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Financial report summary
?Risks
- RISKS RELATED TO OUR BUSINESS AND INDUSTRY
- The possibility of the economy entering a recession and/or experiencing further turmoil or volatility in the financial markets would likely have an adverse effect on our business, financial position, and results of operations.
- Changes in the business and economic conditions in southern New England could adversely affect our financial condition and results of operations.
- Inflationary pressures and rising prices may affect our results of operations and financial condition.
- Fluctuations in interest rates may impair the Bank’s business.
- We are subject to liquidity risk, which could negatively affect our funding levels.
- Our cost of funds for banking operations may increase as a result of general economic conditions, interest rates and competitive pressures.
- Our loan portfolio includes commercial loans, which are generally riskier than other types of loans.
- We may experience losses and expenses if security interests granted for loans are not enforceable.
- Environmental liability associated with our lending activities could result in losses.
- We may be required to repurchase mortgage loans or indemnify buyers against losses in some circumstances, which could adversely affect our results of operations and financial condition.
- Our ACL on loans may not be adequate to cover actual loan losses, and an increase in the ACL on loans will adversely affect our earnings.
- We are a holding company and depend on the Bank for dividends, distributions and other payments.
- We have credit and market risk inherent in our investment securities portfolio.
- Potential downgrades of U.S. government agency and government-sponsored enterprise securities by one or more of the credit ratings agencies could have a material adverse effect on our operations, earnings and financial condition.
- The soundness of other financial institutions could adversely affect us.
- Market changes or economic downturns may adversely affect demand for our fee-based services and level of wealth management AUA.
- We face continuing and growing security risks to our information base, including the information we maintain relating to our customers.
- We rely on other companies to provide key components of our business infrastructure.
- We may not be able to successfully implement future information technology system enhancements, which could adversely affect our business operations and profitability.
- Our business may be adversely affected if we fail to adapt our products and services to evolving industry standards and consumer preferences.
- We may incur significant losses as a result of ineffective risk management processes and strategies.
- Damage to our reputation could significantly harm our business, including our competitive position and business prospects.
- We may not be able to compete effectively in our increasingly competitive industry.
- We may be unable to attract and retain key personnel.
- Natural disasters, acts of terrorism, pandemics and other external events could harm our business.
- Climate change and related legislative and regulatory initiatives may result in operational changes and expenditures that could significantly impact our business.
- If we are required to write-down goodwill or other intangible assets recorded in connection with our acquisitions, our profitability would be negatively impacted.
- Changes in accounting standards can materially 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.
- The market price and trading volume of our stock can be volatile.
- We may need to raise additional capital in the future and such capital may not be available when needed.
- Certain provisions of our articles of incorporation may have an anti-takeover effect.
- 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.
- RISKS RELATED TO OUR REGULATORY ENVIRONMENT
- We operate in a highly regulated industry, and laws and regulations, or changes in them, could limit or restrict our activities and could have a material adverse effect on our operations.
- Our wealth management business is highly regulated, and the regulators have the ability to limit or restrict our activities and impose fines or suspensions on the conduct of our business.
- We are subject to numerous laws designed to protect consumers, including the CRA and fair lending laws, and failure to comply with these laws could lead to a wide variety of sanctions.
- We may become subject to enforcement actions even though noncompliance was inadvertent or unintentional.
- We face significant legal risks, both from regulatory investigations and proceedings, and from private actions brought against us.
Management Discussion
- 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.
- 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.
- 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.