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Item 8. Financial Statements and Supplementary Data

2025-02-25 compared with 2024-02-26 · 564 added, 402 removed, 2022 unchanged (32% of the section changed)

1 unchanged sentence

Description Page

Management’s Annual Report on Internal Control Over Financial Reporting

Reports of Independent Registered Public Accounting Firm (PCAOB ID:

Consolidated Balance Sheets at December 31, 2024 and 2023

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

Consolidated Statements of Income (Loss) for the Years Ended December 31, 2024, 2023 and 2022

Consolidated Statements of Comprehensive Income (Loss) for the Years Ended December 31, 2024, 2023 and 2022

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(2013) issued by COSO.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated balance sheets of the Corporation as of December 31, 2023 and 2022, the related consolidated statements of income, comprehensive income (loss), changes in shareholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2023, and the related notes (collectively referred to as the “financial statements”) and our report dated February 26, 2024 expressed an unqualified opinion.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated balance sheets of the Corporation as of December 31, 2024 and 2023, the related consolidated statements of income (loss), comprehensive income (loss), changes in shareholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2024, and the related notes (collectively referred to as the “financial statements”) and our report dated February 25, 2025 expressed an unqualified opinion.

Basis for Opinion

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/s/ Crowe LLP

Grand Rapids, Michigan

Washington, D.C.

February 25, 2025

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We have audited the accompanying consolidated balance sheets of Washington Trust Bancorp, Inc.

and Subsidiaries (the “Corporation”) as of December 31, 2023 and 2022, the related consolidated statements of income, comprehensive income (loss), changes in shareholders’ equity, and cash flows for each of the three years in the period ended December 31, 2023, and the related notes (collectively referred to as the “financial statements”).

and Subsidiaries (the “Corporation”) as of December 31, 2024 and 2023, the related consolidated statements of income (loss), comprehensive income (loss), changes in shareholders’ equity, and cash flows for each of the three years in the period ended December 31, 2024, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Corporation as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2024, in conformity with accounting principles generally accepted in the United States of America.

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We have served as the Corporation’s auditor since 2019.

Grand Rapids, Michigan

Washington, D.C.

February 25, 2025

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Cash and due from banks $ 21,534 $ 54,970

Interest-earning deposits with correspondent banks 88,368 31,854

Short-term investments 3,987 3,360

Mortgage loans held for sale, at fair value 21,708 20,077

Mortgage loans held for sale, at lower of cost or market 281,706 —

Premises and equipment held for sale, at lower of cost or market 4,788 —

Available for sale debt securities, at fair value (amortized cost $ 1,049,557 ;

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and Subsidiaries

Consolidated Statements of Income

Consolidated Statements of Income (Loss)

(Dollars and shares in thousands, except per share amounts)

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Taxable interest on debt securities 27,850 29,059 21,827

Nontaxable interest on debt securities 8 — —

Dividends on Federal Home Loan Bank stock 4,771 3,315 548

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Income from bank-owned life insurance 3,041 3,488 2,591

Realized losses on securities, net ( 31,047 ) — —

Losses on sale of portfolio loans, net ( 62,888 ) — —

Other income 4,567 1,335 1,588

Total noninterest income 56,140 62,602 87,394

Total noninterest (loss) income ( 27,797 ) 56,140 62,602

Noninterest expense:

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Amortization of intangibles 826 843 860

Debt prepayment penalties — — 6,930

Other expenses 8,835 10,661 9,997

Total noninterest expense 137,069 133,557 128,722

Income before income taxes 56,481 91,170 98,187

Income tax expense 8,305 19,489 21,317

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

Net income available to common shareholders $ 48,091 $ 71,479 $ 76,648

(Loss) income before income taxes ( 38,818 ) 56,481 91,170

Income tax (benefit) expense ( 10,759 ) 8,305 19,489

Net (loss) income ($ 28,059 ) $ 48,176 $ 71,681

Net (loss) income available to common shareholders ($ 28,038 ) $ 48,091 $ 71,479

Weighted average common shares outstanding - basic 17,149 17,033 17,246

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Per share information:

Basic earnings per common share $ 2.82 $ 4.14 $ 4.43

Diluted earnings per common share $ 2.82 $ 4.11 $ 4.39

Basic (loss) earnings per common share ($ 1.63 ) $ 2.82 $ 4.14

Diluted (loss) earnings per common share ($ 1.63 ) $ 2.82 $ 4.11

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

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Years ended December 31, 2024 2023 2022

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

Net (loss) income ($ 28,059 ) $ 48,176 $ 71,681

Other comprehensive income (loss), net of tax:

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Total other comprehensive income (loss), net of tax 21,982 16,647 ( 137,819 )

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

Total comprehensive (loss) income ($ 6,077 ) $ 64,823 ($ 66,138 )

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

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Capital Retained

Earnings Accumulated

Comprehensive

Loss Treasury

Earnings AOCL

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

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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)

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

Net income — — — 48,176 — — 48,176

Net loss — — — ( 28,059 ) — — ( 28,059 )

Total other comprehensive income, net of tax — — — — 21,982 — 21,982

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Share-based compensation — — 2,473 — — — 2,473

Common stock issued in public offering, net 2,199 137 70,384 — — — 70,521

Exercise of stock options, issuance of other compensation-related equity awards, net of awards surrendered 44 1 ( 2,060 ) — — 2,028 ( 31 )

Treasury stock purchased under the 2023 Repurchase Program (1)

( 200 ) — — — — ( 8,814 ) ( 8,814 )

Balance at December 31, 2024 19,274 $ 1,223 $ 196,947 $ 434,014 ($ 119,171 ) ($ 13,285 ) $ 499,728

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Cash flows from operating activities:

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

Net (loss) income ($ 28,059 ) $ 48,176 $ 71,681

Adjustments to reconcile net income to net cash provided by operating activities:

Provision for credit losses 2,400 3,200 ( 1,300 )

Net gain on sale of bank-owned property ( 988 ) — —

Depreciation of premises and equipment 3,934 4,005 3,465

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Amortization of intangibles 826 843 860

Amortization of terminated cash flow hedge loss 8,605 6,465 —

Share-based compensation 2,473 2,064 3,247

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Income from bank-owned life insurance ( 3,041 ) ( 3,488 ) ( 2,591 )

Realized losses on securities, net 31,047 — —

Losses on sale of portfolio loans, net 62,888 — —

Net gains on loan sales, including changes in fair value ( 8,775 ) ( 4,514 ) ( 6,730 )

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Loans originated for sale ( 402,826 ) ( 221,637 ) ( 272,855 )

(Increase) decrease in operating lease right-of-use assets

( 2,208 ) ( 464 ) 2,829

Increase (decrease) in operating lease liabilities

2,469 547 ( 2,708 )

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

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

Decrease (increase) in operating lease right-of-use assets 2,420 ( 2,208 ) ( 464 )

(Decrease) increase in operating lease liabilities ( 2,449 ) 2,469 547

Increase in other assets ( 11,141 ) ( 3,000 ) ( 30,804 )

Increase (decrease) in other liabilities 7,163 ( 17,968 ) 34,070

Net cash provided by operating activities 57,668 31,603 113,006

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Other ( 16,351 ) ( 20,221 ) ( 10,747 )

Proceeds from sales of:

Available for sale debt securities:

Mortgage-backed 185,143 — —

Available for sale debt securities:

Other 193,267 — —

Maturities, calls and

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Other 900 750 —

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

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

Net redemptions (purchases) of Federal Home Loan Bank stock 2,076 ( 8,430 ) ( 30,432 )

