What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2024-02-26 compared with 2023-02-23 · 426 added, 368 removed, 1998 unchanged (28% of the section changed)

4 unchanged sentences

Consolidated Balance Sheets at December 31, 2023 and 2022

Consolidated Statements of Income f or the Years Ended December 31, 2022, 2021 and 2020

Consolidated Statements of Income for the Years Ended December 31, 2023, 2022 and 2021

Consolidated Statements of Comprehensive Income (Loss) for the Years Ended December 31, 2023, 2022 and 2021

Consolidated Statements of Changes in Shareholders’ Equity f or the Years Ended December 31, 2022, 2021 and 2020

Consolidated Statements of Cash Flows f or the Years Ended December 31, 2022, 2021 and 2020

Consolidated Statements of Changes in Shareholders’ Equity for the Years Ended December 31, 2023, 2022 and 2021

Consolidated Statements of Cash Flows for the Years Ended December 31, 2023, 2022 and 2021

Notes to Consolidated Financial Statements:

95 unchanged sentences

ASC 326 requires the measurement of expected lifetime credit losses for financial assets measured at amortized cost at the reporting date.

As of December 31, 2022, the balance of the allowance for credit losses on loans (“ACL”) was $38.0 million.

Management employs a process and methodology to estimate the ACL that evaluates both quantitative and qualitative factors.

As of December 31, 2023, the balance of the allowance for credit losses (“ACL”) on loans was $41.1 million.

Management employs a process and methodology to estimate the ACL on loans that evaluates both quantitative and qualitative factors.

The methodology for evaluating quantitative factors involves pooling loans into portfolio segments for loans that share similar risk characteristics.

88 unchanged sentences

Junior subordinated debentures 1,543 739 370

Other interest expense — — 233

Total interest expense 171,561 38,475 16,560

39 unchanged sentences

Net income $ 48,176 $ 71,681 $ 76,870

Other comprehensive (loss) income, net of tax:

Other comprehensive income (loss), net of tax:

Net change in fair value of available for sale debt securities 14,442 ( 124,238 ) ( 16,676 )

1 unchanged sentence

Net change in defined benefit plan obligations ( 4,821 ) 5,051 6,652

Total other comprehensive (loss) income, net of tax ( 137,819 ) ( 12,590 ) 3,846

Total comprehensive (loss) income ($ 66,138 ) $ 64,280 $ 73,675

Total other comprehensive income (loss), net of tax 16,647 ( 137,819 ) ( 12,590 )

Total comprehensive income (loss) $ 64,823 ($ 66,138 ) $ 64,280

The accompanying notes are an integral part of these consolidated financial statements.

8 unchanged sentences

Comprehensive

(Loss) Income Treasury

Loss Treasury

Balance at December 31, 2020 17,265 $ 1,085 $ 125,610 $ 418,246 ($ 7,391 ) ($ 3,355 ) $ 534,195

Cumulative effect of change in accounting principle - ASC 326

— — — ( 6,108 ) — — ( 6,108 )

Net income — — — 76,870 — — 76,870

Total other comprehensive income, net of tax — — — — 3,846 — 3,846

Total other comprehensive loss, net of tax — — — — ( 12,590 ) — ( 12,590 )

Cash dividends declared ($ 2.10 per share)

2 unchanged sentences

Exercise of stock options, issuance of other compensation-related equity awards, net of awards surrendered 66 — ( 2,415 ) — — 2,238 ( 177 )

Treasury stock purchased under the 2019 Repurchase Program

( 125 ) — — — — ( 4,322 ) ( 4,322 )

Balance at December 31, 2021 17,331 $ 1,085 $ 126,511 $ 458,310 ($ 19,981 ) ($ 1,117 ) $ 564,808

5 unchanged sentences

Exercise of stock options, issuance of other compensation-related equity awards, net of awards surrendered 46 — ( 2,702 ) — — 1,881 ( 821 )

Treasury stock purchased under the 2021 Repurchase Program

( 194 ) — — — — ( 9,479 ) ( 9,479 )

Balance at December 31, 2022 17,183 $ 1,085 $ 127,056 $ 492,043 ($ 157,800 ) ($ 8,715 ) $ 453,669

Net income — — — 48,176 — — 48,176

Total other comprehensive loss, net of tax — — — — ( 137,819 ) — ( 137,819 )

Total other comprehensive income, net of tax — — — — 16,647 — 16,647

Cash dividends declared ($ 2.24 per share)

2 unchanged sentences

Exercise of stock options, issuance of other compensation-related equity awards, net of awards surrendered 48 — ( 2,970 ) — — 2,216 ( 754 )

Treasury stock purchased under the 2021 Stock Repurchase Program ( 194 ) — — — — ( 9,479 ) ( 9,479 )

Treasury stock purchased under the 2023 Repurchase Program (1)

( 200 ) — — — — ( 8,814 ) ( 8,814 )

Balance at December 31, 2023 17,031 $ 1,085 $ 126,150 $ 501,917 ($ 141,153 ) ($ 15,313 ) $ 472,686

(1) Treasury stock includes $ 73 thousand of excise tax attributable to shares repurchased in 2023.

The accompanying notes are an integral part of these consolidated financial statements.

9 unchanged sentences

Depreciation of premises and equipment 4,005 3,465 3,411

Net amortization of premiums and discounts on securities and loans 2,893 3,446 5,720

Net amortization of premiums and discounts on debt securities and loans 1,352 2,893 3,446

Amortization of intangibles 843 860 890

Share–based compensation 2,064 3,247 3,316

Tax benefit (expense) from stock option exercises and other equity awards

Tax (expense) benefit from stock option exercises and other equity awards

( 34 ) 78 182

Deferred income tax expense (benefit) 1,160 2,155 ( 3,130 )

Deferred income tax (benefit) expense ( 3,690 ) 1,160 2,155

Income from bank-owned life insurance ( 3,488 ) ( 2,591 ) ( 2,925 )

7 unchanged sentences

(Increase) decrease in other assets ( 3,000 ) ( 30,804 ) 38,935

Increase (decrease) in other liabilities 34,070 ( 39,747 ) 49,323

(Decrease) increase in other liabilities ( 11,503 ) 34,070 ( 39,747 )

Net cash provided by operating activities 31,603 113,006 100,812

12 unchanged sentences

Net (purchases) redemptions of Federal Home Loan Bank stock ( 8,430 ) ( 30,432 ) 17,254

Purchases of other equity investments, net ( 375 ) ( 650 ) —

Net increase in loans ( 537,467 ) ( 832,450 ) ( 27,921 )

Purchases of loans ( 5,743 ) ( 2,773 ) ( 41,863 )

Proceeds from the sale of property acquired through foreclosure or repossession — — 1,392

Purchases of premises and equipment ( 5,048 ) ( 6,139 ) ( 3,490 )

3 unchanged sentences

Equity investments in real estate limited partnerships ( 8,115 ) ( 1,861 ) —

Purchases of other equity investments, net ( 263 ) ( 375 ) ( 650 )

Net cash used in investing activities ( 550,840 ) ( 999,041 ) ( 240,899 )

8 unchanged sentences

Repayment of Federal Home Loan Bank advances ( 3,305,000 ) ( 2,321,112 ) ( 1,743,036 )

Proceeds from Payment Protection Program Lending Facility — — 200,628

Repayment of Payment Protection Program Lending Facility — — ( 200,628 )

Treasury stock purchased ( 8,814 ) ( 9,479 ) —

2 unchanged sentences

Net cash provided by financing activities 490,999 825,964 116,312

Net (decrease) increase in cash and cash equivalents ( 60,071 ) ( 23,775 ) 63,813

Net decrease in cash and cash equivalents ( 28,238 ) ( 60,071 ) ( 23,775 )

Cash and cash equivalents at beginning of year 118,422 178,493 202,268

18 unchanged sentences

The consolidated financial statements include the accounts of the Bancorp and its wholly-owned subsidiaries, except subsidiaries that are not deemed necessary to be consolidated.

Intercompany balances and transactions have been eliminated in consolidation.

Through consolidation, intercompany balances and transactions have been eliminated.

The Bancorp owns the common stock of two capital trusts, which have issued trust preferred securities.

38 unchanged sentences

Accrued interest for a debt security placed on nonaccrual is reversed against interest income.

There were no debt securities on nonaccrual status as of December 31, 2022 and 2021 and, therefore there was no accrued interest related to debt securities reversed against interest income for 2022 and 2021.

Allowance for Credit Losses on Securities

For available for sale debt securities in an unrealized loss position, management first assesses whether the Corporation intends to sell, or if it is likely that the Corporation will be required to sell the security before recovery of its amortized cost basis.

If either of the criteria regarding intent or requirement to sell is met, the security’s amortized cost basis is written down to fair value through a provision for credit losses charge to earnings.

If either of the criteria regarding intent or requirement to sell is met, the security’s amortized cost basis is written down to fair value through a provision for credit losses recognized in the Consolidated Statements of Income.

For debt securities available for sale that do not meet either of these criteria, management evaluates whether the decline in fair value has resulted from credit losses or other factors.

18 unchanged sentences

Federal Home Loan Bank Stock

The Bank is a member of the FHLB.

The FHLB is a cooperative that provides services, including funding in the form of advances, to its member banking institutions.

As a requirement of membership, the Bank must own a minimum amount of

The Bank is a member of the FHLB, which is a cooperative that provides services, including funding in the form of advances, 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

Notes to Consolidated Financial Statements – (continued)

FHLB stock, calculated periodically based primarily on its level of borrowings from the FHLB.

access to funding and the Bank must own a minimum amount of FHLB stock, calculated periodically based primarily on its level of borrowings from the FHLB.

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.

No market exists for shares of FHLB stock and therefore, it is carried at cost.

11 unchanged sentences

Upfront fees and costs related to mortgage loans held for sale for which the fair value option was elected are recognized in mortgage banking revenues as received / incurred and are not deferred.

Commissions received on mortgage loans brokered to various investors are recognized when received and included in mortgage banking revenues.

Commissions received on mortgage loans brokered to various investors are recognized when received and are included in mortgage banking revenues.

Loan Servicing Rights

5 unchanged sentences

Impairment is measured on an aggregated basis by stratifying the rights based on homogeneous characteristics such as note rate and loan type.

The fair value is estimated based on the present value of expected cash flows, incorporating assumptions for discount rate, prepayment speed and servicing cost.

Any impairment is recognized through a valuation allowance and as a reduction to mortgage banking revenues.

8 unchanged sentences

Loans are also placed on nonaccrual status when, in the opinion of management, full collection of principal and interest is doubtful.

When loans are placed on nonaccrual status, interest previously accrued but not collected is reversed against current period income.

Subsequent interest payments received on nonaccrual loans are applied to the outstanding principal balance of the

When loans are

Notes to Consolidated Financial Statements – (continued)

loan or recognized as interest income depending on management’s assessment of the ultimate collectability of the loan.

Loans are removed from nonaccrual status when they have been current as to principal and interest for a period of time, the borrower has demonstrated an ability to comply with repayment terms, and when, in management’s opinion, the loans are considered to be fully collectible.

placed on nonaccrual status, interest previously accrued but not collected is reversed against current period income.

Subsequent interest payments received on nonaccrual loans are applied to the outstanding principal balance of the loan or recognized as interest income depending on management’s assessment of the ultimate collectability of the loan.

Loans are removed from nonaccrual status when they have been current as to principal and interest (generally for six months), the borrower has demonstrated an ability to comply with repayment terms, and when, in management’s opinion, the loans are considered to be fully collectible.

Troubled Loan Modifications

Effective January 1, 2023, a loan that has been modified is considered a TLM when the modification is made to a borrower experiencing financial difficulty and the modification has a direct impact to the contractual cash flows.

If both of the aforementioned criteria are met, then the modification is considered a TLM and subject to the enhanced disclosure requirements.

In the course of resolving problem loans, the Corporation may choose to modify the contractual terms of loans to borrowers who are experiencing financial difficulty.

Such modifications to borrowers experiencing financial difficulty may include modified contractual terms that have a direct impact to contractual cash flows, including principal forgiveness, interest rate reductions, maturity extensions, other-than-insignificant payment delays, or any combination thereof.

Debt could be bifurcated with separate terms for each tranche of the TLM.

Executing a TLM in lieu of aggressively enforcing the collection of the loan may benefit the Corporation by increasing the ultimate probability of collection.

The following is a description of each type of modifications for a TLM:

• Principal forgiveness results in the reduction in the outstanding principal balance of the loan and can result voluntarily through renegotiated contractual terms with the borrower or involuntarily through a bankruptcy proceeding.

• An interest rate reduction results in the contractual interest rate being reduced from the original agreement.

• A maturity extension represents an extension of the term of the loan beyond its original contractual maturity date.

• An other-than-insignificant payment delay is a deferral arrangement with the borrower, which allows them to delay a scheduled loan payment to a later date.

The Corporation considers that a three months or less payment delay generally would be considered insignificant.

• A combination includes loans that have undergone more than one of the above loan modification types.

Nonaccrual loans that become TLMs generally remain on nonaccrual status for six months, subsequent to being modified, before management considers their return to accrual status.

If a TLM is on accrual status prior to being modified, it is reviewed to determine if the modified loan should remain on accrual status.

TLMs are reported as such for at least one year from the date of the modification.

If the TLM performs in accordance with the modified contractual terms for that period of time, it would be removed from this classification.

Troubled Debt Restructured Loans

A loan that has been modified or renewed is considered to be a TDR when two conditions are met:

1) the borrower is experiencing financial difficulty and 2) concessions are made for the borrower’s benefit that would not otherwise be considered for a borrower or a transaction with similar credit risk characteristics.

