, which could reduce the market value of our securities, even those with no apparent credit exposure.

Inflation and rapid increases in interest rates led to a decline in the trading value of previously issued government securities with interest rates below current market interest rates.

The valuation of our securities requires judgment and as market conditions change security values may also change.

11 unchanged sentences

A downgrade of the sovereign credit ratings of the U.S.

government or the credit ratings of related institutions, agencies or instruments would significantly exacerbate the other risks to which we are subject and any related adverse effects on the business, financial condition and results of operations.

government or the credit ratings of related institutions, agencies or instruments could significantly exacerbate the other risks to which we are subject and any related adverse effects on the business, financial condition and results of operations.

The soundness of other financial institutions could adversely affect us.

6 unchanged sentences

There is no assurance that any such losses would not materially and adversely affect our results of operations.

Changes to and replacement of LIBOR may adversely affect our business, financial condition, and results of operations.

LIBOR is used extensively in the United States 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, intends to end publication of remaining LIBOR tenors in June 2023.

Financial services regulators and industry groups have 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.

We have identified all LIBOR-related contracts and determined which ones will require language to incorporate an alternative reference rate.

In the fourth quarter of 2021, we began processing modifications on loans that reference LIBOR to transition them to a new reference rate, primarily SOFR .

Additionally, contracts executed after December 31, 2021 are no longer being written with LIBOR terms.

For derivative contracts, the International Swap Dealers Association (commonly known as "ISDA") has developed fallback language for swap agreements and established a protocol to allow counterparties to modify legacy trades to include the new fallback language.

We have executed agreements with the majority of our customers to adopt the fallback language protocol.

We have remaining approximately 200 financial instruments that reference LIBOR (predominantly commercial loans) with on-balance sheet amounts of $1.0 billion and approximately 250 derivative instruments (loan related derivatives and cash flow hedging instruments) that reference LIBOR with total notional amounts of $2.0 billion as of December 31, 2022.

We continue to incorporate LIBOR replacement language in contracts.

In addition to changes in contracts, the transition from LIBOR involves changes to risk and pricing models, valuation tools, systems, product design and hedging strategies.

Our failure to adequately manage the transition process with our customers could also impact our reputation.

Given the complexity of the transition, as well as the different risk characteristics between LIBOR and the replacement reference rate, we are unable to assess the ultimate impact of the transition from LIBOR, which may, ultimately, adversely affect our business, financial condition, or results of operations.

Market changes or economic downturns may adversely affect demand for our fee-based services and level of wealth management AUA.

12 unchanged sentences

We regularly assess and test our security systems and disaster preparedness, including back-up systems, but the risks are escalating.

We also review and assess the cyber-security risk of our third-party service providers.

We also review and assess the cybersecurity risk of our third-party service providers.

As a result, cybersecurity and the continued enhancement of our controls and processes to protect our systems, data and networks from attacks, unauthorized access or significant damage remain a priority.

11 unchanged sentences

Such sanctions could include fines and suspension of trading in our stock, among others.

In addition, future system enhancements could have higher than expected

costs and/or result in operating inefficiencies, which could increase the costs associated with the implementation as well as ongoing operations.

In addition, future system enhancements could have higher than expected costs and/or result in operating inefficiencies, which could increase the costs associated with the implementation as well as ongoing operations.

Failure to properly utilize system enhancements that are implemented in the future could result in impairment charges that adversely impact our financial condition and results of operations and could result in significant costs to remediate or replace the defective components.

6 unchanged sentences

Products and services relying on internet and mobile technologies may expose us to fraud and cybersecurity risks.

Implementation of certain new technologies, such as those related to artificial intelligence, automation and algorithms, may have unintended consequences due to their limitations, potential manipulation, or our failure to use them effectively.

Failure to successfully manage these risks in the development and implementation of new or modified products or services could have an adverse effect on our business and reputation.

26 unchanged sentences

Emerging technologies have the potential to further intensify competition and accelerate disruption in the financial services industry.

In recent years, non-financial services firms, such as financial technology companies, have begun to offer services traditionally provided by financial institutions.

In recent years, non-financial services firms, such as financial technology companies, have begun

to offer services traditionally provided by financial institutions.

These firms attempt to use technology and mobile platforms to enhance the ability of companies and individuals to borrow, save and invest money.

13 unchanged sentences

Also, the loss of key personnel could jeopardize our relationships with customers and clients and could lead to the loss of accounts.

At the end of the third quarter of 2022, four client-facing wealth management advisors at WTA, our registered investment adviser subsidiary, resigned.

We could experience additional client asset withdrawals in upcoming months associated with the departure of the former advisors.

Losses of such accounts could have a material adverse impact on our business.

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A significant and sustained decline in our stock price and market capitalization, a significant decline in our expected future cash flows, a significant adverse change in the business climate, slower growth rates or other factors could result in impairment of goodwill.

Write-downs of the amount of any impairment, if necessary, would be charged to the results of operations in the period in which the impairment occurs.

Write-downs of the amount of any impairment, if necessary, would be charged to the results of operations in the

period in which the impairment occurs.

There can be no assurance that future evaluations of goodwill or intangible assets will not result in findings of impairment and related write-downs, which would have an adverse effect on our financial condition and results of operations.

5 unchanged sentences

Additionally, significant changes to accounting standards may require costly technology changes, additional training and personnel, and other expense that will negatively impact our results of operations.

Changes in tax laws and regulations and differences in interpretation of tax laws and regulations may adversely impact our financial statements.