Net decrease (increase) in loans 165,858 ( 537,467 ) ( 832,450 )

Purchases of loans ( 1,435 ) ( 5,743 ) ( 2,773 )

Proceeds from the sale of property acquired through foreclosure or repossession 680 — —

Purchases of premises and equipment ( 4,001 ) ( 5,048 ) ( 6,139 )

Net proceeds from sale of bank-owned property 1,669 — —

Purchases of bank-owned life insurance — — ( 7,000 )

Proceeds from surrender of bank-owned life insurance — 1,932 —

Proceeds from sale of equity investments in real estate limited partnerships — — 50

Equity investments in real estate limited partnerships ( 3,942 ) ( 8,115 ) ( 1,861 )

Purchases of other equity investments, net ( 338 ) ( 263 ) ( 375 )

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

Net cash provided by (used in) investing activities 231,304 ( 550,840 ) ( 999,041 )

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

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Cash flows from financing activities:

Net increase in deposits 329,198 38,911 601,698

Net (decrease) increase in deposits ( 232,360 ) 329,198 38,911

Proceeds from Federal Home Loan Bank advances 2,385,000 3,515,000 3,156,112

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

Net proceeds from issuance of common stock in public offering 70,521 — —

Net proceeds from stock option exercises and issuance of other equity awards, net of awards surrendered ( 31 ) ( 754 ) ( 821 )

Cash dividends paid ( 38,397 ) ( 38,631 ) ( 37,647 )

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

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

Net cash (used in) provided by financing activities ( 265,267 ) 490,999 825,964

Net increase (decrease) in cash and cash equivalents 23,705 ( 28,238 ) ( 60,071 )

Cash and cash equivalents at beginning of year 90,184 118,422 178,493

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Loans charged-off $ 2,413 $ 577 $ 184

Portfolio loans transferred to held for sale 344,594 — —

Loans transferred to property acquired through foreclosure or repossession — 683 —

Premises and equipment transferred to held for sale 4,788 — —

Commitment for equity investments in real estate limited partnerships 6,078 3,020 8,360

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The Bancorp’s equity interest in the capital trusts, which is classified in other assets, and the junior subordinated debentures are included in the Consolidated Balance Sheets.

Interest expense on the junior subordinated debentures is included in the Consolidated Statements of Income.

Interest expense on the junior subordinated debentures is included in the Consolidated Statements of Income (Loss).

Reclassification

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Cash and Cash Equivalents

Cash and cash equivalents, as referenced in the accompanying Consolidated Statements of Cash Flows, consists of cash and due from banks and short-term investments.

Cash and cash equivalents, as referenced in the accompanying Consolidated Statements of Cash Flows, consists of cash and due from banks, interest-earning deposits with correspondent banks and short-term investments.

Cash and due from Banks

Cash and due from banks includes cash on hand, cash items in process of collection, cash on deposit at the FRBB and other correspondent banks, as well as cash pledged to derivative counterparties.

Cash on deposit includes interest-bearing deposits held at correspondent banks of $ 74.5 million and $ 65.8 million, respectively, at December 31, 2023 and 2022.

Cash and due from banks consists of cash on hand, cash items in process of collection, and noninterest-earning cash on deposit with correspondent banks.

Interest-earning Deposits with Correspondent Banks

Interest-earning deposits with correspondent banks includes cash on deposit with the FRBB and other banks, including cash pledged to derivative counterparties.

Cash collateral pledged to derivative counterparties represents restricted cash balances.

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Treasury bills.

Notes to Consolidated Financial Statements – (continued)

Management determines the appropriate classification of securities at the time of purchase.

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Securities not classified as held to maturity are classified as available for sale.

Securities available for sale

Notes to Consolidated Financial Statements – (continued)

consist of debt securities that are available for sale to respond to changes in market interest rates, liquidity needs, changes in funding sources and other similar factors.

Securities available for sale consist of debt securities that are available for sale to respond to changes in market interest rates, liquidity needs, changes in funding sources and other similar factors.

These assets are specifically identified and are carried at fair value.

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Interest income is recognized when earned.

Realized gains or losses from sales of securities are recorded on the trade date and are determined using the specific identification method.

Realized gains or losses from sales of securities are recorded on the trade date, determined using the specific identification method and recognized within noninterest income in the Consolidated Statements of Income (Loss).

The fair values of securities may be based on either quoted market prices or third-party pricing services.

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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 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.

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If a credit loss exists based on the results of this assessment, an ACL (contra asset) is recorded, limited by the amount that the fair value is less than the amortized cost basis.

Any impairment that has not been recorded through an ACL is considered market-related and is recognized in other comprehensive income, net of taxes.

Any impairment that has not been recorded through an ACL is considered market-related and is recognized in AOCL.

Changes in the ACL on available for sale debt securities are recorded as provision for credit losses.

Losses are charged against the ACL when management believes the uncollectability of an available for sale debt security is confirmed or when either of the criteria regarding intent or requirement to sell is met.

Notes to Consolidated Financial Statements – (continued)

Federal Home Loan Bank Stock

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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)

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 purchase of FHLB stock is a requirement for a member to gain 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.

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The Bank monitors its investment to determine if impairment exists.

Based on the capital adequacy and the liquidity position of the FHLB, management believes there is no impairment related to the carrying amount of FHLB stock included in the Consolidated Balance Sheet as of December 31, 2023.

Long-lived Assets Held for Sale

Once all the criteria for held for sale in ASC 360 are met, assets are reclassified to held for sale and measured at lower of the assets carrying value or fair value less costs to sell.

If the carrying value of the assets to be sold exceed the fair value less cost to sell, a valuation allowance is established with a corresponding loss recognized within noninterest income in the Consolidated Statements of Income (Loss).

Mortgage Loans Held for Sale, at Lower of Cost or Market

In the period when held for sale criteria are met, amortization ceases for any unamortized balances of deferred loan origination fees and costs.

Premises and Equipment Held for Sale

Depreciation ceases in the period when held for sale criteria are met.

Mortgage Banking Activities

Mortgage Loans Held for Sale

Residential real estate mortgage loans originated and intended for sale in the secondary market are classified as held for sale.

Mortgage Loans Held for Sale, at Fair Value

Residential real estate mortgage loans originated and intended for sale to the secondary market are classified as held for sale.

ASC 825, “Financial Instruments” allows for the irrevocable option to elect fair value accounting for the initial and subsequent measurement for certain financial assets and liabilities on a contract-by-contract basis that may otherwise not be required to be measured at fair value under other accounting standards.

The Corporation has elected the fair value option for mortgage loans held for sale in order to better match changes in fair values of the loans with changes in the fair value of the derivative forward sale commitment contracts used to economically hedge them.

The Corporation has elected the fair value option for mortgage loans that are originated and intended for sale to the secondary market in order to better match changes in fair values of the loans with changes in the fair value of the derivative forward sale commitment contracts used to economically hedge them.

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

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Mortgage servicing rights are included in other assets and are amortized as an offset to mortgage banking revenues over the period of estimated net servicing income.

Notes to Consolidated Financial Statements – (continued)

Mortgage servicing rights are periodically evaluated for impairment based on their fair value.

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

Loan Servicing Fee Income

Servicing fee income is recorded for fees earned for servicing loans for investors.

The fees are based on a contractual percentage of the outstanding principal or a fixed amount per loan and recognized when earned within mortgage banking revenues.

Portfolio Loans

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

When loans are

Notes to Consolidated Financial Statements – (continued)

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

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

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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.