These concessions may include modifications of the terms of the debt such as deferral of payments, extension of maturity, reduction of principal balance, reduction of the stated interest rate other than normal market rate adjustments, or a combination of these concessions.

Debt may be bifurcated with separate terms for each tranche of the restructured debt.

Prior to the adoption of ASU 2022-02, a loan that had been modified or renewed was considered to be a TDR when two conditions were met:

1) the borrower was experiencing financial difficulty and 2) concessions were made for the borrower’s benefit that would not otherwise have been considered for a borrower or a transaction with similar credit risk characteristics.

These concessions may have included modifications of the terms of the debt such as deferral of payments, extension of maturity, reduction of principal balance, reduction of the stated interest rate other than normal market rate adjustments, or a combination of these concessions.

Debt could be bifurcated with separate terms for each tranche of the restructured debt.

Restructuring of a loan in lieu of aggressively enforcing the collection of the loan may benefit the Corporation by increasing the ultimate probability of collection.

TDRs are classified as accruing or non-accruing based on management’s assessment of the collectability of the loan.

Loans that are already on nonaccrual status at the time of the restructuring generally remain on nonaccrual status for approximately six months before management considers such loans for return to accruing status.

Accruing restructured loans are placed into nonaccrual status if and when the borrower fails to comply with the restructured terms and management deems it unlikely that the borrower will return to a status of compliance in the near term and full collection of principal and interest is in doubt.

TDRs are reported as such for at least one year from the date of the restructuring.

In years after the restructuring, TDRs are removed from this classification if the restructuring did not involve a below-market rate concession and the loan is performing in accordance with their modified contractual terms for a reasonable period of time.

The Corporation elected to account for eligible loan modifications under Section 4013 of the CARES Act, as amended by the CRRSA Act.

Eligible loan modifications from March 1, 2020 through January 1, 2022 made in response to the COVID-19 pandemic were not required to be classified as TDRs.

The vast majority of the loan payment deferral modifications or “deferments” made qualified as eligible loans modifications and were not classified as TDRs.

All of these loans with qualified deferments exited their payment deferral period prior to March 31, 2022.

TDRs were classified as accruing or non-accruing based on management’s assessment of the collectability of the loan.

Loans that were already on nonaccrual status at the time of the restructuring generally remained on nonaccrual status for approximately six months before management considered such loans for return to accruing status.

Accruing restructured loans were placed into nonaccrual status if and when the borrower failed to comply with the restructured terms and management deemed it unlikely that the borrower would return to a status of compliance in the near term and full collection of principal and interest was in doubt.

Notes to Consolidated Financial Statements – (continued)

TDRs were reported as such for at least one year from the date of the restructuring.

In years after the restructuring, TDRs were removed from this classification if the restructuring did not involve a below-market rate concession and the loan was performing in accordance with their modified contractual terms for a reasonable period of time.

Individually Analyzed Loans

Individually analyzed loans are individually assessed for credit impairment and include nonaccrual commercial loans, reasonably expected TDRs, executed TDRs, and certain other loans based on the underlying risk characteristics and the discretion of management to individually analyze such loans.

A TDR is considered reasonably expected to occur no later than the point when management concludes that modification is the best course of action and it is at least reasonably possible that the troubled borrower will accept some form of concession to avoid a default.

Individually analyzed loans are individually assessed for credit impairment and include nonaccrual commercial loans, TLMs, as well as certain other loans based on the underlying risk characteristics and the discretion of management to individually analyze such loans.

Prior to January 1, 2023, individually analyzed loans also included TDRs.

Allowance for Credit Losses on Loans

8 unchanged sentences

Historical credit loss experience provides the basis for the calculation of loss given default and the estimation of expected credit losses.

As discussed further below, adjustments to historical information are made for differences in specific risk characteristics, such as differences in underwriting standards, portfolio mix, delinquency level, or term, as well as for changes in environmental conditions, that may not be reflected in historical loss rates.

Notes to Consolidated Financial Statements – (continued)

As discussed further below, adjustments to historical information are made for differences in specific risk characteristics that may not be reflected in historical loss rates.

Management employs a process and methodology to estimate the ACL on loans that evaluates both quantitative and qualitative factors.

2 unchanged sentences

The first component involves pooling loans into portfolio segments for loans that share similar risk characteristics.

Pooled loan portfolio segments include CRE (including a commercial construction sub-segment), C&I (including a PPP sub-segment), residential real estate, home equity and other consumer loans.

Pooled loan portfolio segments include CRE (including a commercial construction sub-segment), C&I, residential real estate, home equity and other consumer loans.

The second component involves identifying individually analyzed loans that do not share similar risk characteristics with loans that are pooled into portfolio segments.

Individually analyzed loans include nonaccrual commercial loans, reasonably expected TDRs and executed TDRs, as well as certain other loans based on the underlying risk characteristics and the discretion of management to individually analyze such loans.

Individually analyzed loans include nonaccrual commercial loans, TLMs, as well as certain other loans based on the underlying risk characteristics and the discretion of management to individually analyze such loans.

Prior to January 1, 2023, individually analyzed loans included reasonably expected TDRs and executed TDRs.

For loans that are individually analyzed, the ACL 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 is collateral dependent, at the fair value of the collateral.

1 unchanged sentence

For collateral dependent loans for which repayment is to be provided substantially through the sale of the collateral, management adjusts the fair value for estimated costs to sell.

For collateral dependent loans for which repayment is to be provided substantially through the operation of the collateral, such as accruing TDRs, estimated costs to sell are not incorporated into the measurement.

For collateral dependent loans for which repayment is to be provided substantially through the operation of the collateral, estimated costs to sell are not incorporated into the measurement.

Management may also adjust appraised values to reflect estimated market value declines or apply other discounts to appraised values for unobservable factors resulting from its knowledge of circumstances associated with the collateral.

2 unchanged sentences

The methodology incorporates a probability of default and loss given default framework.

Default triggers include the loan has become past due by 90 or more days, a charge-off has occurred, the loan has been placed on nonaccrual status, the loan has been modified in a TDR or the loan is risk-rated as special mention or classified.

Default triggers include the loan has become past due by 90 or more days, a charge-off has occurred, the loan has been placed on nonaccrual status, the loan has been modified as a TLM (effective January 1, 2023;

TDR prior to January 1, 2023), or the loan is risk-rated as special mention or classified.

Loss given default is estimated based on historical credit loss experience.

Probability of default is estimated utilizing a regression model that incorporates econometric factors.

Probability of default is estimated utilizing a

Notes to Consolidated Financial Statements – (continued)

regression model that incorporates econometric factors.

Econometric factors are selected based on the correlation of the factor to historical credit losses for each portfolio segment.

7 unchanged sentences

To estimate the probability of default, the model utilizes forecasted econometric factors over a one-year reasonable and supportable forecast period.

After the forecast period, the model reverts to the historical mean of the respective econometric factor and the associated probability of default on a straight-line basis over a one-year reversion period.

After the forecast period, the econometric factors revert to their historical mean on a straight-line basis over a one-year reversion period resulting in a constant default rate after the reversion period.

The DCF methodology combines the probability of default, the loss given default, prepayment speeds and the remaining life of the loan to estimate a reserve for each loan.

1 unchanged sentence

Quantitative loss factors are also supplemented by certain qualitative risk factors reflecting management’s view of how losses may vary from those represented by quantitative loss rates.

These qualitative risk factors include:

The qualitative risk factors management considers include:

1) changes in lending policies and procedures, including changes in underwriting standards and collection, charge-off, and recovery practices not considered elsewhere in estimating credit losses;

2 unchanged sentences

4) changes in the experience, ability, and depth of lending management and other relevant staff;

5) changes in the volume and severity of past due loans, the

Notes to Consolidated Financial Statements – (continued)

volume of nonaccrual loans, and the volume and severity of adversely classified or rated loans;

5) changes in the volume and severity of past due loans, the volume of nonaccrual loans, and the volume and severity of adversely classified or rated loans;

6) changes in the quality of the institution’s credit review system;

14 unchanged sentences

The estimated funding factor applied to unfunded commitments represents the likelihood that the funding will occur and is based upon the Corporation’s average historical utilization rate for each portfolio.

Notes to Consolidated Financial Statements – (continued)

The ACL on unfunded commitments is included in other liabilities in the Consolidated Balance Sheets.

19 unchanged sentences

Lease expense for operating leases is recognized on a straight-line basis over the lease term.

Variable lease components, such

Notes to Consolidated Financial Statements – (continued)

as consumer price index adjustments, are expensed as incurred and not included in ROU assets and operating lease liabilities.

Variable lease components, such as consumer price index adjustments, are expensed as incurred and not included in ROU assets and operating lease liabilities.

Bank-Owned Life Insurance

5 unchanged sentences

Goodwill is not amortized, but is tested for impairment at the reporting unit level (defined as the segment level), at least annually in the fourth quarter or more frequently whenever events or circumstances occur that indicate that it is more-likely-than-not that an impairment loss has occurred.

In assessing impairment, the Corporation has the option to perform a qualitative analysis to determine whether the existence of events or circumstances leads to a determination that it is more-likely-than-not that the fair value of the reporting unit is less than its carrying amount.

In assessing impairment, management has the option to perform a qualitative analysis to determine whether the existence of events or circumstances leads to a determination that it is more-likely-than-not that the fair value of the reporting unit is less than its carrying amount.

If, after assessing the totality of such events or circumstances, we determine it is not more-likely-than-not that the fair value of a reporting unit is less than its carrying amount, then we would not be required to perform an impairment test.

5 unchanged sentences

Judgment is applied in determining the weightings that are most representative of fair value.

Notes to Consolidated Financial Statements – (continued)

Intangible assets identified in acquisitions consist of advisory contracts.

2 unchanged sentences

Intangible assets with definite lives are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be fully recoverable.

If applicable, the Corporation tests each of the intangibles by comparing the carrying value of the intangible asset to the sum of undiscounted cash flows expected to be generated by the asset.

If applicable, management tests each of the intangibles by comparing the carrying value of the intangible asset to the sum of undiscounted cash flows expected to be generated by the asset.

If the carrying amount of the asset exceeds its undiscounted cash flows, then an impairment loss would be recognized for the amount by which the carrying amount exceeds its fair value.

2 unchanged sentences

Property Acquired through Foreclosure or Repossession

Property acquired through foreclosure or repossession is carried at the lower of cost or fair value less estimated costs to sell.

Property acquired through foreclosure or repossession is initially recorded at fair value less estimated costs to sell, resulting in a new cost basis.

Fair value of such assets is determined based on independent appraisals and other relevant factors.

Any write-down to fair value at the time of foreclosure or repossession is charged to the ACL on loans.

The amount by which the recorded investment in the loan exceeds the fair value (net of estimated costs to sell) at the time of foreclosure or repossession is charged to the ACL on loans.

Subsequent to foreclosure or repossession, a valuation allowance is maintained for declines in market value and for estimated selling expenses.

Any subsequent increases in fair value of the property are recorded as a reduction to the valuation allowance, but not below zero.

Upon sale of foreclosed property, any excess of the carrying value over the sales proceeds is recognized as a loss on sale.

6 unchanged sentences

The carrying value of such investments is recorded in other assets on the Consolidated Balance Sheets.

Notes to Consolidated Financial Statements – (continued)

Investments in real estate limited partnerships are accounted for using the proportional amortization method.

13 unchanged sentences

Impairment of Long - Lived Assets Other than Goodwill

Long-lived assets, including premises and equipment, operating lease ROU assets and investments in real estate limited partnerships, are tested for impairment whenever events or changes in business circumstances indicate that the carrying amount may not be fully recoverable.

Notes to Consolidated Financial Statements – (continued)

amount may not be fully recoverable.

If impairment is determined to exist, any related impairment loss is calculated based on fair value.

15 unchanged sentences

Revenue that is earned at a point in time is derived from transactional information and is recognized as revenue immediately as the transactions occur or upon providing the service to complete the customer’s transaction.

This includes card interchange fees (fee income related to debit card transactions), certain service charges on deposits accounts such as overdraft

Notes to Consolidated Financial Statements – (continued)

charges, ATM fees for customers, stop-payment fees, and certain other income such as wire transfer fees and ATM fees for non-customers.

This includes card interchange fees (fee income related to debit card transactions), certain service charges on deposits accounts such as overdraft charges, ATM fees for customers, stop-payment fees, and certain other income such as wire transfer fees and ATM fees for non-customers.

Revenue that is earned over time is generally recognized over the term of the contract as services are performed and performance obligations are satisfied.

9 unchanged sentences

Pension benefits are accounted for using the net periodic benefit cost method, which recognizes the compensation cost of an employee’s pension benefit over that employee’s approximate service period.

Pension benefit costs and benefit obligations incorporate various actuarial and other assumptions, including discount rates, mortality, rates of return on plan assets and compensation increases.

Pension benefit costs and benefit obligations incorporate various actuarial and other assumptions, including discount rates, mortality, rates of return on plan assets and

Notes to Consolidated Financial Statements – (continued)

compensation increases.

Management evaluates these assumptions on an annual basis and makes modifications to the assumptions based on current rates and trends when it is appropriate to so do.

6 unchanged sentences

Share-based compensation plans provide for awards of stock options and other equity incentives, including restricted stock units and performance share units.

Compensation expense for awards is recognized over the service period based on the fair value at the date of grant and is included in salaries and employee benefits expense in the Corporation’s Consolidated Statements of Income.

Grant date fair value for stock options is estimated using the Black-Scholes option-pricing model.

5 unchanged sentences

Excess tax benefits (expenses) result when tax return deductions differ from recognized share-based compensation cost that are determined using the grant-date fair value approach for financial statement purposes.

