What changed in this filing

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Item 1. Business

2025-02-25 compared with 2024-02-26 · 51 added, 63 removed, 345 unchanged (25% of the section changed)

1 unchanged sentence

The Bancorp, a publicly-owned registered bank holding company that has elected to be a financial holding company, was organized in 1984 under the laws of the state of Rhode Island.

The Bancorp’s common stock trades on the NASDAQ Stock Market under the symbol WASH.

The Bancorp’s common stock trades on the Nasdaq under the symbol WASH.

The Bancorp owns all of the outstanding common stock of the Bank, a Rhode Island chartered financial institution founded in 1800.

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See additional information under the caption “Subsidiaries.”

Washington Trust offers a full range of financial services, including commercial, residential and consumer lending, retail and commercial deposit products, and wealth management and trust services.

Washington Trust offers a full range of financial services, including commercial banking, mortgage banking, personal banking, and wealth management and trust services, through its offices located in Rhode Island, Connecticut, and Massachusetts.

The accounting and reporting policies of Washington Trust conform to GAAP and to general practices of the banking industry.

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

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.

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, 2024, C&I loans represented 20% of the total commercial loan portfolio and 10% of the total loan portfolio.

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Deposits represent Washington Trust’s primary source of funds and are gathered primarily from the areas surrounding our branch network.

The Bank offers a wide variety of deposit products with a range of interest rates and terms to consumer, commercial, non-profit and municipal deposit customers.

The Bank offers a wide variety of products with a range of interest rates and terms to consumer, commercial, non-profit and municipal customers.

Washington Trust’s deposit accounts consist of noninterest-bearing demand deposits, interest-bearing demand deposits, NOW accounts, money market accounts, savings accounts and time deposits.

A variety of retirement deposit accounts are offered to customers.

Additional deposit services provided to customers include debit cards, ATMs, telephone banking, internet banking, mobile banking, remote deposit capture and other cash management services.

A variety of retirement deposit accounts are also offered to customers.

Additional deposit services provided to customers include debit cards, ATMs, telephone banking, internet banking, mobile banking, remote deposit capture and cash management services.

Wholesale brokered deposits from out-of-market institutional sources are also utilized as part of our overall funding strategy.

Washington Trust is a participant in the DDM program, the ICS program and the CDARS program.

Washington Trust is a participant in the DDM, ICS, and CDARS programs.

Washington Trust uses these deposit sweep services to place customer and client funds into interest-bearing demand accounts, money market accounts, and/or certificates of deposits issued by other participating banks.

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Investment Security Activities

Washington Trust’s investment securities portfolio amounted to $1.0 billion, or 14% of total assets, at December 31, 2023 and is managed to generate interest income, to implement interest rate risk management strategies and to provide a readily available source of liquidity for balance sheet management.

Washington Trust’s investment securities portfolio amounted to $916.3 million, or 13% of total assets, at December 31, 2024 and is managed to generate interest income, to implement interest rate risk management strategies and to provide a readily available source of liquidity for balance sheet management.

Washington Trust may acquire, hold and transact in various types of investment securities in accordance with applicable federal regulations, state statutes and guidelines specified in Washington Trust’s internal investment policy.

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At December 31, 2024, the Bank had advances payable to the FHLB of $1.1 billion.

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

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.

At December 31, 2024, the Bank had available borrowing capacity with the FHLB of $753.0 million.

The Bank also has access to a $40.0 million unused line of credit with the FHLB.

Additional funding sources are available through the FRBB and in other forms of borrowing, such as securities sold under repurchase agreements.

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These assets are not included in the Consolidated Financial Statements.

Washington Trust’s wealth management revenues represented 18% of total revenues in December 31, 2023.

Washington Trust’s wealth management revenues represent our largest source of noninterest income.

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.

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See “-Supervision and Regulation-Consumer Protection Regulation” for a discussion of certain regulations that apply to WTMC.

Washington Trust’s residential mortgage origination business conducted in our residential mortgage lending offices located outside of Rhode Island is performed by this Bank subsidiary.

Washington Trust’s residential mortgage origination business conducted through our residential mortgage lending offices located outside of Rhode Island is performed by this Bank subsidiary.

The Bank has other subsidiaries whose primary functions are to provide servicing on passive investments, such as loans acquired from the Bank and investment securities.

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As of December 31, 2024, the Bank had 10 branch offices located in southern Rhode Island (Washington County), 17 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.