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.

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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

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 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.

If a TLM is on accrual status prior to being modified, it is

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.

reviewed to determine if the modified loan should remain on accrual status.

If the TLM successfully meets all repayment terms according to the modification documents for a specified period of time (generally 12 months) and the borrower is no longer experiencing financial difficulty, it would be declassified from TLM status.

Individually Analyzed Loans

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

The ACL on loans is established through a provision for credit losses recognized in the Consolidated Statements of Income.

The ACL on loans is established through a provision for credit losses recognized in the Consolidated Statements of Income (Loss).

The ACL on loans is also increased by recoveries of amounts previously charged-off and is reduced by charge-offs on loans.

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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.

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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 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

Loss given default is estimated based on historical credit loss

Notes to Consolidated Financial Statements – (continued)

regression model that incorporates econometric factors.

Probability of default is estimated utilizing a 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.

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

The ACL on unfunded commitments is adjusted through a provision for credit losses recognized in the Consolidated Statements of Income.

The ACL on unfunded commitments is adjusted through a provision for credit losses recognized in the Consolidated Statements of Income (Loss).

Premises and Equipment

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The remaining useful life of the intangible assets that are being amortized is also evaluated to determine whether events and circumstances warrant a revision to the remaining period of amortization.

Property Acquired through Foreclosure or Repossession

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

Property Acquired through Foreclosure

Property acquired through foreclosure 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.

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.

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 is charged to the ACL on loans.

Subsequent to foreclosure, a valuation allowance on the asset is established for declines in fair value.

Any subsequent increases in fair value 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.

Any excess of sales proceeds over the carrying value of the foreclosed property is first applied as a recovery to the valuation allowance, if any, with the remainder being recognized as a gain on sale.

Changes to the valuation allowance, expenses associated with ownership of these properties, and gains and losses from their sale are included in other noninterest expense.

Loans that are substantively repossessed include only those loans for which the Corporation has obtained control of the collateral, but has not completed legal foreclosure proceedings.

Changes to the valuation allowance, operating expenses associated with ownership of these properties, and gains or losses recognized upon sale are included in other noninterest expense in the Consolidated Statements of Income (Loss).

Investments in Real Estate Limited Partnerships

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Under the proportional amortization method, the investment is amortized over the same tax period and in proportion to the total tax benefits expected to be allocated to the Bank.

The amortization is recognized as a component of income tax expense in the Consolidated Statements of Income.

The amortization is recognized as a component of income tax expense in the Consolidated Statements of Income (Loss).

In addition, operating losses and tax credits generated by the partnership are also recorded as a reduction to income tax expense.

1 unchanged sentence

The Corporation invests in equity investments without readily determinable fair value.

Such equity investments are classified within other assets in the Consolidated Balance Sheet.

Such equity investments are classified within other assets in the Consolidated Balance Sheets.

The Corporation has elected to carry equity investments without readily determinable fair value at cost, less impairment, if any, plus or minus changes in observable prices.

1 unchanged sentence

If the equity investment is deemed to be impaired, an impairment loss is recognized in the amount by which the carrying value of the equity investment exceeds its estimated fair value.

The impairment loss is recognized as a reduction of other noninterest income in the Consolidated Statement of Income.

The impairment loss is recognized as a reduction of other noninterest income in the Consolidated Statements of Income (Loss).

An impairment loss can be reversed in a subsequent period if there are observable transactions for the identical or similar investment of the same issuer at an amount that is greater than the carrying value of the investment that was established when the impairment loss was recognized.

The reversal of any impairment loss or other changes resulting from observable transactions are recognized in other noninterest income in the Consolidated Statement of Income.

The reversal of any impairment loss or other changes resulting from observable transactions are recognized in other noninterest income in the Consolidated Statements of Income (Loss).

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

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.

Impairment losses on assets to be disposed of, if any, are based on the estimated proceeds to be received, less costs of disposal.

An impairment loss is recognized within noninterest expense in the Consolidated Statement of Income.

Impairment losses on assets to be disposed of, if any, are based on the estimated proceeds to be received, less

Notes to Consolidated Financial Statements – (continued)

costs of disposal.

An impairment loss is recognized within noninterest expense in the Consolidated Statements of Income (Loss).

A previously recognized impairment loss cannot be reversed in a subsequent period.

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Contract cost assets are included in other assets in the Consolidated Balance Sheets.

The amortization of contract cost assets is recorded within salaries and employee benefits expense in the Consolidated Statements of Income.

The amortization of contract cost assets is recorded within salaries and employee benefits expense in the Consolidated Statements of Income (Loss).

Pension Costs

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

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.

Management evaluates these assumptions on an annual basis and makes modifications to the

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.

assumptions based on current rates and trends when it is appropriate to so do.

The effect of modifications to those assumptions is recorded in other comprehensive income (loss) and amortized to net periodic cost over future periods.

The service cost component of net periodic benefit cost is recognized within salaries and employee benefits expense in the Consolidated Statements of Income.

All other components of net periodic benefit cost are recognized in other noninterest expense in the Consolidated Statements of Income.

The funded status of defined benefit pension plans, measured as the difference between the fair value of plan assets and the projected benefit obligation, is recognized in the Consolidated Balance Sheet.

The service cost component of net periodic benefit cost is recognized within salaries and employee benefits expense in the Consolidated Statements of Income (Loss).

All other components of net periodic benefit cost are recognized in other noninterest expense in the Consolidated Statements of Income (Loss).

The changes in the funded status of the defined benefit plans, including actuarial gains and losses and prior service costs and credits, are recognized in comprehensive income in the year in which the changes occur.

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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 Consolidated Statements of Income.

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

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Segment Reporting

The Corporation manages its operations through two reportable business segments, consisting of Commercial Banking and Wealth Management Services.

Additional information on the segments is presented in Note 18.

The Corporation manages its operations through two reportable business segments, consisting of Commercial Banking and Wealth Management Services, as determined by the Corporation’s designated CODM.

Additional information on the Corporation’s reportable business 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.

An allocation methodology is utilized to allocate income and expenses to the business segments.

Direct activities are assigned to the appropriate business segment to which the activity relates.

Indirect activities, such as corporate, technology and other support functions, are allocated to business segments primarily based upon full-time equivalent employee computations.

Segment reporting results may be restated, when necessary, to reflect changes in organizational structure or allocation methodology.

Any changes in estimates and allocations that may affect the reported results of any business segment will not affect the consolidated financial position or results of operations of the Corporation as a whole.

Earnings Per Common Share

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Diluted EPS is computed using the weighted-average number of shares determined for the basic EPS computation plus the dilutive effect on common shares outstanding, using the treasury stock method.

Comprehensive Income

Comprehensive income is defined as all changes in equity, except for those resulting from transactions with shareholders.

Net income is a component of comprehensive income.

Comprehensive Income (Loss)

Comprehensive income (loss) is defined as all changes in equity, except for those resulting from transactions with shareholders.

Net income is a component of comprehensive income (loss).

All other components are referred to in the aggregate as other comprehensive income (loss).

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Derivative Instruments and Hedging Activities

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

Derivatives are recognized as either assets or liabilities 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.

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 changes in the fair value are recorded in other comprehensive income (loss) and subsequently reclassified to earnings when gains or losses are realized.

When a cash flow hedge is discontinued, but the hedged cash flows or forecasted transaction is still expected to occur, changes in value that were accumulated in other comprehensive income (loss) are amortized or accreted into earnings over the same periods that the hedged transactions will affect earnings.