Excess tax benefits (expenses) related to the settlement of share-based awards are recorded as a decrease (increase) to income tax expense in the Corporation’s Consolidated Income Statements and are classified in the Consolidated Statements of Cash Flows as an operating activity.

Notes to Consolidated Financial Statements – (continued)

Excess tax benefits (expenses) related to the settlement of share-based awards are recorded as a decrease (increase) to income tax expense in the Consolidated Income Statements and are classified in the Consolidated Statements of Cash Flows as an operating activity.

Dividends declared on restricted stock units issued under the 2013 Stock Option and Incentive Plan are nonforfeitable and paid quarterly in conjunction with dividends declared and paid to common shareholders.

3 unchanged sentences

Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.

The impact of tax legislation changes is recognized as a component of income tax expense in the period of enactment.

Valuation allowances are established when necessary to reduce deferred tax assets to an amount, which is more-likely-than-not to be realizable.

Additionally, a liability for unrecognized tax benefits is recorded for uncertain tax positions taken by the Corporation on its tax returns for which there is less than a 50% likelihood of being recognized upon a tax examination.

The Corporation records interest related to unrecognized tax benefits in income tax expense.

Interest related to unrecognized tax benefits is recorded in income tax expense.

Penalties, if incurred, would be recognized as a component of income tax expense.

2 unchanged sentences

Additional information on the segments is presented in Note 18.

Notes to Consolidated Financial Statements – (continued)

Management uses an allocation methodology to allocate income and expenses to the business lines.

7 unchanged sentences

Share‑based awards that entitle holders to receive nonforfeitable dividends before vesting are considered participating securities (i.e., restricted stock units awarded under the 2013 Stock Option and Incentive Plan), not subject to performance-based measures.

These participating securities are included in the earnings allocation for computing basic earnings per share under this method.

Undistributed income is allocated to common shareholders and participating securities under the two-class method based upon the proportion of each to the total weighted average shares available.

8 unchanged sentences

Standby letters of credit are conditional commitments issued to guarantee the performance of a customer to a third party.

The credit risk involved in issuing standby letters of credit

Notes to Consolidated Financial Statements – (continued)

is essentially the same as that involved in extending loan facilities to customers.

The credit risk involved in issuing standby letters of credit is essentially the same as that involved in extending loan facilities to customers.

Under the standby letters of credit, the Corporation is required to make payments to the beneficiary of the letters of credit upon request by the beneficiary contingent upon the customer’s failure to perform under the terms of the underlying contract with the beneficiary.

2 unchanged sentences

The accounting for changes in the fair value of derivatives depends on the intended use of the derivative and resulting designation.

For derivatives designated as cash flow hedges, the effective portion of changes in the fair value of the derivative are recorded in other comprehensive income (loss) and subsequently reclassified to earnings when gains or losses are realized.

For derivatives designated as cash flow hedges, the changes in the fair value are recorded in other comprehensive income (loss) and subsequently reclassified to earnings when gains or losses are realized.

For derivatives not designated as hedges, changes in fair value of the derivative instruments are recognized in earnings, in noninterest income.

4 unchanged sentences

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

ASC 820, “Fair Value Measurements and Disclosures”, establishes a framework for measuring fair value and expands disclosures about fair value measurements.

ASC 820, “Fair Value Measurements and Disclosures”, establishes a

Notes to Consolidated Financial Statements – (continued)

framework for measuring fair value and expands disclosures about fair value measurements.

The required disclosures about fair value measurements have been included in Note 10.

1 unchanged sentence

Accounting Standards Adopted in 2023

There were no recently issued accounting pronouncements, applicable to the Corporation, that were adopted in 2022.

Accounting Standards Pending Adoption

Business Combinations - ASC 805

2021-08, “Accounting for Contract Assets and Contract Liabilities from Contracts with Customers” (“ASU 2021-08”), was issued in October 2021 to clarify the accounting for contract cost assets and contract liabilities acquired in a business combination.

Under current GAAP, an acquirer generally recognizes assets acquired and liabilities assumed in a business combination at fair value on the acquisition date.

The provisions of ASU 2021-08 clarify that contract cost assets and contract liabilities acquired in a business combination should be accounted for in accordance with ASC 606 as if the acquirer had originated the contracts.

ASU 2021-08 is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, with early adoption permitted.

The provisions under ASU 2021-08 are required to be applied prospectively.

The adoption of ASU 2021-08 is not expected to have a material impact on the Corporation’s consolidated financial statements.

Financial Instruments - Credit Losses - ASC 326

2022-02, “Troubled Debt Restructurings and Vintage Disclosures” (“ASU 2022-02”), was issued in March 2022 to provide updates on the accounting treatment for TDRs and related disclosures requirements, as well as modifying the disclosure requirement associated with the existing credit quality indicators “vintage” disclosure.

With respect to TDRs, ASU 2022-02 eliminates the recognition and measurement guidance for TDRs under current GAAP and instead requires that the Corporation evaluate whether the modification represents a new loan or a continuation of existing loan, consistent with the current GAAP treatment for other loan modifications.

In addition, ASU 2022-02 eliminates existing disclosure requirements on TDRs and replaces with enhanced disclosure requirements related to loan modifications made to borrowers, including those experiencing financial difficulty.

ASU 2022-02 also provides an update to the existing tabular vintage disclosure of credit quality indicators by requiring current period gross write-offs to be disclosed by year of origination for each loan segment.

ASU 2022-02 is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, with early adoption permitted.

The provisions under ASU 2022-02 should be applied on a

Notes to Consolidated Financial Statements – (continued)

prospective basis.

However, the Corporation has the option to use a modified retrospective transition method related to the change in accounting treatment for TDRs with a cumulative effect of the change in accounting principle recognized in the opening balance of retained earnings as of the adoption date.

The adoption of this ASU is not expected to have a material impact on the consolidated financial statements.

Reference Rate Reform - ASC 848

2022-06, “Deferral of the Sunset Date of Topic 848” (“ASU 2022-06”), was issued in December 2022 and defers the date for which accounting relief can be applied under Topic 848.

ASU 2022-06 applies to entities that have contracts, hedging relationships and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform.

The objective of the guidance in Topic 848 is to ease the burden in accounting for recognizing the effects of reference rate reform on financial reporting.

A sunset provision was included within Topic 848 based on expectations of when LIBOR would cease being published.

The Corporation had adopted the accounting relief provisions of Topic 848 effective October 1, 2020.

The amendments in ASU 2022-06 defer the sunset date of Topic 848 from December 31, 2022 to December 31, 2024, after which entities will no longer be able to apply the accounting relief in Topic 848.

ASU 2022-06 was effective for all entities upon its issuance.

The adoption of the provisions of Topic 848, as amended, did not have a material impact on the Corporation’s consolidated financial statements.

With respect to TDRs, ASU 2022-02 eliminates the recognition and measurement guidance for TDRs under current GAAP and instead requires that the Corporation evaluate whether the modification represents a new loan or a continuation of an existing loan, consistent with the current GAAP treatment for other loan modifications.

In addition, ASU 2022-02 eliminates existing disclosure requirements on TDRs and replaces with enhanced disclosure requirements related to certain loan modifications made to borrowers experiencing financial difficulty.

ASU 2022-02 also provides an update to the existing credit quality indicators “vintage” tabular disclosure requiring current period gross write-offs to be disclosed by year of origination for each loan segment.

The Corporation adopted the provisions of ASU 2022-02 on January 1, 2023 on a prospective basis.

The adoption of this ASU did not have a material impact on the consolidated financial statements.

See Note 4 for additional information regarding modifications to borrowers experiencing financial difficulty.

Accounting Standards Pending Adoption

Segment Reporting - Topic 280

Accounting Standards Update No.

2023-07, “Segment Reporting (Topic 280) - Improvements to Reportable Segment Disclosures” (“ASU 2023-07”), was issued in November 2023 to enhance and provide additional transparency on segment disclosures, including disclosure of significant segment expense provided to the chief operating decision maker (“CODM”), as well as disclosing the title and position of the CODM and how they use reported results in assessing segment performance and allocation of resources.

ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted.

The provisions under ASU 2023-07 should be applied on a retrospective basis.

ASU 2023-07 is not expected to have a material impact on the Corporation’s financial statements.

Income Taxes - Topic 740

Accounting Standards Update No.

2023-09, “Income Taxes (Topic 740) - Improvements to Income Tax Disclosures” (“ASU 2023-09”), was issued in December 2023 to enhance and provide additional transparency on income tax disclosures.

ASU 2023-09 is effective for fiscal years beginning after December 15, 2024, with early adoption permitted.

The provisions under ASU 2023-09 should be applied on a prospective basis, however retrospective application is also permitted.

ASU 2023-09 is not expected to have a material impact on the Corporation’s financial statements.

Note 3 - Securities

10 unchanged sentences

government-sponsored enterprises 879,597 246 ( 125,887 ) — 753,956

912,581 269 ( 138,748 ) — 774,102

Individual name issuer trust preferred debt securities

3 unchanged sentences

Total available for sale debt securities $ 1,152,629 $ 261 ($ 152,510 ) $ — $ 1,000,380

Notes to Consolidated Financial Statements – (continued)

(Dollars in thousands)

16 unchanged sentences

See Note 13 for additional discussion of FHLB borrowings.

Notes to Consolidated Financial Statements – (continued)

The schedule of maturities of available for sale debt securities is presented below.

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Included in the above table are debt securities with an amortized cost balance of $ 253.0 million and a fair value of $ 226.5 million at December 31, 2023 that are callable at the discretion of the issuers.

Final maturities of the callable securities range from 2 years to 14 years, with call features ranging from 1 month to 11 months.

Final maturities of the callable securities range from 6 months to 13 years, with call features ranging from 1 month to 7 months.

Assessment of Available for Sale Debt Securities for Impairment

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Management evaluates both qualitative and quantitative factors to assess whether an impairment exists.

The following tables summarize temporarily impaired securities, segregated by length of time the securities have been in a continuous unrealized loss position:

Notes to Consolidated Financial Statements – (continued)

The following tables summarize available for sale debt securities in an unrealized loss position, for which an ACL on securities has not been recorded, segregated by length of time that the securities have been in a continuous unrealized loss position:

(Dollars in thousands) Less than 12 Months 12 Months or Longer Total

36 unchanged sentences

99 $ 308,892 ($ 25,598 ) 91 $ 661,065 ($ 147,084 ) 190 $ 969,957 ($ 172,682 )

Notes to Consolidated Financial Statements – (continued)

The Corporation does not intend to sell these debt securities and has determined, based upon available evidence, that it is more likely than not that the Corporation will not be required to sell each security before the recovery of its amortized cost basis and management does not believe that any of the securities are impaired due to reasons of credit quality.

As a result, the Corporation did not recognize a provision for credit losses on these securities for the years ended December 31, 2022 and 2021.

As a result of the Corporation’s review of these qualitative and quantitative factors mentioned below, management believes the unrealized losses on these debt securities are primarily attributable to changes in the investment spreads and interest rates and not changes in the credit quality of the issuers of the debt securities.

There were no debt securities on nonaccrual status at December 31, 2023 and 2022 and, therefore there was no accrued interest related to debt securities reversed against interest income for 2023 and 2022.

As of December 31, 2023, the Corporation does not intend to sell the debt securities in an unrealized loss position and has determined that it is more-likely-than-not that the Corporation will not be required to sell each security before the recovery of its amortized cost basis.

In addition, management does not believe that any of the securities are impaired due to reasons of credit quality.

As further described below, management believes the unrealized losses on these debt securities are primarily attributable to changes in the investment spreads and interest rates.

Therefore, no ACL was recorded at both December 31, 2023 and 2022.

Obligations of U.S.

9 unchanged sentences

As of December 31, 2023, there was one individual name issuer trust preferred debt security with an amortized cost of $ 2.0 million and unrealized losses of $ 228 thousand that was rated below investment grade by S&P.

We noted no downgrades to below investment grade between December 31, 2022 and the filing date of this report.

We noted no downgrades to below investment grade between December 31, 2023 and

Notes to Consolidated Financial Statements – (continued)

the filing date of this report.

Based on the information available through the filing date of this report, all individual name issuer trust preferred debt securities continue to accrue interest and make payments as expected with no payment deferrals or defaults on the part of the issuers.

5 unchanged sentences

Based on the information available through the filing date of this report, all corporate bond debt securities continue to accrue interest and make payments as expected with no payment deferrals or defaults on the part of the issuers.

Notes to Consolidated Financial Statements – (continued)

Note 4 - Loans

10 unchanged sentences

2,604,478 2,323,002

285,715 247,697

Home equity 312,594 285,715

19,203 15,721

5 unchanged sentences

(2) C&I consists of loans to businesses and individuals, a portion of which are fully or partially collateralized by real estate.

C&I also includes $ 1.1 million and $ 38.0 million, respectively, of PPP loans as of December 31, 2022 and 2021.

(3) Residential real estate consists of mortgage and homeowner construction loans secured by one- to four-family residential properties.