Changes in tax laws and regulations, differences in interpretation of tax laws and regulations, and reductions in the value of our deferred tax assets may adversely impact our financial statements.

We are subject to tax law changes that could impact our effective income tax rate and our net deferred tax assets.

1 unchanged sentence

We assess the deferred tax assets periodically to determine the likelihood of our ability to realize the benefits.

A valuation allowance is established when it is more-likely-than-not that all or some portion of our deferred tax assets will not be realized.

Management judgment is required in determining the appropriate recognition and valuation of deferred tax assets and liabilities, including projections of future taxable income, as well as the character of that income.

A change in statutory tax rates may result in a decrease or increase to our deferred tax assets.

A change in statutory tax rates and/or a change in realizability may result in a decrease or increase to our deferred tax assets.

A decrease in our deferred tax assets could have a material adverse effect on our results of operations or financial condition.

12 unchanged sentences

We cannot assure you that such capital will be available to us on acceptable terms or at all.

Our inability to raise sufficient additional capital on acceptable terms when needed could subject us to certain activity restrictions or to a variety of enforcement remedies available to the

regulatory authorities, including limitations on our ability to pay dividends or pursue acquisitions, the issuance by regulatory authorities of a capital directive to increase capital and the termination of deposit insurance by the FDIC.

Our inability to raise sufficient additional capital on acceptable terms when needed could subject us to certain activity restrictions or to a variety of enforcement remedies available to the regulatory authorities, including limitations on our ability to pay dividends or pursue acquisitions, the issuance by regulatory authorities of a capital directive to increase capital and the termination of deposit insurance by the FDIC.

Certain provisions of our articles of incorporation may have an anti-takeover effect.

1 unchanged sentence

The combination of these provisions may inhibit a non-negotiated merger or other business combination, which, in turn, could adversely affect the market price of our common stock.

Adverse developments affecting the financial services industry, such as actual events or concerns involving liquidity, defaults, or non-performance by financial institutions or transactional counterparties, could adversely affect our financial condition and results of operations.

Actual events involving limited liquidity, defaults, non-performance or other adverse developments that affect financial institutions, transactional counterparties or other companies in the financial services industry or the financial services industry generally, or concerns or rumors about any events of these kinds or other similar risks, have in the past and may in the future lead to market-wide liquidity problems.

For example, on May 1, 2023, First Republic Bank went into receivership and its deposits and substantially all of its assets were acquired by JPMorgan Chase Bank, National Association.

Similarly, on March 10, 2023, Silicon Valley Bank went into receivership, and on March 12, 2023, Signature Bank went into receivership.

Inflation and rapid increases in interest rates led to a decline in the trading value of previously issued government securities with interest rates below current market interest rates.

The Federal Reserve announced a program to provide loans to FDIC-insured depository institutions and certain U.S.

branches and agencies of foreign banks secured by certain of such government securities to mitigate the risk of potential losses on the sale of such instruments.

Currently new advances (with terms up to one year) under the program can only be made through March 11, 2024.

There is no guarantee that the Treasury, FDIC and/or Federal Reserve, as applicable, take such actions in the future in the event of the closure of other banks or financial institutions, that they would do so in a timely fashion or that such actions, if taken, would have their intended effect.

RISKS RELATED TO OUR REGULATORY ENVIRONMENT

43 unchanged sentences

however, some legal/regulatory frameworks provide for the imposition of fines or penalties for noncompliance even though the noncompliance was inadvertent or unintentional and even though there were systems and procedures designed to ensure compliance in place at the time.

Failure to comply with these and other regulations, and supervisory expectations related thereto, may result in fines, penalties, lawsuits, regulatory sanctions, reputation damage, or restrictions on our business.

On September 27, 2023, the Bank entered into a settlement with the DOJ through an agreement to resolve allegations that it violated fair lending laws in the state of Rhode Island from 2016 to 2021.

Under the settlement, the Bank will provide $7.0 million in loan subsidies over a five-year period with the goal of increasing home mortgage loans, home improvement loans, and home refinance loans in specific census tracts in Rhode Island.

Loan subsidies may include originating a loan for a home purchase, refinancing or home improvement at an interest rate below the otherwise prevailing market interest rate offered by Washington Trust and payment of the initial mortgage insurance premium on loans subject to such mortgage insurance.

The cost of such subsidies will generally be recognized over the life of the respective loans.

Loan subsidies may also include down payment assistance and closing cost assistance.

The Bank also will commit $2.0 million for focused community outreach and marketing efforts over a five-year period.

The expenses associated with community outreach and marketing efforts will be recorded in the period in which the activities occur and are consistent with historical spending levels.

In addition, the Bank will commit to opening two full-service branches in specific census tracts in Rhode Island, including the previously announced new branch in Olneyville, Rhode Island.

The settlement included no civil penalties levied against the Bank.

The United States District Court for the District of Rhode Island approved the settlement on October 31, 2023.

The settlement resolved all claims made by the DOJ against the Bank related to its lending practices in the state of Rhode Island from 2016 to 2021.

Failure to comply with these and other regulations or any applicable enforcement actions or settlement agreements, and supervisory expectations related thereto, may result in fines, penalties, lawsuits, regulatory sanctions, reputation damage, or restrictions on our business.

We face significant legal risks, both from regulatory investigations and proceedings, and from private actions brought against us.

5 unchanged sentences

Actions currently pending against us may result in judgments, settlements, fines, penalties or other results adverse to us, which could materially adversely affect our business, financial condition or results of operations, or cause serious reputational harm to us.

Unresolved Staff Comments.

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 1A. Risk Factors