For derivatives designated as fair value hedges, the hedged item is measured at fair value through a basis adjustment recognized on the balance sheet.

The changes in fair value of derivatives designated as fair value hedges, as well as the offsetting changes in fair value of the hedged item are recognized in earnings.

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

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Net accrued interest receivable or payable on derivatives that do not qualify for hedge accounting are reported in noninterest income.

Fair Value Measurements

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Accounting Standards Adopted in 2024

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 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.

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 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.

The Corporation adopted the provisions of ASU 2023-07 on December 31, 2024 on a retrospective basis.

The adoption of ASU 2023-07 did not have a material impact on the Corporation’s financial statements.

See Note 18 for additional information on business segments.

Accounting Standards Pending Adoption

Income Taxes - Topic 740

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

Income Statement - Reporting Comprehensive Income - Subtopic 220

Accounting Standards Update No.

2024-03, “Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40) - Disaggregation of Income Statement Expenses” (“ASU 2024-03”), was issued in November 2024 to enhance and provide additional disclosure on certain costs and expenses.

The effective date of ASU 2024-03 was further clarified in a subsequent ASU issued in January 2025.

ASU 2024-03 is effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027, with early adoption permitted.

The provisions under ASU 2024-03 can be applied on either a prospective or retrospective basis.

ASU 2024-03 is not expected to have a material impact on the Corporation’s financial statements.

Note 3 - Securities

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Obligations of U.S.

government agencies and U.S.

government-sponsored enterprises $ 41,751 $ — ($ 3,139 ) $ — $ 38,612

$ 250,450 $ 15 ($ 24,723 ) $ — $ 225,742

Mortgage-backed securities issued by U.S.

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government-sponsored enterprises 984,546 52 ( 129,451 ) — 855,147

Obligations of states and political subdivisions

650 5 — — 655

Individual name issuer trust preferred debt securities

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See Note 13 for additional discussion of FHLB borrowings.

In December 2024, the Bank sold available for sale debt securities with an amortized cost balance of $ 409.5 million (fair value of $ 378.4 million) and reinvested $ 378.4 million into purchases of available for sale debt securities.

The sale of debt securities resulted in a net realized pre-tax loss of $ 31.0 million that was recognized in the December 2024.

See Note 14 for additional disclosure regarding the Corporation’s public offering of common stock.

The following table summarizes amounts related to the sale of available for debt securities:

(Dollars in thousands)

For the periods ended December 31, 2024 2023 2022

Proceeds from sales $ 378,410 $ — $ —

Gross realized gains $ — $ — $ —

Gross realized losses ( 31,047 ) — —

Net realized losses on securities ($ 31,047 ) $ — $ —

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 $ 50.0 million and a fair value of $ 46.2 million at December 31, 2024 that are callable at the discretion of the issuers.

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

Final maturities of the callable securities range from 7 months to 20 years, with call features ranging from 1 month to 8 years.

Notes to Consolidated Financial Statements – (continued)

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.

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:

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Obligations of U.S.

government agencies and U.S.

government-sponsored enterprises 2 $ 15,289 ($ 12 ) 6 $ 23,323 ($ 3,127 ) 8 $ 38,612 ($ 3,139 )

1 $ 19,824 ($ 176 ) 20 $ 195,903 ($ 24,547 ) 21 $ 215,727 ($ 24,723 )

Mortgage-backed securities issued by U.S.

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Obligations of U.S.

Government Agency and U.S.

Government Agencies and U.S.

Government-Sponsored Enterprise Securities, including Mortgage-Backed Securities

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As disclosed in Note 1, the Corporation utilizes a zero credit loss estimate for these securities.

Notes to Consolidated Financial Statements – (continued)

Individual Name Issuer Trust Preferred Debt Securities

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As of December 31, 2024, there was one individual name issuer trust preferred debt security with an amortized cost of $ 2.0 million and unrealized losses of $ 107 thousand that was rated below investment grade by S&P.

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.

We noted no downgrades to below investment grade between December 31, 2024 and 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.

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$ 5,137,838 $ 5,647,706

(1) CRE consists of commercial mortgages primarily secured by income-producing property, as well as construction and development loans.

(1) CRE consists of commercial mortgages primarily secured by non-owner occupied income-producing property, as well as construction and development loans.

Construction and development loans are made to businesses for land development or the on-site construction of industrial, commercial, or residential buildings.

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

Also, includes a $ 1.5 million negative basis adjustment associated with fair value hedges at December 31, 2024.

See Note 9 for additional disclosure.

(4) Other consists of loans to individuals secured by general aviation aircraft and other personal installment loans.

(5) Includes net unamortized loan origination costs of $ 10.9 million and $ 13.0 million, respectively, at December 31, 2024 and 2023 and net unamortized premiums on loans purchased from and serviced by other financial institutions of $ 242 thousand and $ 286 thousand, respectively, at December 31, 2024 and 2023.

Loan balances exclude accrued interest receivable of $ 22.9 million and $ 17.6 million, respectively, as of December 31, 2023 and 2022.

The carrying value of loans excludes accrued interest receivable of $ 22.1 million and $ 22.9 million, respectively, as of December 31, 2024 and 2023.

Notes to Consolidated Financial Statements – (continued)

As of December 31, 2024 and 2023, loans amounting to $ 2.8 billion and $ 3.4 billion, respectively, were pledged as collateral to the FHLB under a blanket pledge agreement and to the FRBB for the discount window.

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The ability of commercial borrowers to honor their repayment commitments is dependent on the general economy, as well as the health of the real estate economic sector in the Corporation’s market area.

Notes to Consolidated Financial Statements – (continued)

Past Due Loans

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Nonaccrual loans of $ 16.9 million and $ 37.7 million, respectively, at December 31, 2024 and 2023 were current as to the payment of principal and interest.

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.

As of December 31, 2024 and 2023, nonaccrual loans secured by one- to four-family residential property amounting to $ 1.0 million and $ 960 thousand, 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, 2024.

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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.

In the course of resolving problem loans, the Corporation may choose to modify the contractual terms of certain loans.

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.

The decision to modify a loan, versus

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:

aggressively enforcing the collection of the loan, may benefit the Corporation by increasing the ultimate probability of collection.

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.

The following table presents the carrying value at December 31, 2024, of TLMs made during the year, segregated by class of loans and type of concession granted:

(Dollars in thousands)

Year ended December 31, 2023

Maturity Extension Combination (1)

Maturity Extension Other-than-Insignificant Payment Delay Combination (1)

Total % of Total Loan Class (2)

Commercial real estate $ 3,340 $ — $ 6,713 $ 10,053 — %

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Total commercial 3,855 5,000 6,713 15,568 1

Residential Real Estate:

Residential real estate — 260 — 260 —

Total $ 3,855 $ 5,260 $ 6,713 $ 15,828 — %

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(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:

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

(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

Maturity Extension Other-than-Insignificant Payment Delay Combination (1)

Total % of Total Loan Class (2)

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

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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 tables present the financial effect of TLMs made during the periods indicated, segregated by class of loans:

Year ended December 31, 2024

Financial Effect

Interest Rate Reduction:

Commercial real estate Provided interest rate reduction by a weighted average rate of 3 %

Maturity Extension:

Commercial real estate Provided maturity extension for a weighted average period of 12 months

Commercial & industrial Provided maturity extension for a weighted average period of 120 months

Other-than-Insignificant Payment Delay:

Commercial real estate Provided payment delay for a weighted average period of 5 months

Commercial & industrial Provided payment delay for a weighted average period of 12 months