13 unchanged sentences

(Dollars in thousands) Days Past Due

December 31, 2022 30-59 60-89 Over 90 Total Past Due Current Total Loans

December 31, 2023 Current 30-59 60-89 90 or More Total Past Due Total Loans

Commercial real estate

11 unchanged sentences

(Dollars in thousands) Days Past Due

December 31, 2021 30-59 60-89 Over 90 Total Past Due Current Total Loans

December 31, 2022 Current 30-59 60-89 90 or More Total Past Due Total Loans

Commercial real estate

16 unchanged sentences

(Dollars in thousands)

December 31, 2022 2021

December 31, 2023 December 31, 2022

Nonaccrual Loans Nonaccrual Loans

With an ACL Without an ACL Total With an ACL Without an ACL Total

Commercial real estate

$ 10,997 $ 21,830 $ 32,827 $ — $ — $ —

Commercial & industrial

— 682 682 — — —

Total commercial 10,997 22,512 33,509 — — —

2 unchanged sentences

8,495 1,131 9,626 6,009 5,885 11,894

1,483 — 1,483 360 592 952

Total consumer 1,483 — 1,483 360 592 952

Total nonaccrual loans $ 12,846 $ 14,203

Total $ 20,975 $ 23,643 $ 44,618 $ 6,369 $ 6,477 $ 12,846

Accruing loans 90 days or more past due $ — $ —

No ACL was deemed necessary on nonaccrual loans with a carrying value of $ 6.5 million and $ 4.2 million, respectively, as of December 31, 2022 and 2021.

Nonaccrual loans of $ 37.7 million and $ 5.7 million, respectively, at December 31, 2023 and 2022 were current as to the payment of principal and interest.

As of December 31, 2022 and 2021, nonaccrual loans secured by one- to four-family residential property amounting to $ 2.9 million and $ 1.5 million, respectively, were in process of foreclosure.

As of December 31, 2023 and 2022, nonaccrual loans secured by one- to four-family residential property amounting to $ 960 thousand and $ 2.9 million, respectively, were in process of foreclosure.

There were no significant commitments to lend additional funds to borrowers whose loans were on nonaccrual status at December 31, 2023.

10 unchanged sentences

Total $ 3,355 $ 463

Troubled Loan Modifications

As disclosed in Note 2, effective January 1, 2023, the Corporation adopted ASU 2022-02, which eliminated the accounting guidance for TDRs and added enhanced disclosures with respect to certain modifications for borrowers experiencing financial difficulty.

Notes to Consolidated Financial Statements – (continued)

The following table presents the carrying value at December 31, 2023, of TLMs made during the period indicated, segregated by class of loans and type of concession granted:

(Dollars in thousands)

Year ended December 31, 2023

Maturity Extension Combination (1)

Commercial real estate $ 13,780 $ 8,050 $ 21,830 1 %

Commercial & industrial — — — —

Total commercial 13,780 8,050 21,830 1

Total $ 13,780 $ 8,050 $ 21,830 — %

(1) Combination includes an interest rate reduction, payment deferral and maturity extension.

(2) Percentage of TLMs to the total loans outstanding within the respective loan class.

The following table presents the financial effect of TLMs made during the period indicated, segregated by class of loans:

(Dollars in thousands)

Year ended December 31, 2023

Weighted Average Interest Rate Reduction Weighted Average Maturity Extension

(in months) Weighted Average Other-than-Insignificant Payment Delay

Commercial real estate 3 % 10 12

Commercial & industrial — — —

Total commercial 3 10 12

Total 3 % 10 12

Management closely monitors the performance of TLMs to understand the effectiveness of the modifications.

The following table presents an aging analysis as of the date indicated, of TLMs that have been modified in the past 12 months:

(Dollars in thousands) Days Past Due

December 31, 2023 30-59 60-89 Over 90 Total Past Due Current Total Loans

Commercial real estate

$ — $ — $ — $ — $ 21,830 $ 21,830

Commercial & industrial

Total commercial — — — — 21,830 21,830

Total loans $ — $ — $ — $ — $ 21,830 $ 21,830

The total carrying value of TLMs at December 31, 2023 were included in nonaccrual loans.

There were no TLMs made in the previous 12 months for which there was a subsequent payment default.

There were no significant commitments to lend additional funds to borrowers experiencing financial difficulty whose loans were TLMs at December 31, 2023.

Troubled Debt Restructurings

The recorded investment in TDRs consists of unpaid principal balance, net of charge-offs and unamortized deferred loan origination fees and costs.

For accruing TDRs, the recorded investment also includes accrued interest.

As disclosed in Note 2, effective January 1, 2023, the Corporation adopted ASU 2022-02, which eliminated the accounting guidance for TDRs.

Historical disclosures that were required prior to adoption of ASU 2022-02 are shown below.

Notes to Consolidated Financial Statements – (continued)

3 unchanged sentences

Accruing TDRs

$ 3,571 $ 16,564

Nonaccrual TDRs

$ 8,644 $ 19,383

Total $ 8,644

Specific reserves on TDRs included in the ACL on loans

2 unchanged sentences

(Dollars in thousands) Outstanding Recorded Investment

# of Loans Pre-Modifications Post-Modifications

Years ended December 31, 2022 2021 2022 2021 2022 2021

Year ended December 31, 2022 # of Loans Pre-Modification Post-Modification

Commercial real estate — $ — $ —

— 2 $ — $ 9,859 $ — $ 9,859

Commercial & industrial 3 1,687 1,687

3 — 1,687 — 1,687 —

Total commercial 3 1,687 1,687

10 unchanged sentences

(1) Loans included in this classification were modified with a combination of any two of the concessions listed in this table.

In 2022 and 2021, there were no TDRs modified within the previous 12 months for which there was a payment default.

In 2022, there were no TDRs modified within the previous 12 months for which there was a payment default.

Individually Analyzed Loans

Individually analyzed loans include nonaccrual commercial loans, reasonably expected TDRs, executed TDRs, and certain other loans based on the underlying risk characteristics and the discretion of management to individually analyze such loans.

As of December 31, 2022, the carrying value of individually analyzed loans amounted to $ 10.0 million, of which $ 8.5 million were considered collateral dependent.

Individually analyzed loans include nonaccrual commercial loans, TLMs and certain other loans based on the underlying risk characteristics and the discretion of management to individually analyze such loans.

Prior to January 1, 2023, individually analyzed loans also included TDRs.

As of December 31, 2023, the carrying value of individually analyzed loans amounted to $ 34.6 million, all of which were considered collateral dependent.

As of December 31, 2022, individually analyzed loans amounted to $ 10.0 million, of which $ 8.5 million were considered collateral dependent.

For collateral dependent loans where management has determined that foreclosure of the collateral is probable, or where the borrower is experiencing financial difficulty and repayment of the loan is to be provided substantially through the operation or sale of the collateral, the ACL is measured based on the difference between the fair value of the collateral and the amortized cost basis of the loan as of the measurement date.

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The loan risk rating system takes into consideration parameters including the borrower’s financial condition, the borrower’s performance with respect to loan terms, the adequacy of collateral, the adequacy of guarantees and other credit quality characteristics.

The takes the risk rating into consideration along with other credit attributes in the establishment of an appropriate ACL on loans.

The Corporation takes the risk rating into consideration along with other credit attributes in the establishment of an appropriate ACL on loans.

See Note 5 for additional information.

13 unchanged sentences

A “doubtful” loan is placed on nonaccrual status and has a high probability of loss, but the extent of the loss is difficult to quantify due to dependency upon collateral having a value that is difficult to determine or upon some near-term event which lacks certainty.

A loan in the “loss” category is considered generally uncollectible or the timing or amount of payments cannot be determined.

“Loss” is not intended to imply that the loan has no recovery value, but rather, it is not practical or desirable to continue to carry the asset.

A loan in the “loss” category is considered generally uncollectible or the timing or amount of payments cannot be

Notes to Consolidated Financial Statements – (continued)

“Loss” is not intended to imply that the loan has no recovery value, but rather, it is not practical or desirable to continue to carry the asset.

The Corporation’s procedures call for loan risk ratings and classifications to be revised whenever information becomes available that indicates a change is warranted.

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2023 2022 2021 2020 2019 Prior Revolving Loans Amortized Cost Revolving Loans Converted to Term Loans Total

$ 591,596 $ 383,062 $ 177,286 $ 170,259 $ 148,371 $ 242,061 $ 6,243 $ 1,437 $ 1,720,315

Pass $ 327,139 $ 598,946 $ 396,468 $ 168,451 $ 167,484 $ 333,356 $ 42,095 $ 1,032 $ 2,034,971

Special Mention — — — — — 16,630 — — 16,630

20,579 22,324 328 24,270 28,676 10,564 146 — 106,887

— — 503 — 1,187 412 — — 2,102

Classified 21,830 — 18,430 — 14,498 — — — 54,758

348,969 598,946 414,898 168,451 181,982 349,986 42,095 1,032 2,106,359

Gross charge-offs — — — — — 373 — — 373

55,607 124,894 52,282 49,812 72,876 145,361 90,664 587 592,083

3 unchanged sentences

66,726 125,712 52,471 49,812 73,739 145,361 90,664 587 605,072

Gross charge-offs 37 — — — — — — — 37

Residential Real Estate:

Residential real estate:

838,566 707,760 277,613 123,098 72,541 294,549 — — 2,314,127

— 600 — 266 2,315 5,694 — — 8,875

Current 431,563 808,442 666,447 255,554 113,462 320,894 — — 2,596,362

Past Due — — — 886 594 6,636 — — 8,116

Total residential real estate 431,563 808,442 666,447 256,440 114,056 327,530 — — 2,604,478

838,566 708,360 277,613 123,364 74,856 300,243 — — 2,323,002

20,665 8,308 3,742 2,406 1,947 3,139 235,004 9,268 284,479

— — — — 68 98 548 522 1,236

Gross charge-offs — — — — — — — — —

Current 24,925 14,997 6,829 2,919 1,982 3,696 241,459 12,591 309,398

Past Due — — — — 130 829 1,301 936 3,196

Total home equity 24,925 14,997 6,829 2,919 2,112 4,525 242,760 13,527 312,594

20,665 8,308 3,742 2,406 2,015 3,237 235,552 9,790 285,715

4,231 4,287 1,676 299 235 4,726 251 — 15,705

16 — — — — — — — 16

4,247 4,287 1,676 299 235 4,726 251 — 15,721

Gross charge-offs — — — — — — — — —

Current 6,777 3,530 3,685 1,001 120 3,824 243 — 19,180

Past Due 21 — — — — — 2 — 23

Total other 6,798 3,530 3,685 1,001 120 3,824 245 — 19,203

Gross charge-offs 159 — 8 — — — — — 167

Total Loans $ 878,981 $ 1,551,627 $ 1,144,330 $ 478,623 $ 372,009 $ 831,226 $ 375,764 $ 15,146 $ 5,647,706

Total gross charge-offs $ 196 $ — $ 8 $ — $ — $ 373 $ — $ — $ 577

Notes to Consolidated Financial Statements – (continued)

2 unchanged sentences

2022 2021 2020 2019 2018 Prior Revolving Loans Amortized Cost Revolving Loans Converted to Term Loans Total

$ 417,705 $ 212,649 $ 260,940 $ 206,164 $ 163,132 $ 266,067 $ 7,015 $ 2,202 $ 1,535,874

Pass $ 591,596 $ 383,062 $ 177,286 $ 170,259 $ 148,371 $ 242,061 $ 6,243 $ 1,437 $ 1,720,315

Special Mention 20,579 22,324 328 24,270 28,676 10,564 146 — 106,887

9,089 489 33,982 28,432 — 20,273 320 — 92,585

— 958 — 2,685 6,959 1 — — 10,603

426,794 214,096 294,922 237,281 170,091 286,341 7,335 2,202 1,639,062

Classified — — 503 — 1,187 412 — — 2,102

612,175 405,386 178,117 194,529 178,234 253,037 6,389 1,437 1,829,304

Pass 127,152 63,180 71,265 86,470 85,011 114,241 90,987 745 639,051

Special Mention 13,566 — — — 1,427 — 1,426 — 16,419

— — 606 4,599 6,195 15,605 1,186 — 28,191

— — — — — — — — —

Classified — 225 — 7 — — 695 — 927

140,718 63,405 71,265 86,477 86,438 114,241 93,108 745 656,397

1 unchanged sentence

Residential real estate:

733,658 353,742 158,140 85,656 88,365 297,792 — — 1,717,353

— 1,402 1,167 2,379 763 3,911 — — 9,622

Current 838,566 707,760 277,613 123,098 72,541 294,549 — — 2,314,127

Past Due — 600 — 266 2,315 5,694 — — 8,875

Total residential real estate 838,566 708,360 277,613 123,364 74,856 300,243 — — 2,323,002

733,658 355,144 159,307 88,035 89,128 301,703 — — 1,726,975

10,434 5,850 3,703 2,380 1,064 3,592 211,488 8,421 246,932

— — 185 — — 245 115 220 765

Current 20,665 8,308 3,742 2,406 1,947 3,139 235,004 9,268 284,479

Past Due — — — — 68 98 548 522 1,236

Total home equity 20,665 8,308 3,742 2,406 2,015 3,237 235,552 9,790 285,715

10,434 5,850 3,888 2,380 1,064 3,837 211,603 8,641 247,697

5,536 3,264 1,313 407 747 6,090 258 — 17,615

21 — — — — — — — 21

5,557 3,264 1,313 407 747 6,090 258 — 17,636

Current 4,231 4,287 1,676 299 235 4,726 251 — 15,705

Past Due 16 — — — — — — — 16

Total other 4,247 4,287 1,676 299 235 4,726 251 — 15,721

Total Loans $ 1,616,371 $ 1,189,746 $ 532,413 $ 407,075 $ 341,778 $ 675,484 $ 335,300 $ 11,972 $ 5,110,139

Consistent with industry practice, Washington Trust may renew commercial loans at or immediately prior to their maturity.

Washington Trust may renew commercial loans at or immediately prior to their maturity.

In the tables above, renewals subject to full credit evaluation before being granted are reported as originations in the period renewed.

In addition, loans with extensions of maturity dates of more than three months are reported as originations in the period extended.