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

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 Rhode Island (Westerly and Warwick).

See additional disclosure in Item 2, Properties.

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

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Washington Trust operates in a highly competitive wealth management services marketplace.

Key competitive factors include investment performance, quality and level of service, as well as personal relationships.

Key competitive factors include investment products, level of investment performance, client services, as well as personal relationships.

Principal competitors in the wealth management services business are commercial banks and trust companies, investment advisory firms, mutual fund companies, online and full-service stock brokerage firms, and other financial companies.

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We believe that providing caring, personal customer service with a human connection is an important differentiator for Washington Trust, especially in this digital age.

We seek to build strong relationships with our customers and understand their needs and challenges.

Our talented team is committed to providing an exceptional customer experience by listening and providing trusted advice and personalized solutions.

We seek to build strong relationships with our customers.

Our talented team is committed to providing an exceptional customer experience by listening, understanding the unique needs and challenges of each customer, and providing trusted advice and personalized solutions.

We invest in our employees.

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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

promote and recognize employees for their work successes;

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

offer a flexible, wide-ranging benefit package to meet the diverse needs of our workforce;

offer a flexible, wide-ranging benefit package to meet the differing needs of our workforce;

and provide policies and benefits to help employees create a work-life balance.

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This process is essential to ensure leadership continuity in key positions, retain and develop intellectual and knowledge capital for the future, and encourage professional development.

We are committed to fostering an inclusive culture that respects and values the diversity of our employees, customers, and community, where all ideas, perspectives and experiences are heard.

A diverse and inclusive workforce enables us to better understand the needs and challenges of our customers so we can build stronger relationships.

We recognize that an inclusive environment will foster increased collaboration, problem-solving, innovation and creativity, ultimately driving positive results.

We also recognize that being viewed as an employer that champions diversity, inclusion and equality of opportunity can provide a talent advantage allowing us to attract, hire and retain the best talent available.

We have a formalized strategy that guides our diversity, equity & inclusion (“DE&I”) efforts, focusing on four pillars – culture and employee experience;

recruitment, development and retention;

leadership and workforce engagement;

and impactful community relationships.

To assist us in implementing our DE&I strategy, we have formed a DE&I Council, a cross functional group of colleagues representing different perspectives, backgrounds and experiences.

The DE&I Council assists us with developing a diverse talent pipeline;

identifying areas for increased education and awareness;

providing insight into organizational climate and culture;

implementing DE&I initiatives;

promoting the use of best practices;

and identifying opportunities for Washington Trust to engage with its broader communities.

We are committed to fostering a culture that respects and values people - employees, customers, and community - where all ideas, perspectives and experiences are heard.

We recognize that a supportive and inclusive environment will foster increased collaboration, problem-solving, innovation and creativity, ultimately driving positive results.

Statistical Disclosures

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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.

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The BHCA also generally prohibits a bank holding company from engaging directly or indirectly in activities other than those of banking, managing or controlling banks or furnishing services to its subsidiary banks.

However, among other permitted activities, a bank holding company may engage directly or indirectly in, and acquire control of companies engaged in, activities that the Federal Reserve has determined to be closely related to banking or managing and controlling banks, subject to certain notification requirements.

However, among other permitted activities, a bank holding company may engage directly or indirectly in, and acquire control of companies engaged in,

activities that the Federal Reserve has determined to be closely related to banking, subject to certain notification requirements.

In 2005, the Bancorp elected financial holding company status pursuant to the provisions of the GLBA.

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Under rebuttable presumptions of control established by the Federal Reserve, the acquisition of control of voting securities of a bank holding company constitutes an acquisition of control under the Change in Bank Control Act, requiring prior notice to the Federal Reserve, if, immediately after the transaction, the acquiring person (or persons acting in concert) will own, control, or hold with power to vote 10% or more of any class of voting securities of the bank holding company, and if either (i) the bank holding company has registered securities under Section 12 of the Exchange Act, or (ii) no other person will own, control, or hold the power to vote a greater percentage of that class of voting securities immediately after the transaction.

On July 30, 2024, the FDIC approved a notice of proposed rulemaking to amend the FDIC’s rules implementing the Change in Bank Control Act.

If adopted, the proposed rule would eliminate an exemption from prior notice to the FDIC for a proposed change in control involving the acquisition of voting securities of a depository institution holding company for which the Federal Reserve reviews a notice pursuant to the Change in Bank Control Act.