Residential real estate Provided payment delay for a weighted average period of 6 months

Notes to Consolidated Financial Statements – (continued)

Year ended December 31, 2023

Financial Effect

Interest Rate Reduction:

Commercial real estate Provided interest rate reduction by a weighted average rate of 3 %

Maturity Extension:

Commercial real estate Provided maturity extension for a weighted average period of 10 months

Other-than-Insignificant Payment Delay:

Commercial real estate Provided payment delay for a weighted average period of 12 months

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

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(Dollars in thousands) Days Past Due

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

December 31, 2024 Current 30-59 60-89 Over 90 Total Past Due Total Loans

Commercial real estate

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Commercial & industrial

5,000 515 — — 515 5,515

Total commercial 15,053 515 — — 515 15,568

Residential Real Estate:

Residential real estate

260 — — — — 260

Total loans $ 15,313 $ 515 $ — $ — $ 515 $ 15,828

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

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)

The following table presents the recorded investment in TDRs and other pertinent information:

(Dollars in thousands)

December 31, 2022

Accruing TDRs

Nonaccrual TDRs

Total $ 8,644

Specific reserves on TDRs included in the ACL on loans

Additional commitments to lend to borrowers with TDRs

The following table presents TDRs occurring during the period indicated and the recorded investment pre- and post- modification:

(Dollars in thousands) Outstanding Recorded Investment

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

At December 31, 2024, a $ 515 thousand C&I loan and a $ 260 thousand residential real estate loan, which were modified as TLMs in the previous 12 months, had a subsequent payment default.

(Dollars in thousands) Days Past Due

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

Commercial real estate

$ 21,830 $ — $ — $ — $ — $ 21,830

Commercial & industrial

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

Total 3 $ 1,687 $ 1,687

The following table presents TDRs occurring during the period indicated by type of modification:

(Dollars in thousands)

Years ended December 31, 2022

Below-market interest rate concession $ —

Payment deferral —

Maturity / amortization concession —

Interest only payments —

Combination (1)

Total $ 1,687

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

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

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

At December 31, 2023, 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, 2024.

Individually Analyzed Loans

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.

See Note 10 for additional disclosure regarding fair value of individually analyzed collateral dependent loans.

As of December 31, 2024 and 2023, the carrying value of individually analyzed loans amounted to $ 16.6 million and $ 34.6 million, respectively.

The carrying value of collateral dependent individually analyzed loans was $ 11.6 million and $ 34.6 million, respectively, at December 31, 2024 and 2023.

Notes to Consolidated Financial Statements – (continued)

See Note 10 for additional disclosure regarding fair value of individually analyzed collateral dependent loans.

The following table presents the carrying value of collateral dependent individually analyzed loans:

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Commercial & industrial (2)

515 259 682 —

Total commercial 10,568 1,511 33,509 97

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1,023 — 1,131 —

Home equity (3)

Total consumer — — 592 —

Total $ 11,591 $ 1,511 $ 34,640 $ 97

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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

Notes to Consolidated Financial Statements – (continued)

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.

Notes to Consolidated Financial Statements – (continued)

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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Notes to Consolidated Financial Statements – (continued)

The following table summarizes the Corporation’s loan portfolio by credit quality indicator and loan portfolio segment as of December 31, 2023:

The following table includes information on credit quality indicators and gross charge-offs for the Corporation’s loan portfolio, segregated by class of loans as of December 31, 2024:

(Dollars in thousands) Term Loans Amortized Cost by Origination Year

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38,939 51,162 140,042 24,807 38,352 166,465 82,238 469 542,474

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

Gross charge-offs 33 — — — — 175 — — 208

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Residential real estate:

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

74,458 383,983 746,566 375,848 173,676 365,380 — — 2,119,911

Past due — 287 1,434 — 1,290 4,730 — — 7,741

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Gross charge-offs 229 10 — — 2 3 — — 244

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

Total loans, amortized cost $ 334,388 $ 897,170 $ 1,502,297 $ 771,287 $ 342,333 $ 958,894 $ 318,761 $ 14,189 $ 5,139,319

Total gross charge-offs $ 262 $ 10 $ — $ — $ 2 $ 2,139 $ — $ — $ 2,413

(1) Excludes a $ 1.5 million negative basis adjustment associated with fair value hedges.

See Note 9 for additional disclosure.

Notes to Consolidated Financial Statements – (continued)

The following table summarizes the Corporation’s loan portfolio by credit quality indicator and loan portfolio segment as of December 31, 2022:

The following table includes information on credit quality indicators and gross charge-offs for the Corporation’s loan portfolio, segregated by class of loans as of December 31, 2023:

(Dollars in thousands) Term Loans Amortized Cost by Origination Year

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

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

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

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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:

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

Gross charge-offs — — — — — — — — —

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

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

Gross charge-offs — — — — — — — — —

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

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

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

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

Total loans, amortized cost $ 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

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.

In addition, loans

Notes to Consolidated Financial Statements – (continued)

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

Loan Servicing Activities

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Amortization ( 1,763 ) — ( 1,763 )

Decrease in impairment reserve — 154 154

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

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Amortization ( 1,538 ) — ( 1,538 )

Increase in impairment reserve — ( 34 ) ( 34 )

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

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Amortization ( 1,567 ) — ( 1,567 )

Increase in impairment reserve — ( 34 ) ( 34 )

Decrease in impairment reserve — 34 34

Balance at December 31, 2024 $ 7,667 $ — $ 7,667

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Total depreciation expense $ 3,934 $ 4,005 $ 3,465

In the second quarter of 2024, the Bank sold an operations facility and a net gain of $ 988 thousand was recognized within other noninterest income.

For the years ended 2023 and 2022, there were no sales of premises and equipment and therefore, no gains or losses were recognized in those periods.

In the fourth quarter of 2024, land and premises associated with five branch locations with a total net book value of $ 4.8 million were reclassified to held for sale, as the Bank committed to sell these assets and lease them back from the buyers.

The sales-leaseback transactions for four of the five locations were completed on January 30, 2025.

See Note 7 for additional information related to the leaseback of the assets.

Notes to Consolidated Financial Statements – (continued)

Note 7 - Leases

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Operating lease liabilities totaled $ 29.6 million and $ 32.0 million, respectively, as of December 31, 2024 and 2023.

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 both December 31, 2024 and 2023, there were no operating leases that had not yet commenced.

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

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Range of lease renewal options

3 years - 5 years

1 year - 5 years

3 years - 5 years

1 unchanged sentence

12.6 years 13.1 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, 2024, including a reconciliation to the present value of operating lease liabilities recognized in the Consolidated Balance Sheets:

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Cash paid reducing operating lease liabilities $ 4,510 $ 4,275 $ 4,076

(1) Included in net occupancy expenses in the Consolidated Statements of Income.

(1) Included in net occupancy expenses in the Consolidated Statements of Income (Loss).

On January 30, 2025, the Bank completed sales-leaseback transactions for four branch locations and recognized additional operating lease ROU assets of $ 9.4 million and operating lease liabilities of $ 9.4 million.

The leases expire in 17 years and include the option to renew for two additional 15 -year terms.

Notes to Consolidated Financial Statements – (continued)

Note 8 - Goodwill and Intangible Assets

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Net amount $ 2,885 $ 3,711

Notes to Consolidated Financial Statements – (continued)

The balance of intangible assets at December 31, 2024 includes wealth management advisory contracts resulting from the 2005 acquisition of Weston and the 2015 acquisition of Halsey.

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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 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.