Notes to Consolidated Financial Statements – (continued)

8 unchanged sentences

Amortization ( 3,438 ) — ( 3,438 )

Increase in impairment reserve — ( 154 ) ( 154 )

Decrease in impairment reserve — 154 154

Balance at December 31, 2021 9,821 — 9,821

1 unchanged sentence

Amortization ( 1,763 ) — ( 1,763 )

Decrease in impairment reserve — 154 154

Balance at December 31, 2022 9,015 — 9,015

1 unchanged sentence

Amortization ( 1,538 ) — ( 1,538 )

Increase in impairment reserve — ( 34 ) ( 34 )

Balance at December 31, 2023 $ 8,546 ($ 34 ) $ 8,512

41 unchanged sentences

$ 22,065 $ 12,228 $ 34,293 $ 8,042 $ 1,300 $ 471 $ 1,771 $ 44,106

Adoption of ASC 326 3,405 3,029 6,434 221 ( 106 ) ( 48 ) ( 154 ) 6,501

Charge-offs — ( 307 ) ( 307 ) ( 107 ) ( 183 ) ( 66 ) ( 249 ) ( 663 )

14 unchanged sentences

Total premises and equipment, net $ 32,291 $ 31,550

Depreciation of premises and equipment amounted to $ 3.5 million, $ 3.4 million and $ 3.2 million, respectively, for the years ended December 31, 2022, 2021, and 2020.

The following table presents a summary of depreciation expense:

(Dollars in thousands) Year ended December 31,

Fixed Asset Type Income Statement Line Item 2023 2022 2021

Premises and improvements Net occupancy $ 1,840 $ 1,668 $ 1,470

Furniture, fixtures and equipment Equipment 2,165 1,797 1,941

Total depreciation expense $ 4,005 $ 3,465 $ 3,411

Note 7 - Leases

2 unchanged sentences

Operating lease liabilities totaled $ 32.0 million and $ 29.6 million, respectively, as of December 31, 2023 and 2022.

As of December 31, 2023, there were no operating leases that had not yet commenced.

As of December 31, 2022, there were three operating leases that had not yet commenced.

As of December 31, 2021, there were two operating leases that had not yet commenced.

The following table presents information regarding the Corporation’s operating leases:

8 unchanged sentences

13.1 years 13.3 years

Notes to Consolidated Financial Statements – (continued)

The following table presents the undiscounted annual lease payments under the terms of the Corporation’s operating leases at December 31, 2023, including a reconciliation to the present value of operating lease liabilities recognized in the Consolidated Balance Sheets:

5 unchanged sentences

Present value of operating lease liabilities (1)

(1) Includes $ 439 thousand related to options to extend lease terms that are reasonably certain of being exercised.

(1) Includes short-term operating lease liabilities of $ 3.1 million.

Notes to Consolidated Financial Statements – (continued)

The following table presents the components of total lease expense and operating cash flows:

23 unchanged sentences

Net amount $ 3,711 $ 4,554

Notes to Consolidated Financial Statements – (continued)

The balance of intangible assets at December 31, 2023 includes wealth management advisory contracts resulting from the 2005 acquisition of Weston and the 2015 acquisition of Halsey.

2 unchanged sentences

Amortization expense for the years ended December 31, 2023, 2022, and 2021, amounted to $ 843 thousand, $ 860 thousand and $ 890 thousand, respectively.

Notes to Consolidated Financial Statements – (continued)

The following table presents estimated annual amortization expense for intangible assets at December 31, 2023:

6 unchanged sentences

All derivatives are recognized as either assets or liabilities on the balance sheet and are measured at fair value.

Derivative assets are included in other assets and derivative liabilities are included in other liabilities in the Consolidated Balance Sheets.

Derivative assets are included in other assets and derivative liabilities are included in other liabilities in the Unaudited Consolidated Balance Sheets.

The accounting for changes in the fair value of derivatives depends on the intended use of the derivative and resulting designation.

7 unchanged sentences

Cash Flow Hedging Instruments

As of December 31, 2022 and 2021, the Corporation had an interest rate swap contract that was designated as a cash flow hedge to hedge the interest rate risk associated with short-term variable rate FHLB advances.

The interest rate swap on borrowings matures in December 2023.

In addition, at December 31, 2022, and 2021, the Corporation had an interest rate swap contract that was designated as a cash flow hedge to hedge the interest rate risk associated with a pool of variable rate commercial loans.

The interest rate swap on loans matures in May 2026.

As of December 31, 2023 and 2022, the Corporation had interest rate swap contracts that were designated as cash flow hedges to hedge the interest rate risk associated with short-term borrowings.

See Note 13 for additional disclosure on borrowings.

Additionally, the Corporation had an interest rate swap contract that was designated as a cash flow hedge to hedge the interest rate risk associated with a pool of variable rate commercial loans.

On March 31, 2023, the Corporation terminated this interest rate swap contract and the derivative liability was derecognized.

The loss on this interest rate swap included in the AOCL component of shareholders’ equity was updated to its termination date fair value of $ 26.5 million, or $ 20.1 million after tax.

This loss is being amortized into earnings as a reduction of interest income on a straight-line basis over the remaining life of the original interest rate swap term, or through May 1, 2026.

At December 31, 2023, the remaining unamortized balance of the loss included in the AOCL component of shareholders’ equity was $ 20.0 million, or $ 14.9 million after tax.

Notes to Consolidated Financial Statements – (continued)

The changes in fair value of derivatives designated as cash flow hedges are recorded in other comprehensive income (loss) and subsequently reclassified to earnings when gains or losses are realized.

5 unchanged sentences

For interest rate swaps, the third party exchanges the client’s fixed-rate loan payments for variable-rate loan payments.

The Corporation‘s credit policies with respect to interest rate contracts with commercial borrowers are similar to those used for loans.

The Corporation retains the risk that is associated with the potential failure of counterparties and the risk inherent in originating loans.

The interest rate contracts with counterparties are generally subject to bilateral collateralization terms.

These derivatives are not designated as hedges and therefore, changes in fair value are recognized in earnings.

3 unchanged sentences

These derivatives are not designated as hedges and therefore, changes in fair value are recognized in earnings.

Notes to Consolidated Financial Statements – (continued)

Under a risk participation-out agreement, a derivative asset, the Corporation participates out a portion of the credit risk associated with the interest rate swap position executed with the commercial borrower for a fee paid to the participating bank.

5 unchanged sentences

Both interest rate lock commitments and forward sale commitments are derivative financial instruments, but do not meet criteria for hedge accounting and therefore, the changes in fair value of these commitments are recognized in earnings.

Notes to Consolidated Financial Statements – (continued)

The following table presents the notional amounts and fair values of derivative instruments in the Consolidated Balance Sheets:

9 unchanged sentences

Interest rate contracts with customers 938,872 6,594 52,102 935,099 32 68,137

Mirror contracts with counterparties 935,099 67,797 61 1,022,388 2,001 32,480

Mirror interest rate contracts with counterparties 938,872 51,859 6,757 935,099 67,797 61

Risk participation agreements 321,055 66 1 282,191 — 2

7 unchanged sentences

collateral pledged (3)

— 7,716 — 34,539

Net amounts $ 51,966 $ 52,814 $ 45,055 $ 68,292

(1) The fair value of derivative assets includes accrued interest receivable of $ 239 thousand and $ 24 thousand, respectively, at December 31, 2023 and 2022.

The fair value of derivative liabilities includes accrued interest payable of $ 856 thousand and $ 19 thousand, respectively, at December 31, 2022 and 2021.

There was no accrued interest payable included in the fair value of derivative liabilities at December 31, 2023, compared to $ 856 thousand of accrued interest payable at December 31, 2022.

(2) Interest rate risk management contracts and loan related derivative contracts with counterparties are subject to master netting arrangements.

(3) Collateral pledged to derivative counterparties is in the form of cash.

(3) Collateral contractually required to be pledged to derivative counterparties is in the form of cash.

Washington Trust may need to post additional collateral in the future in proportion to potential increases in unrealized loss positions.

Notes to Consolidated Financial Statements – (continued)

The following table presents the effect of derivative instruments in the Consolidated Statements of Changes in Shareholders’ Equity:

3 unchanged sentences

Interest rate risk management contracts:

Interest rate caps $ — $ — $ 89

Interest rate swaps

$ 7,026 ($ 18,632 ) ($ 2,566 )

Interest rate floors

Total $ 7,026 ($ 18,632 ) ($ 2,566 )

Interest rate cap and interest rate floor contracts designated as cash flow hedges matured in 2020.

For derivatives designated as cash flow hedging instruments, see Note 19 for additional disclosure pertaining to the amounts and location of reclassifications from AOCL into earnings.

The following table presents the effect of derivative instruments in the Consolidated Statements of Income:

Notes to Consolidated Financial Statements – (continued)

(Dollars in thousands) Amount of Gain (Loss)

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Items recorded at fair value on a recurring basis include securities available for sale, mortgage loans held for sale and derivatives.

Additionally, from time to time, we may be required to record at fair value other assets on a nonrecurring basis, such as collateral dependent individually analyzed loans, OREO and mortgage servicing rights.

These nonrecurring fair value adjustments typically involve the application of lower of cost or market accounting or write-downs of individual assets.

Additionally, from time to time, we may be required to record other assets at fair value on a nonrecurring basis, such as collateral dependent individually analyzed loans.

Fair value is a market-based measurement, not an entity-specific measurement.

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• Level 3 – Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable in the markets and which reflect the Corporation’s market assumptions.

Notes to Consolidated Financial Statements – (continued)

Fair Value Option Election

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Changes in fair value of mortgage loans held for sale accounted for under the fair value option election are included in mortgage banking revenues in the Consolidated Statements of Income.

Changes in fair value amounted to a decrease to mortgage banking revenues of $ 868 thousand in 2022, compared to a decrease to mortgage banking revenues of $ 1.3 million in 2021.

Changes in fair value amounted to an increase in mortgage banking revenues of $ 470 thousand in 2023, compared to a decrease in mortgage banking revenues of $ 868 thousand in 2022.

There were no mortgage loans held for sale 90 days or more past due as of December 31, 2023 and 2022.

Notes to Consolidated Financial Statements – (continued)

Valuation Techniques

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such items are classified as Level 1.

There were no Level 1 securities held at December 31, 2022 and 2021.

There were no Level 1 debt securities held at December 31, 2023 and 2022.

Level 2 debt securities are traded less frequently than exchange-traded instruments.

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Debt securities not actively traded whose fair value is determined through the use of cash flows utilizing inputs that are unobservable are classified as Level 3.

There were no Level 3 securities held at December 31, 2022 and 2021.

There were no Level 3 debt securities held at December 31, 2023 and 2022.

Mortgage Loans Held for Sale

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The Corporation evaluates the credit risk of its counterparties, as well as that of the Corporation.

Accordingly, factors such as the likelihood of default

Notes to Consolidated Financial Statements – (continued)

by the Corporation and its counterparties, its net exposures and remaining contractual life are considered in determining if any fair value adjustments related to credit risk are required.

Accordingly, factors such as the likelihood of default by the Corporation and its counterparties, its net exposures and remaining contractual life are considered in determining if any fair value adjustments related to credit risk are required.

Counterparty exposure is evaluated by netting positions that are subject to master netting agreements, as well as considering the amount of collateral securing the position, if any.

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As a result, the Corporation has classified its interest rate lock commitments as Level 2.

Notes to Consolidated Financial Statements – (continued)

Items Recorded at Fair Value on a Recurring Basis

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Total liabilities at fair value on a recurring basis $ 52,814 $ — $ 52,814 $ —

Notes to Consolidated Financial Statements – (continued)

(Dollars in thousands) Total Quoted Prices in Active Markets for Identical Assets

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Total liabilities at fair value on a recurring basis $ 76,008 $ — $ 76,008 $ —

Notes to Consolidated Financial Statements – (continued)

Items Recorded at Fair Value on a Nonrecurring Basis

The following table presents the carrying value of assets held at December 31, 2023, which were written down to fair value during the twelve months ended December 31, 2023:

(Dollars in thousands) Total Quoted Prices in Active Markets for Identical Assets

(Level 1) Significant Other Observable Inputs

(Level 2) Significant Unobservable Inputs

Collateral dependent individually analyzed loans $ 8,050 $ — $ — $ 8,050

Loan servicing rights 8,512 — — 8,512

Total assets at fair value on a nonrecurring basis $ 16,562 $ — $ — $ 16,562

There were no assets written down to fair value during the twelve months ended December 31, 2022.

During 2021, two collateral dependent individually analyzed loans were written down to fair value.

One loan with a carrying value of $ 3.1 million was paid in full in the fourth quarter of 2021.

The second loan with a carrying value of $ 533 thousand was fully reserved for as of December 31, 2021.

The following table presents valuation techniques and unobservable inputs for assets measured at fair value on a nonrecurring basis for which the Corporation has utilized Level 3 inputs to determine fair value:

(Dollars in thousands) Fair Value Valuation Technique Unobservable Input Inputs Utilized (Weighted Average)

(Dollars in thousands) Fair Value Valuation Technique Unobservable Input Inputs Utilized

December 31, 2023

1 unchanged sentence

Appraisal adjustments 0 %

Valuation of Financial Instruments

The estimated fair values and related carrying amounts for financial instruments for which fair value is only disclosed are presented below as of the periods indicated.

The tables exclude financial instruments for which the carrying value approximates fair value such as cash and cash equivalents, FHLB stock, accrued interest receivable, BOLI, non-maturity deposits and accrued interest payable.

The Corporation considers cash and cash equivalents, accrued interest receivable and

Loan servicing rights 8,512 Discounted Cash Flow Discount Rate 10 % - 14 % ( 10 %)

Prepayment rates 6 % - 53 % ( 9 %)

Notes to Consolidated Financial Statements – (continued)

accrued interest payable as level 1 measurements within the fair value hierarchy.