As a result, if the proposed rule is adopted, the acquisition of control of a bank holding company for an insured state nonmember bank would require prior notice to both the FDIC and the Federal Reserve.

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.

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to issue directives to increase capital;

to place the bank into receivership;

place the bank into receivership;

and to initiate injunctive actions against banking organizations and institution-related parties.

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The FDIC calculates deposit insurance assessment rates for established small banks, generally those banks with less than $10 billion of assets that have been insured for at least five years, using the CAMELS rating system and other factors.

The CAMELS rating system is a supervisory rating system designed to take into account and reflect all financial and operational risks that a bank may face, including capital adequacy, asset quality, management capability, earnings, liquidity and sensitivity to market risk.

The CAMELS rating system is a supervisory rating system designed to take into account and reflect various financial and operational risks that a bank may face, including capital adequacy, asset quality, management capability, earnings, liquidity and sensitivity to market risk.

To determine a bank’s assessment rate, each of seven financial ratios and a weighted average of CAMELS component ratings are multiplied by a corresponding pricing multiplier.

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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 2024, the FDIC insurance expense for the Bank was $5.5 million.

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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.

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Community Reinvestment Act.

The CRA requires the FDIC to evaluate the Bank’s performance in helping to meet the credit needs of the entire community it serves, including low- and moderate-income neighborhoods, consistent with its safe and sound banking operations, and to take this record into consideration when evaluating certain applications.

sound banking operations, and to take this record into consideration when evaluating certain applications.

The FDIC’s CRA regulations are generally based upon objective criteria of the performance of institutions under three key assessment tests:

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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.

On February 5, 2024, the American Bankers Association, the U.S.

Chamber of Commerce, the Independent Community Bankers of America, along with four state trade associations jointly sued the Federal Reserve, FDIC, and Office of Comptroller of the Currency for exceeding their statutory authority in adopting revised regulations to implement the Community Reinvestment Act.

The lawsuit filed in the U.S.

District Court for the Northern District of Texas requested the regulatory agencies vacate the rule and sought a preliminary injunction pausing the new rules while the court decided the merits of the case.

On March 29, 2024, the district court judge granted a temporary injunction to pause the implementation of CRA final rule with respect to the plaintiff trade associations while the case moves forward.

The banking agencies have appealed the issuance of the injunction to the U.S.

Court of Appeals for the Fifth Circuit.

However, the new CRA regulations are currently expected to become effective on January 1, 2026.

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

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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.

The Bancorp’s currently outstanding trust preferred securities were grandfathered under this rule.

In addition, under rules that became effective January 1, 2015, AOCI (positive or negative) must be reflected in Tier 1 capital;

In addition, under rules that became effective January 1, 2015, AOCI (positive or negative) must be reflected in Tier 1

however, the Bancorp and the Bank were permitted to make a one-time, permanent election to continue to exclude AOCI from capital.

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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.

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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.

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.

Further, the CFPB also has a broad mandate to prohibit unfair, deceptive or abusive acts and practices and is specifically empowered to require certain disclosures to consumers and draft model disclosure forms.

Failure to comply with consumer protection laws and regulations can subject financial institutions to enforcement actions, fines and other penalties.

Failure to comply with consumer protection laws and

regulations can subject financial institutions to enforcement actions, fines and other penalties.

The FDIC examines the Bank for compliance with CFPB rules and enforces CFPB rules with respect to the Bank.

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Privacy and Customer Information Security.

The GLBA requires financial institutions to implement policies and procedures regarding the disclosure of nonpublic personal information about consumers to nonaffiliated third parties.

The GLBA requires financial institutions to implement policies and procedures regarding the disclosure of nonpublic personal information about consumers to non-affiliated third parties.

In general, the Bank must provide its customers with an initial and annual disclosure that explains its policies and procedures regarding the disclosure of such nonpublic personal information, and, except as otherwise required or permitted by law, the Bank is prohibited from disclosing such information except as provided in such policies and procedures.

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

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

Generally, 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.

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(ii) a blocking of assets in which the government or specially designated nationals of the sanctioned country have an interest, by prohibiting transfers of property subject to U.S.

jurisdiction (including property in the possession or control of U.S.

jurisdiction (including property in the possession or

control of U.S.

and (iii) restrictions on transactions with or involving certain persons or entities.

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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