Notes to Consolidated Financial Statements – (continued)

Interest Rate Risk Management Agreements

Interest rate risk management agreements, such as caps, swaps and floors, are used from time to time as part of the Corporation’s interest rate risk management strategy.

Interest rate swaps are 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.

Interest rate risk management agreements, such as swaps, caps, floors, and collars, are used from time to time as part of the Corporation’s interest rate risk management strategy.

Interest rate swaps are agreements in which the Corporation and another party agree to exchange interest payments (e.g., fixed-rate for variable-rate payments or variable-rate for fixed-rate payments) computed on a notional principal amount.

Interest rate caps and floors represent options purchased by the Corporation to manage the interest rate paid throughout the term of the option contract.

An interest rate collar is a derivative instrument that represents simultaneously buying an interest rate cap and selling an interest rate floor.

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

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Cash Flow Hedging Instruments

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.

As of December 31, 2024 and 2023, the Corporation had interest rate swap contracts that were designated as cash flow hedges.

In addition, at December 31, 2024, the Corporation had an interest rate collar that was designated as a cash flow hedge.

These cash flow hedges were executed to hedge the interest rate risk associated with short-term borrowings.

The changes in fair value of these derivatives designated as cash flow hedges are recorded in other comprehensive income (loss) and subsequently reclassified to earnings when gains or losses are realized (i.e., in the same period during which the hedged transactions affect earnings.)

The Corporation also 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.

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At December 31, 2024, the remaining unamortized balance of the loss included in the AOCL component of shareholders’ equity was $ 11.4 million, or $ 8.5 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.

Fair Value Hedging Instruments

As of December 31, 2024, the Corporation had interest rate swap contracts that were designated as fair value hedges.

The fair value hedges were executed to hedge the interest rate risk associated with a closed-pool of fixed-rate residential real estate loans (the “hedged item”).

The hedged item is measured at fair value through a basis adjustment recognized on the balance sheet.

The changes in fair value of derivatives designated as fair value hedges, as well as the offsetting changes in fair value of the hedged item are recognized in earnings.

Loan Related Derivative Contracts

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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.

Under a risk participation-in agreement, a derivative liability, the Corporation assumes, or participates in, a portion of the credit risk associated with the interest rate swap position with the commercial borrower for a fee received from the other bank.

Under a risk participation-in agreement, a derivative liability, the Corporation assumes, or participates in, a portion of the

Notes to Consolidated Financial Statements – (continued)

credit risk associated with the interest rate swap position with the commercial borrower for a fee received from the other bank.

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 rate locks and mortgage loans held for sale, the Corporation enters into forward sale commitments.

Forward sale commitments are contracts for delayed delivery or net settlement of the underlying instrument, such as a residential real estate mortgage loan, where the seller agrees to deliver on a specified future date, either a specified instrument at a specified price or yield or the net cash equivalent of an underlying instrument.

To mitigate the interest rate risk and pricing risk associated with rate locks and mortgage loans that are originated and intended for sale, the Corporation enters into forward sale commitments.

Forward sale commitments are contracts for delayed delivery or net settlement of the underlying instrument, such as a residential mortgage loan, where the seller agrees to deliver on a specified future date, either a specified instrument at a specified price or yield or the net cash equivalent of an underlying instrument.

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:

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$ 120,000 $ 1,529 $ 229 $ 120,000 $ 802 $ 1,119

Interest rate collar 50,000 — 30 — — —

Derivatives Designated as Fair Value Hedging Instruments:

Interest rate risk management contracts:

Interest rate swaps 100,000 1,477 — — — —

Derivatives not Designated as Hedging Instruments:

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(1) The fair value of derivative assets includes accrued interest receivable of $ 120 thousand and $ 239 thousand, respectively, at December 31, 2024 and 2023.

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.

There was no accrued interest payable included in the fair value of derivative liabilities at December 31, 2024 and December 31, 2023.

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

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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 balance sheet location, carrying value, and cumulative basis adjustment of the hedged item associated with fair value hedges:

(Dollars in thousands)

December 31, 2024 December 31, 2023

Balance Sheet Location Carrying Value of Hedged Item (1)

Cumulative Basis Adjustment Carrying Value of Hedged Item Cumulative Basis Adjustment

Residential real estate loans $ 98,519 ($ 1,481 ) $ — $ —

(1) Represents the carrying value of the hedged item associated with fair value hedges on a closed-pool of fixed-rate residential real estate loans that are expected to be outstanding for the designated hedged periods.

The amortized cost balance of the closed-pool of residential real estate loans used in the fair value hedges was $ 733.2 million at December 31, 2024.

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

(Dollars in thousands) Gain (Loss) Recognized in Other Comprehensive Income, Net of Tax

(Dollars in thousands) Amounts Recognized in Other Comprehensive Income (Loss), Net of Tax

Years ended December 31, 2024 2023 2022

3 unchanged sentences

$ 7,703 $ 7,026 ($ 18,632 )

Interest rate collar ( 22 ) — —

Total $ 7,681 $ 7,026 ($ 18,632 )

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)

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

(Dollars in thousands) Amount of Gain (Loss)

Recognized in Noninterest Income

Recognized in the Consolidated Statements of Income (Loss)

Years ended December 31, Statement of Income Location 2024 2023 2022

Derivatives Designated as Cash Flow Hedging Instruments:

Interest rate risk management contracts:

Interest rate swaps Interest income:

Interest and fees on loans ($ 8,605 ) ($ 9,228 ) ($ 2,758 )

Interest rate swaps Interest expense:

FHLB advances

1,775 1,665 ( 70 )

Derivatives Designated as Fair Value Hedging Instruments:

Interest rate risk management contracts:

Interest rate swaps Interest income:

Interest and fees on loans 1,477 — —

Hedged item Interest income:

Interest and fees on loans ( 1,481 ) — —

Derivatives not Designated as Hedging Instruments:

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Interest rate contracts with customers Loan related derivative income ( 28,561 ) ( 1,408 ) ( 92,730 )

Mirror contracts with counterparties Loan related derivative income 3,211 94,759 31,547

Mirror interest rate contracts with counterparties Loan related derivative income 28,963 3,211 94,759

Risk participation agreements

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Total ($ 6,109 ) ($ 5,749 ) $ 3,342

For derivatives designated as cash flow hedging instruments in the table above, the amounts represent the pre-tax reclassifications from AOCL into earnings.

Notes to Consolidated Financial Statements – (continued)

Note 10 - Fair Value Measurements

The Corporation uses fair value measurements to record fair value adjustments on certain assets and liabilities and to determine fair value disclosures.

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 other assets at fair value on a nonrecurring basis, such as collateral dependent individually analyzed loans.

Items recorded at fair value on a recurring basis include securities available for sale, mortgage loans that are originated and intended for sale to the secondary market, and derivatives.

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, loan servicing rights, property acquired through foreclosure or repossession, and mortgage loans reclassified to held for sale from portfolio.

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

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GAAP allows for the irrevocable option to elect fair value accounting for the initial and subsequent measurement for certain financial assets and liabilities on a contract-by-contract basis.

The Corporation has elected the fair value option for mortgage loans held for sale to better match changes in fair value of the loans with changes in the fair value of the forward sale commitment contracts used to economically hedge them.

The Corporation has elected the fair value option for mortgage loans that are originated and intended for sale to the secondary market to better match changes in fair value of the loans with changes in the fair value of the forward sale commitment contracts used to economically hedge them.

The following table presents a summary of mortgage loans held for sale accounted for under the fair value option:

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Aggregate principal balance

21,420 19,480

Difference between fair value and principal balance $ 288 $ 597

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

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 (Loss).