The Corporation considers FHLB stock, BOLI and non-maturity deposits as level 2 measurements.

Items for which Fair Value is Only Disclosed

The estimated fair values and related carrying amounts for financial instruments for which fair value is only disclosed are presented in the tables below:

(Dollars in thousands) Carrying Amount Total

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Financial Assets:

Cash and cash equivalents $ 90,184 $ 90,184 $ 90,184 $ — $ —

Loans, net of allowance for credit losses on loans 5,606,649 5,365,396 — — 5,365,396

51,893 51,893 — 51,893 —

Investment in BOLI

103,736 103,736 — 103,736 —

Financial Liabilities:

Non-maturity deposits $ 3,559,923 $ 3,559,923 $ — $ 3,559,923 $ —

Time deposits 1,788,237 1,773,643 — 1,773,643 —

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Financial Assets:

Cash and cash equivalents $ 118,422 $ 118,422 $ 118,422 $ — $ —

Loans, net of allowance for credit losses on loans 5,072,112 4,929,449 — — 4,929,449

43,463 43,463 — 43,463 —

Investment in BOLI

102,182 102,182 — 102,182 —

Financial Liabilities:

Non-maturity deposits $ 3,896,080 $ 3,896,080 $ — $ 3,896,080 $ —

Time deposits 1,122,882 1,137,219 — 1,137,219 —

2 unchanged sentences

Junior subordinated debentures 22,681 18,963 — 18,963 —

Notes to Consolidated Financial Statements – (continued)

Note 11 - Income Taxes

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Total income tax expense $ 8,305 $ 19,489 $ 21,317

Notes to Consolidated Financial Statements – (continued)

Total income tax expense varies from the amount determined by applying the Federal income tax rate to income before income taxes.

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State income tax expense, net of federal tax benefit 1,107 2.0 1,856 2.1 1,943 2.0

1,856 2.1 1,943 2.0 1,995 2.2

Tax-exempt income, net

( 721 ) ( 0.8 ) ( 772 ) ( 0.8 ) ( 803 ) ( 0.9 )

( 544 ) ( 0.6 ) ( 614 ) ( 0.6 ) ( 523 ) ( 0.6 )

Investments in low-income housing limited partnerships ( 261 ) ( 0.3 ) ( 117 ) ( 0.1 ) ( 118 ) ( 0.1 )

Share-based compensation 29 0.1 ( 68 ) ( 0.1 ) ( 159 ) ( 0.2 )

( 68 ) ( 0.1 ) ( 159 ) ( 0.2 ) 92 0.1

Tax-exempt income, net ( 543 ) ( 1.0 ) ( 721 ) ( 0.8 ) ( 772 ) ( 0.8 )

Investments in low-income housing tax credits and other benefits, net ( 357 ) ( 0.6 ) ( 261 ) ( 0.3 ) ( 117 ) ( 0.1 )

( 732 ) ( 1.3 ) ( 544 ) ( 0.6 ) ( 614 ) ( 0.6 )

State valuation allowance adjustment, net 2,153 3.8 — — — —

State net operating loss carryforward, net of federal tax ( 1,312 ) ( 2.3 ) — — — —

Adjustment to net deferred tax assets for enacted changes in state tax law ( 4,093 ) ( 7.2 ) — — — —

Other 192 0.2 81 0.1 417 0.4

Total income tax expense $ 8,305 14.7 % $ 19,489 21.4 % $ 21,317 21.7 %

On October 6, 2023 the Commonwealth of Massachusetts enacted into law a tax bill, which made changes to how corporations calculate their Massachusetts taxable income.

The law enacted a single sales factor apportionment formula and prescribed a method for sourcing of income from investment and trading activities, effective on January 1, 2025.

Upon the enactment, the Corporation was required to revalue its deferred tax assets and liabilities reflecting the updated apportionment formula and income sourcing method.

In addition, as further described below, the Corporation determined a portion of state deferred tax assets did not meet the more-likely-than-not realization threshold and a valuation allowance was required.

As a result, the Corporation increased net deferred tax assets by $ 3.3 million with a corresponding decrease to income tax expense in 2023.

Notes to Consolidated Financial Statements – (continued)

The following table presents the approximate tax effects of temporary differences that give rise to deferred tax assets and deferred tax liabilities:

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Allowance for credit losses on loans 10,470 9,127

Cash flow hedges 7,151 1,268

Operating lease liabilities

Deferred compensation

Cash flow hedges 5,250 7,151

Deferred loan origination fees

1 unchanged sentence

Defined benefit pension obligations

State net operating loss carryforwards 1,312 —

Deferred tax assets

76,961 75,036

valuation allowance ( 2,153 ) —

Deferred tax assets, net of valuation allowance 74,808 75,036

Deferred Tax Liabilities:

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The Corporation’s net deferred tax asset is included in other assets in the Consolidated Balance Sheets.

Management has determined that a valuation allowance is not required for any of the deferred tax assets since it is more-likely-than-not that these assets will be realized primarily through future reversals of existing taxable temporary differences or by offsetting projected future taxable income.

Net deferred tax assets decreased by $ 2.6 million during 2023, including the establishment of a valuation allowance of $ 2.2 million.

Deferred tax assets are to be reduced by a valuation allowance if, based on the weight of available evidence, it is more-likely-than-not that some portion or all of the deferred tax assets will not be realized.

Deferred tax assets are realized primarily through future reversals of existing taxable temporary differences or by offsetting projected future taxable income.

Management determined that no valuation allowance was required at December 31, 2022.

The valuation allowance amounted to $ 2.2 million at December 31, 2023 and 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.

These operating loss carryforwards have various expirations beginning in 2028 through 2042, the majority of which are subject to annual usage limitations.

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.

The Corporation had no unrecognized tax benefits as of December 31, 2023 and 2022.

Notes to Consolidated Financial Statements – (continued)

The Corporation files income tax returns in the U.S.

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federal income and state tax examinations by tax authorities for years before 2020.

Notes to Consolidated Financial Statements – (continued)

Note 12 - Deposits

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December 31, 2023 2022

Noninterest-bearing:

Noninterest-bearing demand deposits $ 693,746 $ 858,953

Interest-bearing:

Interest-bearing demand deposits (1)

5 unchanged sentences

1,788,237 1,122,882

Total interest-bearing deposits $ 4,654,414 $ 4,160,009

Total deposits $ 5,348,160 $ 5,018,962

(1) Includes wholesale brokered demand deposit balances of $ 31,153 and $ 0 , respectively, as of December 31, 2022 and 2021.

(2) Includes wholesale brokered time deposit balances of $ 327,044 and $ 515,228 , respectively, as of December 31, 2022 and 2021.

(1) Includes wholesale brokered demand deposit balances of $ 0 and $ 31.2 million, respectively, as of December 31, 2023 and 2022.

(2) Includes wholesale brokered time deposit balances of $ 654.1 million and $ 327.0 million, respectively, as of December 31, 2023 and 2022.

The following table presents scheduled maturities of time certificates of deposit:

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Federal Home Loan Bank Advances

Advances payable to the FHLB amounted to $ 980.0 million and $ 145.0 million, respectively, at December 31, 2022 and 2021.

Advances payable to the FHLB amounted to $ 1.2 billion and $ 980.0 million, respectively, at December 31, 2023 and 2022.

At December 31, 2023, the Corporation has interest rate swaps with a notional amount of $ 120.0 million that were designated as cash flow hedges to hedge the interest rate risk associated with short-term FHLB advances.

See Note 9 for additional disclosure on derivatives.

As of December 31, 2023 and 2022, the Bank had access to a $ 40.0 million unused line of credit with the FHLB.

Additionally, the Bank had a $ 215.0 million standby letter of credit with the FHLB at December 31, 2022.

This standby letter of credit was executed in 2022 to collateralize an institutional deposit.

The Bank had remaining available borrowing capacity of $ 668.3 million and $ 1.6 billion, respectively with the FHLB at December 31, 2022 and 2021.

Additionally, the Bank had a standby letter of credit with the FHLB of $ 65.0 million and $ 215.0 million, respectively, at December 31, 2023 and December 31, 2022.

This standby letter of credit collateralizes an institutional deposit.

The Bank had remaining available borrowing capacity of $ 1.1 billion and $ 668.3 million, respectively, with the FHLB at December 31, 2023 and 2022.

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

7 unchanged sentences

2027 45,000 4.24

2028 125,000 4.15

2029 and thereafter — —

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In accordance with GAAP, the trusts are treated as unconsolidated subsidiaries.

The $ 8.3 million of junior subordinated debentures associated with Trust I bear interest at a rate equal to the three-month LIBOR rate plus 1.45 % and mature on September 15, 2035.

The $ 14.4 million of junior subordinated debentures associated with Trust II bear interest at a rate equal to the three-month LIBOR rate plus 1.45 % and mature on November 23, 2035.

The $ 8.3 million of junior subordinated debentures associated with Trust I mature on September 15, 2035 and bear interest at a rate equal to the three-month SOFR rate plus 1.71 %, or 7.10 % as of December 31, 2023.

Prior to the cessation of LIBOR on June 30, 2023, the Trust I junior subordinated debentures bore interest at a rate equal to the three-month LIBOR rate plus 1.45 %, which was 6.22 % at December 31, 2022.

The $ 14.4 million of junior subordinated debentures associated with Trust II mature on November 23, 2035 and bear interest at a rate equal to the three-month SOFR rate plus 1.71 %, or 7.09 % as of December 31, 2023.

Prior to the cessation of LIBOR, the Trust II junior subordinated debentures bore interest at a rate equal to the three-month LIBOR rate plus 1.45 %, which was 6.14 % at December 31, 2022.

The debentures may be redeemed at par at the Bancorp’s option, subject to the approval of the applicable banking regulator to the extent required under applicable guidelines or policies.

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For the year ended December 31, 2023, the Corporation repurchased 200,000 shares at an average price of $ 43.70 and a total cost of $ 8.8 million, under its 2023 Repurchase Program.

The total cost included $ 73 thousand of excise tax attributable to shares that were repurchased in 2023.

The primary source of liquidity for the Bancorp is dividends received from the Bank.

The Bancorp and the Bank are regulated enterprises and their abilities to pay dividends are subject to regulatory review and restriction.

The Bancorp and the Bank are regulated entities and their abilities to pay dividends are subject to regulatory review and restriction.

Certain regulatory and statutory restrictions exist regarding dividends, loans, and advances from the Bank to the Bancorp.

1 unchanged sentence

The FDIC and the FRBB have the authority to use their enforcement powers to prohibit a bank or bank holding company, respectively, from paying dividends if, in their opinion, the payment of dividends would constitute an unsafe or unsound practice.

Payment of dividends by a bank is also restricted pursuant to various state regulatory limitations.

Dividends paid by the Bank to the Bancorp amounted to $ 38.8 million and $ 53.2 million, respectively, for the years ended December 31, 2023 and 2022.

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(1) Leverage ratio.

In addition to the minimum regulatory capital required for capital adequacy purposes outlined in the table above, the Corporation is required to maintain a minimum capital conservation buffer, in the form of common equity, of 2.50% in order to avoid restrictions on capital distributions and discretionary bonuses.

The Corporation’s capital levels exceeded the minimum regulatory capital requirements plus the capital conservation buffer at December 31, 2022 and 2021.

In addition to the minimum regulatory capital required for capital adequacy outlined in the table above, the Corporation and the Bank are required to maintain a minimum capital conversation buffer, in the form of common equity, of 2.50% resulting in a requirement for the Corporation and the Bank to effectively maintain total capital, Tier 1 capital and common equity Tier 1 capital ratios of 10.50%, 8.50% and 7.00%, respectively.

The Corporation and the Bank must maintain the capital conservation buffer to avoid restrictions on the ability to pay dividends and discretionary bonuses.

The Corporation’s and the Bank’s capital levels exceeded the minimum regulatory capital requirements plus the capital conservation buffer at December 31, 2023 and 2022.

The Bancorp owns the common stock of two capital trusts, which have issued trust preferred securities.

1 unchanged sentence

At both December 31, 2023 and 2022, $ 22.0 million in trust preferred securities were included in the Tier 1 capital of the Corporation for regulatory capital reporting purposes pursuant to the capital adequacy guidelines of the Federal Reserve.

In accordance with regulatory capital rules, the Corporation elected the option to delay the estimated impact of ASC 326 on its regulatory capital over a two-year deferral and subsequent three-year transition period ending December 31, 2024.

As a result, capital ratios exclude the full impact of the increased ACL on loans and unfunded loan commitments attributed to the adoption of ASC 326, adjusted for an approximation of the after-tax provision for credit losses attributable to ASC 326

Notes to Consolidated Financial Statements – (continued)

relative to the incurred loss methodology during the two-year deferral period.

The cumulative difference at the end of the deferral period is being phased-in to regulatory capital over the three-year transition period, which began January 1, 2022.

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(2) Revenue from contracts with customers in scope of ASC 606.

The following table presents revenue from contracts with customers based on the timing of revenue recognition:

The following table presents revenue from contracts with customers segregated by revenue recognition timing:

(Dollars in thousands)

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Deferred revenues, which are considered contract liabilities under ASC 606, represent advance consideration received from customers for which the Corporation has a remaining performance obligation to fulfill.

Contract liabilities are recognized as revenue over the life of the contract as the performance obligations are satisfied.

Contract liabilities are recognized as

Notes to Consolidated Financial Statements – (continued)

revenue over the life of the contract as the performance obligations are satisfied.

The balances of contract liabilities were insignificant at both December 31, 2023 and 2022 and were included in other liabilities in the Consolidated Balance Sheets.

For commissions and incentives that are in scope of ASC 606, such as those paid to employees in our wealth management services and commercial banking segments in order to obtain customer contracts, contract cost assets are established.

Notes to Consolidated Financial Statements – (continued)

contract cost assets are capitalized and amortized over the estimated useful life that the asset is expected to generate benefits.

The contract cost assets are capitalized and amortized over the estimated useful life that the asset is expected to generate benefits.

The carrying value of contract cost assets amounted to $ 2.0 million and $ 2.1 million, respectively, at December 31, 2023 and 2022 and were included in other assets in the Consolidated Balance Sheets.

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Washington Trust also has non-qualified retirement plans to provide supplemental retirement benefits to certain employees, as defined in the plans.

The defined benefit pension plans were previously amended to freeze benefit accruals after a 10 -year transition period ending in December 2023.

These defined benefit pension plans were previously amended to freeze benefit accruals after a 10-year transition period, which ended in December 2023.

In the fourth quarter of 2023, the Corporation’s Board of Directors approved a resolution to terminate the qualified pension plan and participants were notified of the termination.

Work on the qualified pension plan termination process has commenced and the qualified pension plan’s assets are expected to be distributed in 2025, pending completion of applicable regulatory approvals, including receipt of a determination letter from the Internal Revenue Service.

The qualified pension plan liability is expected to be settled in 2025 through a combination of lump sum payments to participants and purchase of a group annuity contract from a highly-rated insurance company.

Upon settlement in 2025, the Corporation expects to recognize a pre-tax pension settlement charge that will include a non-cash charge for the recognition of all pre-tax actuarial losses accumulated in AOCL at that time.

The actual amount of the settlement charge will depend on various factors, including interest rates, plan asset returns, the lump sum election rate and annuity pricing.

The qualified pension plan is funded on a current basis, in compliance with the requirements of ERISA.

1 unchanged sentence

Washington Trust evaluates these assumptions annually.

The actuarial assumptions as of December 31, 2023 included considerations for the termination of the qualified pension plan.

Notes to Consolidated Financial Statements – (continued)

The following table presents the plans’ projected benefit obligations, fair value of plan assets and funded (unfunded) status:

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Securities available for sale and other short-term investments designated for this purpose, with the carrying value of $ 13.6 million and $ 14.0 million are included in the Consolidated Balance Sheets at December 31, 2023 and 2022, respectively.

The following table presents the amounts included in AOCI (AOCL) related to the qualified pension plan and non-qualified retirement plans:

The following table presents the amounts included in AOCL related to the qualified pension plan and non-qualified retirement plans:

(Dollars in thousands) Qualified

2 unchanged sentences

At December 31, 2023 2022 2023 2022

Net actuarial loss included in AOCI (AOCL), pre-tax

Net actuarial loss included in AOCL, pre-tax

$ 8,837 $ 1,846 $ 2,939 $ 3,455

Notes to Consolidated Financial Statements – (continued)

The accumulated benefit obligation for the qualified pension plan was $ 75.3 million and $ 64.8 million, respectively, at December 31, 2023 and 2022.

The accumulated benefit obligation for the non-qualified retirement plans amounted to $ 13.2 million and $ 13.1 million, respectively, at December 31, 2023 and 2022.

Notes to Consolidated Financial Statements – (continued)

The following table presents components of net periodic benefit cost and other amounts recognized in other comprehensive income (loss), on a pre-tax basis:

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Other Changes in Plan Assets and Benefit Obligations Recognized in Other Comprehensive Income (on a pre-tax basis):

Net (gain) loss ( 2,074 ) ( 8,132 ) 1,708 ( 4,572 ) ( 621 ) 1,244

Net loss (gain) 6,991 ( 2,074 ) ( 8,132 ) ( 516 ) ( 4,572 ) ( 621 )

Recognized in other comprehensive income (loss)

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Discount rate 4.51 % 5.54 % 5.10 % 5.50 %

Rate of compensation increase 5.00 3.75 5.00 3.75

Rate of compensation increase 0.50 5.00 N/A 5.00

The following table presents the measurement date and weighted-average assumptions used to determine net periodic benefit cost for the years ended December 31, 2023, 2022 and 2021:

13 unchanged sentences

The expected long-term rate of return on plan assets is based on what the Corporation believes is realistically achievable based on the types of assets held by the plan and the plan’s investment practices.

The assumption is updated annually, taking

Notes to Consolidated Financial Statements – (continued)

into account the asset allocation, historical asset return trends on the types of assets held and the current and expected economic conditions.

The assumption is updated annually, taking into account the asset allocation, historical asset return trends on the types of assets held and the current and expected economic conditions.

Decreases in the long-term rate of return assumption on plan assets increase pension costs and, in general, may increase the requirement to make funding contributions to the plans.

Increases in the long-term rate of return on plan assets have the opposite effect.

Notes to Consolidated Financial Statements – (continued)

The discount rate assumption for defined benefit pension plans is reset on the measurement date.

22 unchanged sentences

Corporate bonds — 4,854 — 4,854

Common stocks 16,565 — — 16,565

Mutual funds 23,932 — — 23,932

3 unchanged sentences

such items are classified as Level 1.

This category includes cash and cash equivalents, as well as common stocks and mutual funds which are exchange-traded.

This category includes cash and cash equivalents, as well as exchange-traded mutual funds.

Level 2 securities in the qualified pension plan include debt securities with quoted prices, which are traded less frequently than exchange-traded instruments, whose values are determined using matrix pricing with inputs that are observable in the market or can be derived principally from or corroborated by observable market data.

1 unchanged sentence

government-sponsored enterprises, obligations of states and political subdivisions and corporate bonds.

Notes to Consolidated Financial Statements – (continued)

In certain cases where there is limited activity or less transparency around inputs to the valuation, securities may be classified as Level 3.

As of December 31, 2023 and 2022, the qualified pension plan did not have any securities in the Level 3 category.

Notes to Consolidated Financial Statements – (continued)

The following table presents the asset allocations of the qualified pension plan, by asset category:

3 unchanged sentences

Fixed income securities (1)

Equity securities (2)

Mutual funds 5.4 29.4

Total 100.0 % 100.0 %

2 unchanged sentences

government-sponsored enterprises, obligations of states and political subdivisions and corporate bonds.

(2) Includes mutual funds at December 31, 2022 and common stocks and mutual funds at December 31, 2021.

The assets of the qualified defined benefit pension plan trust are managed to ensure that all present and future benefit obligations are met as they come due.

It seeks to achieve this goal while trying to mitigate volatility in plan funded status, contributions and expense by aligning the characteristics of the plan assets to that of the plan liabilities.

The qualified pension plan is well-funded and will become frozen at December 31, 2023, at which point all future benefit accruals will cease.

Our investment approach takes these factors into consideration, and as such we have been increasing our allocation to lower-risk fixed income securities and reducing our allocation to higher-risk equity securities.

The qualified pension plan is considered well-funded and benefit accruals have been frozen at December 31, 2023.

In addition, as noted above, the qualified pension plan’s termination has commenced in 2023.

Our investment approach takes these factors into consideration, and as such we have increased our allocation to lower-risk fixed income securities, while simultaneously reducing our allocation to higher-risk equity securities.

Cash inflow is typically composed of investment income from portfolio holdings and employer contributions, while cash outflow is for the purpose of paying plan benefits and certain plan expenses.

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The Code permits flexibility in plan contributions so that normally a range of contributions is possible.

The Corporation does not expect to make a contribution to the qualified pension plan in 2023.

The Corporation does not expect to make contributions to the qualified pension plan in the future due to the plan’s termination that is expected to be completed in 2025 and the plan’s funded status.

In addition, the Corporation expects to contribute $ 859 thousand in benefit payments to the non-qualified retirement plans in 2024.

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2025 (1) 76,626 873

2025 3,553 899

2026 3,888 935

2027 4,169 951

2029 and thereafter — 4,749

(1) The expected benefit payments for the qualified pension plan in 2025 reflects the termination of the plan that is expected to be completed in 2025 .

The Corporation’s 401(k) Plan provides a match up to a maximum of 3 % of employee contributions for substantially all employees.

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Total employer matching contributions under this plan amounted to $ 3.5 million, $ 3.2 million and $ 3.0 million in 2023, 2022 and 2021, respectively.

Notes to Consolidated Financial Statements – (continued)

Deferred Compensation Plan

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The plan is funded primarily through pre-tax contributions made by the participants.

The assets and liabilities of the Deferred Compensation Plan are recorded at fair value in the Consolidated Balance Sheets.

Notes to Consolidated Financial Statements – (continued)

assets and liabilities of the Deferred Compensation Plan are recorded at fair value in the Consolidated Balance Sheets.

The participants in the plan bear the risk of market fluctuations of the underlying assets.

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The Corporation’s equity compensation plans include the 2003 Stock Incentive Plan, the 2013 Stock Option and Incentive Plan and the 2022 Long Term Incentive Plan, which have been approved by the Corporation’s Board of Directors and shareholders.

Following shareholder approval of the 2022 Long Term Incentive Plan on April 26, 2022, awards are being granted only from the 2022 Long Term Incentive Plan.

The maximum number of shares of common stock that may be issued under the 2022 Long Term Incentive Plan is 600,000 and is subject to adjustment in accordance with the terms of this plan.

Awards are being granted only from the 2022 Long Term Incentive Plan, as there are no securities available for future grants under the 2003 Stock Incentive Plan or 2013 Stock Option and Incentive Plan.

The maximum number of shares of common stock that may be issued under the 2022 Long Term Incentive Plan is 669,966 at December 31, 2023 and is subject to adjustment in accordance with the terms of this plan.

The types of permitted equity awards under the 2022 Long Term Incentive Plan include stock options (both incentive and non-qualified options), stock appreciation rights, restricted stock, restricted stock units, unrestricted stock, cash-based awards, and dividend equivalent rights.

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$ 492 $ 857 $ 978

(1) Includes $ 78 thousand and $ 182 thousand, respectively, of excess tax benefits recognized upon the settlement of share-based compensation awards in 2022 and 2021.

Includes $ 103 thousand of excess tax expenses recognized upon the settlement of share-based compensation awards in 2020.

(1) Includes $ 34 thousand of excess tax expense recognized upon the settlement of share-based compensation awards in 2023, compared to $ 78 thousand and $ 182 thousand, respectively, of excess tax benefits in 2022 and 2021.

As of December 31, 2023, there was $ 4.4 million of total unrecognized compensation cost related to share-based compensation arrangements, including stock options, restricted stock units and performance share units granted under the Plans.

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Number of Stock Options Weighted Average Exercise Price Weighted Average Remaining Contractual Term (Years) Aggregate Intrinsic Value (000’s)

Beginning of period 322,140 $ 45.95

Options outstanding at beginning of period 371,890 $ 46.67

Granted 49,000 26.42

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Forfeited or expired ( 11,033 ) 36.53

End of period 371,890 $ 46.67 6.95 $ 1,514

Options outstanding at end of period 409,857 $ 44.52 6.34 $ 303

Options exercisable at end of period 253,257 $ 45.09 4.83 $ 11

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133,528 6.47 47.44 77,728 46.68

$ 50.01 to $ 60.00

137,042 5.42 55.60 85,242 56.22

Total 409,857 6.34 $ 44.52 253,257 $ 45.09

The total intrinsic value of stock options exercised during the years ended December 31, 2022, 2021 and 2020 was $ 142 thousand, $ 897 thousand and $ 46 thousand, respectively.

There were no stock options exercised during the year ended December 31, 2023.

The total intrinsic value of stock options exercised during the years ended December 31, 2022 and 2021 was $ 142 thousand and $ 897 thousand, respectively.

Restricted Stock Units

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Performance Share Units

The Corporation granted performance share units to certain key employees providing the opportunity to earn shares of common stock over a 3 -year to 5 -year performance period.

The Corporation granted performance share units to certain key employees providing the opportunity to earn shares of common stock over a 3 -year performance period.

The number of shares to be vested will be contingent upon the Corporation’s attainment of certain performance measures as detailed in the performance share unit award agreements.

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2021 46.15 70 % 22,652

2018 54.25 124 % 5,158

Total 144,938

The following table presents a summary of performance share units as of and for the year ended December 31, 2023:

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Beginning of period 144,938 $ 45.41

Granted 47,520 47.35

Vested ( 48,010 ) 37.37

Forfeited (1)

( 47,176 ) 45.25

End of period 97,272 $ 50.40

(1) The number of shares include adjustments made to performance measure estimates on outstanding awards that have not yet vested.

The weighted average grant date fair value pertains only to awards granted during the year.

Notes to Consolidated Financial Statements – (continued)

(1) The number of forfeited shares also includes adjustments made to performance measure estimates on outstanding awards that have not yet vested.

Note 18 - Business Segments

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cash management activities;

banking activities, including customer support and the operation of ATMs, telephone banking, internet banking and mobile banking services;

banking activities, including customer support and the operation of

Notes to Consolidated Financial Statements – (continued)

ATMs, telephone banking, internet banking and mobile banking services;

as well as investment portfolio and wholesale funding activities.

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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;

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Services Consolidated

Net interest income (expense) $ 156,040 ($ 50 ) $ 155,990

Net interest income $ 137,061 $ 37 $ 137,098

Provision for credit losses 3,200 — 3,200

Net interest income (expense) after provision for credit losses 157,340 ( 50 ) 157,290

Net interest income after provision for credit losses 133,861 37 133,898

Noninterest income 20,006 36,134 56,140

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Expenditures for long-lived assets 5,013 35 5,048

Notes to Consolidated Financial Statements – (continued)

(Dollars in thousands)

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Expenditures for long-lived assets 5,475 664 6,139

Notes to Consolidated Financial Statements – (continued)

(Dollars in thousands)

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Expenditures for long-lived assets 3,246 244 3,490

Notes to Consolidated Financial Statements – (continued)

Note 19 - Other Comprehensive Income (Loss)

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Net change in defined benefit plan obligations ( 6,475 ) 1,654 ( 4,821 )

Total other comprehensive loss ($ 181,341 ) $ 43,522 ($ 137,819 )

(1) The pre-tax amounts reclassified into earnings in the Consolidated Statements of Income include a $ 2.8 million reduction in interest and fees on loans and a $ 70 thousand increase in FHLB interest expense.