Changes in fair value amounted to a decrease in mortgage banking revenues of $ 310 thousand in 2024, compared to an increase in mortgage banking revenues of $ 470 thousand in 2023.

There were no mortgage loans held for sale 90 days or more past due as of December 31, 2024 and 2023.

Notes to Consolidated Financial Statements – (continued)

Valuation Techniques

Debt Securities

Valuation Techniques for Items Recorded at Fair Value on a Recurring Basis

Available for Sale Debt Securities

Available for sale debt securities are recorded at fair value on a recurring basis.

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government-sponsored enterprises, including mortgage-backed securities, individual name issuer trust preferred debt securities, and corporate bonds.

Notes to Consolidated Financial Statements – (continued)

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 debt securities held at December 31, 2024 and 2023.

Mortgage Loans Held for Sale

The Corporation has elected the fair value option for mortgage loans held for sale.

Mortgage Loans Held for Sale, at Fair Value

The Corporation has elected the fair value option for mortgage loans that are originated and intended for sale to the secondary market.

The fair value is estimated based on current market prices for similar loans in the secondary market and therefore are classified as Level 2 assets.

Collateral Dependent Individually Analyzed Loans

Collateral dependent individually analyzed loans are valued based upon the lower of amortized cost or fair value.

Fair value is determined based on the appraised value of the underlying collateral.

Such collateral primarily consists of real estate and, to a lesser extent, other business assets.

For collateral dependent loans that are expected to be repaid substantially through the sale of the collateral, management adjusts the fair value for estimated costs to sell.

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

Internal valuations may be utilized to determine the fair value of other business assets.

Collateral dependent individually analyzed loans are categorized as Level 3.

Interest rate derivative contracts are traded in over-the-counter markets where quoted market prices are not readily available.

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As a result, the Corporation has classified its derivative valuations in their entirety as Level 2.

Fair value measurements of forward loan commitments (interest rate lock commitments and forward sale commitments) are primarily based on current market prices for similar assets in the secondary market for mortgage loans and therefore are classified as Level 2 assets.

The fair value of interest rate lock commitments is also dependent on the ultimate closing of the loans.

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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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Obligations of U.S.

government-sponsored enterprises

$ 225,742 $ — $ 225,742 $ —

government agencies and U.S government-sponsored enterprises $ 38,612 $ — $ 38,612 $ —

Mortgage-backed securities issued by U.S.

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855,147 — 855,147 —

Obligations of states and political subdivisions

Individual name issuer trust preferred debt securities

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Total liabilities at fair value on a recurring basis $ 51,663 $ — $ 51,663 $ —

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 $ 52,814 $ — $ 52,814 $ —

Valuation Techniques for Items Recorded at Fair Value on a Nonrecurring Basis

Collateral Dependent Individually Analyzed Loans

Collateral dependent individually analyzed loans are valued based upon the lower of amortized cost or fair value.

Fair value is determined based on the appraised value of the underlying collateral.

Such collateral primarily consists of real estate and, to a lesser extent, other business assets.

For collateral dependent loans that are expected to be repaid substantially through the sale of the collateral, management adjusts the fair value for estimated costs to sell.

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

Internal valuations may be utilized to determine the fair value of other business assets.

Collateral dependent individually analyzed loans are categorized as Level 3.

Loan Servicing Rights

Loans sold with the retention of servicing result in the recognition of loan servicing rights.

Loan servicing rights are originally recorded at fair value and then amortized as an offset to mortgage banking revenues over the estimated period of servicing.

Loan servicing rights are evaluated quarterly for impairment based on their fair value.

Impairment exists if the carrying value exceeds the estimated fair value.

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

The fair value is estimated using an independent valuation model that estimates the present value of expected cash flows, incorporating assumptions for discount rates and prepayment rates.

Loan servicing rights are categorized as Level 3.

Mortgage Loans Held for Sale, at Lower of Cost or Market

Following the public offering of common stock by the Corporation disclosed in Note 14 and pursuant to the terms of a sales agreement effective December 30, 2024, the Bank committed to sell residential mortgage loans with an amortized cost balance of $ 344.6 million that were held in portfolio.

These loans were reclassified to held for sale and written down to a fair value of $ 281.7 million, resulting in a net pre-tax loss of $ 62.9 million that was recognized in December 2024.

The fair value of these loans was based on the terms of the sales agreement with an unrelated third party and therefore are categorized as Level 2.

The sale of these loans was completed on January 24, 2025.

Notes to Consolidated Financial Statements – (continued)

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Collateral dependent individually analyzed loans $ 9,057 $ — $ — $ 9,057

Mortgage loans held for sale, at lower of cost or market 281,706 — 281,706 —

Total assets at fair value on a nonrecurring basis $ 290,763 $ — $ 281,706 $ 9,057

The following table presents the carrying value of assets held at December 31, 2023, which were written down to fair value during the year 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.

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:

The following tables present 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

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Appraisal adjustments 0 % - 10 % ( 7 %)

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

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

December 31, 2023

Collateral dependent individually analyzed loans $ 8,050 Appraisals of collateral Discount for costs to sell 0 %

Appraisal adjustments 0 %

Loan servicing rights

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

Prepayment rates 6 % - 53 % ( 9 %)

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5,095,878 4,952,110 — — 4,952,110

49,817 49,817 — 49,817 —

Investment in BOLI

6 unchanged sentences

Junior subordinated debentures 22,681 19,602 — 19,602 —

(1) The estimated fair value excludes a $ 1.5 million negative basis adjustment associated with fair value hedges.

See Note 9 for additional disclosure.

(Dollars in thousands) Carrying Amount Total

25 unchanged sentences

5,978 11,995 18,329

Deferred Tax Expense (Benefit):

Deferred Tax (Benefit) Expense:

( 14,618 ) 412 1,012

( 2,119 ) ( 4,102 ) 148

Total deferred tax expense (benefit) ( 3,690 ) 1,160 2,155

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

Total deferred tax (benefit) expense (1)

( 16,737 ) ( 3,690 ) 1,160

Total income tax (benefit) expense ($ 10,759 ) $ 8,305 $ 19,489

(1) The deferred income tax benefit recognized in 2024 was largely associated with loans that were reclassified to held for sale and written down to fair value in December 2024.

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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(Dollars in thousands) Amount Rate Amount Rate Amount Rate

Tax expense at Federal statutory rate $ 11,861 21.0 % $ 19,146 21.0 % $ 20,619 21.0 %

Increase (decrease) in taxes resulting from:

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

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

Tax (benefit) expense at Federal statutory rate ($ 8,152 ) 21.0 % $ 11,861 21.0 % $ 19,146 21.0 %

(Decrease) increase in taxes resulting from:

State income tax (benefit) expense, net of federal tax benefit ( 1,460 ) 3.8 1,107 2.0 1,856 2.1

( 639 ) 1.6 ( 732 ) ( 1.3 ) ( 544 ) ( 0.6 )

Tax-exempt income, net ( 460 ) 1.2 ( 543 ) ( 1.0 ) ( 721 ) ( 0.8 )

Investments in low-income housing tax credits and other benefits, net ( 420 ) 1.1 ( 357 ) ( 0.6 ) ( 261 ) ( 0.3 )

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

Share-based compensation 151 ( 0.4 ) 29 0.1 ( 68 ) ( 0.1 )

Revaluation of net deferred tax assets for changes in state tax rates 323 ( 0.8 ) ( 4,093 ) ( 7.2 ) — —

State valuation allowance adjustment, net 1,628 ( 4.2 ) 2,153 3.8 — —

State net operating loss carryforward, net of federal tax ( 1,528 ) 3.9 ( 1,312 ) ( 2.3 ) — —

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

Other ( 202 ) 0.5 192 0.2 81 0.1

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

Total income tax (benefit) expense ($ 10,759 ) 27.7 % $ 8,305 14.7 % $ 19,489 21.4 %

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.