Total other comprehensive income $ 22,898 ($ 6,251 ) $ 16,647

(1) The pre-tax amounts reclassified into earnings in the Consolidated Statements of Income include a $ 9.2 million reduction in interest and fees on loans and a $ 1.7 million reduction in FHLB interest expense.

(2) The pre-tax amount presented above is included in other expenses in the Consolidated Statements of Income.

Notes to Consolidated Financial Statements – (continued)

(Dollars in thousands)

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( 27,344 ) 6,563 ( 20,781 )

Net cash flow hedge gains reclassified into earnings (1)

Net cash flow hedge losses reclassified into earnings (1)

2,828 ( 679 ) 2,149

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Total other comprehensive loss ($ 181,341 ) $ 43,522 ($ 137,819 )

(1) The pre-tax amounts reclassified into earnings in the Consolidated Statements of Income include a $ 1.5 million increase in interest and fees on loans and a $ 1.1 million increase in FHLB interest expense.

(2) The pre-tax amount presented above is included in other expenses in the Consolidated Statements of Income.

Notes to Consolidated Financial Statements – (continued)

(Dollars in thousands)

6 unchanged sentences

( 3,067 ) 736 ( 2,331 )

Net cash flow hedge losses reclassified into earnings (1)

Net cash flow hedge gains reclassified into earnings (1)

( 310 ) 75 ( 235 )

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Net change in defined benefit plan obligations 8,752 ( 2,100 ) 6,652

Total other comprehensive income $ 4,965 ($ 1,119 ) $ 3,846

(1) The pre-tax amounts reclassified into earnings in the Consolidated Statements of Income include a $ 203 thousand reduction in interest and fees on loans, $ 817 thousand increase in FHLB interest expense and a $ 116 thousand increase in junior subordinated debentures interest expense.

Total other comprehensive loss ($ 16,567 ) $ 3,977 ($ 12,590 )

(2) The pre-tax amount presented above is included in other expenses in the Consolidated Statements of Income.

Notes to Consolidated Financial Statements – (continued)

The following tables present the changes in AOCI (AOCL) by component, net of tax:

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Balance at December 31, 2022 ($ 131,033 ) ($ 22,645 ) ($ 4,122 ) ($ 157,800 )

Other comprehensive income (loss) before reclassifications 14,442 1,301 ( 5,000 ) 10,743

Amounts reclassified from accumulated other comprehensive income (loss) — 5,725 179 5,904

Net other comprehensive income (loss) 14,442 7,026 ( 4,821 ) 16,647

Balance at December 31, 2023 ($ 116,591 ) ($ 15,619 ) ($ 8,943 ) ($ 141,153 )

(Dollars in thousands) Net Unrealized Losses on Available for Sale Debt Securities Net Unrealized Losses on Cash Flow Hedges Net Unrealized Losses on Defined Benefit Plan Obligations Total

Balance at December 31, 2021 ($ 6,795 ) ($ 4,013 ) ($ 9,173 ) ($ 19,981 )

Other comprehensive (loss) income before reclassifications ( 124,238 ) ( 20,781 ) 3,750 ( 141,269 )

Amounts reclassified from accumulated other comprehensive income

— 2,149 1,301 3,450

Amounts reclassified from accumulated other comprehensive (loss) income — 2,149 1,301 3,450

Net other comprehensive (loss) income ( 124,238 ) ( 18,632 ) 5,051 ( 137,819 )

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Other comprehensive (loss) income before reclassifications ( 16,676 ) ( 2,331 ) 4,491 ( 14,516 )

Amounts reclassified from accumulated other comprehensive income

— ( 235 ) 2,161 1,926

Amounts reclassified from accumulated other comprehensive (loss) income — ( 235 ) 2,161 1,926

Net other comprehensive (loss) income ( 16,676 ) ( 2,566 ) 6,652 ( 12,590 )

1 unchanged sentence

Notes to Consolidated Financial Statements – (continued)

(Dollars in thousands) Net Unrealized Gains on Available for Sale Debt Securities Net Unrealized Losses on Cash Flow Hedges Net Unrealized Losses on Defined Benefit Plan Obligations Total

Balance at December 31, 2019 $ 3,226 ($ 793 ) ($ 13,670 ) ($ 11,237 )

Other comprehensive income (loss) before reclassifications 6,655 ( 1,521 ) ( 3,896 ) 1,238

Amounts reclassified from accumulated other comprehensive income

— 867 1,741 2,608

Net other comprehensive income (loss) 6,655 ( 654 ) ( 2,155 ) 3,846

Balance at December 31, 2020 $ 9,881 ($ 1,447 ) ($ 15,825 ) ($ 7,391 )

Note 20 - Earnings per Common Share

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Net income available to common shareholders $ 48,091 $ 71,479 $ 76,647

Weighted average common shares outstanding 17,246 17,310 17,282

Weighted average common shares outstanding for basic EPS

17,033 17,246 17,310

Dilutive effect of common stock equivalents 29 135 145

Weighted average diluted common shares outstanding 17,381 17,455 17,402

Earnings per common share:

Basic earnings per common share $ 4.14 $ 4.43 $ 4.03

Diluted earnings per common share $ 4.11 $ 4.39 $ 4.00

Weighted average common shares outstanding for diluted EPS

17,062 17,381 17,455

$ 2.82 $ 4.14 $ 4.43

$ 2.82 $ 4.11 $ 4.39

Weighted average common stock equivalents, not included in common stock equivalents above because they were anti-dilutive, totaled 465,997 , 149,742 and 100,150 , respectively, for the years ended December 31, 2023, 2022 and 2021.

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The Corporation is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers and to manage the Corporation’s exposure to fluctuations in interest rates.

These financial instruments include commitments to extend credit, standby letters of credit, mortgage loan commitments, loan related derivative contracts and interest rate risk management contracts.

These financial instruments include commitments to extend credit and standby letters of credit, as well as derivative financial instruments, such as mortgage loan commitments, loan related derivative contracts and interest rate risk management contracts.

These instruments involve, to varying degrees, elements of credit risk in excess of the amount recognized in the Consolidated Balance Sheets.

The contract or notional amounts of these instruments reflect the extent of involvement the Corporation has in particular classes of financial instruments.

See Note 9 for additional disclosure pertaining to derivative financial instruments.

Financial Instruments Whose Contract Amounts Represent Credit Risk (Unfunded Commitments)

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Should the Corporation be required to make payments to the beneficiary, repayment from the customer to the Corporation is required.

Financial Instruments Whose Notional Amounts Exceed the Amount of Credit Risk

Mortgage Loan Commitments

Interest rate lock commitments are extended to borrowers and relate to the origination of mortgage loans held for sale.

To mitigate the interest rate risk and pricing risk associated with these rate locks and mortgage loans held for sale, the Corporation enters into forward sale commitments.

Both interest rate lock commitments and forward sale commitments are derivative financial instruments.

Loan Related Derivative Contracts

The Corporation’s credit policies with respect to interest rate contracts with commercial borrowers are similar to those used for loans.

The interest rate contracts with other counterparties are generally subject to bilateral collateralization terms.

Interest Rate Risk Management Contracts

The Corporation’s interest rate risk management contracts consist of interest rate swap agreements in which the Corporation and another party agree to exchange interest payments (e.g., fixed-rate for variable-rate payments) computed on a notional principal amount.

The credit risk associated with these transactions is the risk of default by the counterparty.

To minimize this risk, the Corporation enters into interest rate agreements only with highly rated counterparties that management believes to be creditworthy.

Notes to Consolidated Financial Statements – (continued)

The following table presents the contractual and notional amounts of financial instruments with off-balance sheet risk:

4 unchanged sentences

Standby letters of credit 9,323 9,028

Financial instruments whose notional amounts exceed the amount of credit risk:

Mortgage loan commitments:

Interest rate lock commitments

12,201 49,800

Forward sale commitments

23,150 103,626

Loan related derivative contracts:

Interest rate contracts with customers 935,099 1,022,388

Mirror interest rate contracts with counterparties 935,099 1,022,388

Risk participation-in agreements

221,247 163,207

Interest rate risk management contracts:

Interest rate swaps

320,000 320,000

See Note 9 for additional disclosure pertaining to derivative financial instruments.

ACL on Unfunded Commitments

The ACL on unfunded commitments is management’s estimate of expected lifetime credit losses over the expected contractual term in which the Corporation is exposed to credit risk via a contractual obligation to extend credit, unless that obligation is unconditionally cancellable by the Corporation.

Unfunded commitments for home equity lines of credit and commercial demand loans are considered unconditionally cancellable for regulatory capital purposes and, therefore, are excluded from the calculation to estimate the ACL on unfunded commitments.

For each portfolio, estimated loss rates and funding factors are applied to the corresponding balance of unfunded commitments.

The estimated loss rates applied to unfunded commitments are the same quantitative and qualitative loss rates applied to the corresponding on-balance sheet amounts in determining the ACL on loans.

The activity in the ACL on unfunded commitments for the year ended December 31, 2023 is presented below:

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Ending Balance $ 1,091 $ 822 $ 1,913 $ 15 $ — $ 12 $ 12 $ 1,940

Notes to Consolidated Financial Statements – (continued)

The activity in the ACL on unfunded commitments for the year ended December 31, 2022 is presented below:

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Ending Balance $ 1,236 $ 988 $ 2,224 $ 50 $ — $ 16 $ 16 $ 2,290

Notes to Consolidated Financial Statements – (continued)

Other Contingencies

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Management is of the opinion, based on its review with counsel of the development of such matters to date, that the ultimate disposition of such matters will not materially affect the consolidated balance sheets or statements of income of the Corporation.

Other Matters

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

When selling a residential real estate mortgage loan or acting as originating agent on behalf of a third party, Washington Trust generally makes various representations and warranties.

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Any change in the estimate is recorded in mortgage banking revenues in the Consolidated Statements of Income.

Notes to Consolidated Financial Statements – (continued)

Note 22 - Parent Company Financial Statements

The following tables present parent company only financial statements of the Bancorp, reflecting the investment in the Bank on the equity basis of accounting.

The following tables present parent company only condensed financial statements of the Bancorp, reflecting the investment in the Bank on the equity basis of accounting.

The Statements of Changes in Shareholders’ Equity for the parent company only are identical to the Consolidated Statements of Changes in Shareholders’ Equity and are therefore not presented.

Balance Sheets (Dollars in thousands, except par value)

Balance Sheets (Dollars in thousands)

December 31, 2023 2022

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Total assets $ 505,665 $ 486,863

Liabilities and Shareholders’ Equity:

Junior subordinated debentures $ 22,681 $ 22,681

1 unchanged sentence

Other liabilities 277 164

Total liabilities 33,194 32,800

Shareholders’ equity 472,686 453,669

Common stock of $ .0625 par value;

authorized 60,000,000 shares;

17,363,457 shares issued and 17,182,753 shares outstanding at December 31, 2022 and 17,363,457 shares issued and 17,330,818 shares outstanding at December 31, 2021

Paid-in capital 127,056 126,511

Retained earnings 492,043 458,310

Accumulated other comprehensive loss ( 157,800 ) ( 19,981 )

Treasury stock, at cost;

180,704 shares at December 31, 2022 and 32,639 shares at December 31, 2021

( 8,715 ) ( 1,117 )

Total shareholders’ equity 453,669 564,808

Total liabilities and shareholders’ equity $ 505,665 $ 486,863

Notes to Consolidated Financial Statements – (continued)

Statements of Income (Dollars in thousands)

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Non-bank 46 20 11

Other income (losses) — ( 102 ) —

Other losses ( 300 ) — ( 102 )

Total income 38,568 53,260 45,641

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Net income $ 48,176 $ 71,681 $ 76,870

Notes to Consolidated Financial Statements – (continued)

Statements of Cash Flows (Dollars in thousands)

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Non-bank — 87 54

Tax benefit (expense) from stock option exercises and other equity awards 78 182 ( 103 )

Deferred income tax benefit 5 ( 24 ) —

Increase in dividend receivable 2,386 ( 1,128 ) ( 2,261 )

(Increase) decrease in other assets ( 175 ) 50 109

Increase (decrease) in accrued expenses and other liabilities 93 31 ( 31 )

Tax (expense) benefit from stock option exercises and other equity awards ( 34 ) 78 182

Deferred income tax (benefit) expense ( 56 ) 5 ( 24 )

Decrease (increase) in dividend receivable 653 2,386 ( 1,128 )

Decrease (increase) in other assets 8 ( 175 ) 50

Increase in accrued expenses and other liabilities 113 93 31

Other, net 36 ( 97 ) ( 182 )

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Purchases of other equity investments, net ( 263 ) ( 375 ) ( 650 )

Net cash used in investing activities 721 ( 650 ) —

Net cash (used in) provided by investing activities ( 263 ) 721 ( 650 )

Cash flows from financing activities:

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Net cash used in financing activities ( 48,199 ) ( 47,947 ) ( 36,526 )

Net increase (decrease) in cash 7,267 6,632 ( 180 )

Net (decrease) increase in cash ( 10,856 ) 7,267 6,632

Cash at beginning of year 15,557 8,290 1,658

2 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 8. Financial Statements and Supplementary Data