Upon the enactment in 2023, the Corporation was required to revalue its deferred tax assets and liabilities reflecting the updated apportionment formula and income sourcing method.

Notes to Consolidated Financial Statements – (continued)

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Net unrealized losses on available for sale debt securities $ 33,646 $ 38,823

Loss on portfolio loans reclassified to held for sale 15,093 —

Allowance for credit losses on loans 10,595 10,470

Operating lease liabilities

Deferred compensation

Deferred compensation liabilities 5,439 5,258

State net operating loss carryforwards 2,840 1,312

Cash flow hedges 2,595 5,250

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Share-based compensation

Capital loss carryforward 1,550 —

Defined benefit pension obligations

State net operating loss carryforwards 1,312 —

Nonaccrual interest 606 511

Deferred tax assets

7 unchanged sentences

( 6,784 ) ( 7,365 )

Depreciation of premises and equipment ( 1,956 ) ( 1,897 )

Loan servicing rights

( 1,936 ) ( 2,171 )

Depreciation of premises and equipment ( 1,897 ) ( 1,494 )

Amortization of intangibles

( 729 ) ( 946 )

Defined benefit pension obligations

Deferred compensation assets ( 577 ) ( 467 )

Contract cost incentives ( 529 ) ( 440 )

( 61 ) ( 226 )

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

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

Net deferred tax assets increased by $ 9.2 million during 2024 and included establishment of a deferred tax asset associated with loans that were reclassified to held for sale and written down to fair value in December 2024.

This deferred tax asset was realized in January 2025 when the loan sale was completed.

See Note 10 for additional disclosure on loans reclassified to held for sale.

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.

The valuation allowance amounted to $ 3.8 million and $ 2.2 million, respectively, at December 31, 2024 and 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 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.

Notes to Consolidated Financial Statements – (continued)

The Corporation had no unrecognized tax benefits as of December 31, 2024 and 2023.

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federal income and state tax examinations by tax authorities for years before 2021.

Notes to Consolidated Financial Statements – (continued)

Note 12 - Deposits

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Interest-bearing demand deposits 592,904 504,959

504,959 333,197

NOW accounts 692,812 767,036

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Total deposits $ 5,115,800 $ 5,348,160

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

(1) Includes wholesale brokered time deposit balances of $ 297.5 million and $ 654.1 million, respectively, as of December 31, 2024 and 2023.

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Time certificates of deposit in denominations of $250 thousand or more totaled $ 353.9 million and $ 271.2 million, respectively, at December 31, 2024 and 2023.

Notes to Consolidated Financial Statements – (continued)

Note 13 - Borrowings

Federal Home Loan Bank Advances

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 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.

Advances payable to the FHLB amounted to $ 1.1 billion and $ 1.2 billion, respectively, at December 31, 2024 and 2023.

See Note 9 for additional disclosure on derivatives designated as cash flow hedges that were executed to hedge the interest rate risk associated with short-term FHLB advances.

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

Notes to Consolidated Financial Statements – (continued)

As of December 31, 2024 and 2023, the Bank had available borrowing capacity of $ 753.0 million and $ 1.1 billion, respectively, with the FHLB.

In addition, the Bank had access to a $ 40.0 million unused line of credit with the FHLB at both December 31, 2024 and 2023.

Furthermore, the Bank had standby letters of credit with the FHLB of $ 66.0 million and $ 65.0 million, respectively, at December 31, 2024 and December 31, 2023, to collateralize institutional deposits.

The following table presents maturities and weighted average interest rates on FHLB advances outstanding as of December 31, 2024:

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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 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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Note 14 - Shareholders' Equity

Common Stock Issued in Public Offering

On December 16, 2024, the Corporation completed an underwritten public offering of 2,198,528 shares of its common stock at a public offering price of $ 34.00 per share, and disclosed that the use of proceeds would include investments in the Bank and Bank balance sheet optimization strategies involving the sale of lower-yielding loans and securities, the purchase of debt securities with current market yields, and the repayment of wholesale funding balances.

The net proceeds received from the offering, after deducting underwriting discounts and commissions and operating expenses payable by the Corporation, were $ 70.5 million.

Stock Repurchase Program

On December 28, 2023, the Corporation announced that its Board of Directors adopted the 2024 Repurchase Program, which authorizes the repurchase of up to 850,000 shares, or approximately 5 %, of the Corporation’s outstanding common stock.

This authority may be exercised from time to time and in such amounts as market conditions warrant, and subject to regulatory considerations.

The timing and actual numbers of shares repurchased will depend on a variety of factors including price, corporate and regulatory requirements, market conditions, and other corporate liquidity requirements and priorities.

The 2024 Repurchase Program commenced on January 1, 2024 and expires on December 31, 2024 and may be modified, suspended, or discontinued at any time.

For the year ended December 31, 2024, there were no shares repurchased under the 2024 Repurchase Program.

The 2024 Repurchase Program expired on December 31, 2024.

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

The 2023 Repurchase Program expired on December 31, 2023.

For the year ended December 31, 2022, the Corporation repurchased 194,162 shares at an average price of $ 48.82 and a total cost of $ 9.5 million, under its 2021 Repurchase Program.

The 2021 Repurchase Program expired on December 31, 2022.

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

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(1) Leverage ratio.

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.

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 conservation 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 Corporation’s and the Bank’s capital levels exceeded the minimum regulatory capital requirements plus the capital conservation buffer at December 31, 2024 and December 31, 2023.

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

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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 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.

The cumulative difference quantified at the end of the deferral period was fully phased-in to regulatory capital on January 1, 2025.

Note 15 - Revenue from Contracts with Customers

The following table summarizes total revenues as presented in the Consolidated Statements of Income and the related amounts that are from contracts with customers within the scope of ASC 606.

The following table summarizes total revenues as presented in the Consolidated Statements of Income (Loss) and the related amounts that are from contracts with customers within the scope of ASC 606.

As shown below, a substantial portion of our revenues are specifically excluded from the scope of ASC 606.

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3,041 — 3,488 — 2,591 —

Realized losses on securities, net ( 31,047 ) — — — — —

Losses on sale of portfolio loans, net ( 62,888 ) — — — — —

4,567 1,142 1,335 1,226 1,588 1,219

1 unchanged sentence

Total revenues $ 100,651 $ 48,224 $ 193,238 $ 44,493 $ 218,592 $ 48,153

(1) As reported in the Consolidated Statements of Income.

(1) As reported in the Consolidated Statements of Income (Loss).

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

10 unchanged sentences

Service charges on deposit accounts

1,110 964 680

Total revenues from contracts with customers in scope of ASC 606

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Receivables amounted to $ 6.0 million and $ 5.5 million, respectively, at December 31, 2024 and 2023 and were included in other assets in the Consolidated Balance Sheets.

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

Notes to Consolidated Financial Statements – (continued)

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

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

The balances of contract liabilities were insignificant at both December 31, 2024 and 2023 and were included in other liabilities in the Consolidated Balance Sheets.

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The carrying value of contract cost assets amounted to $ 2.1 million and $ 2.0 million, respectively, at December 31, 2024 and 2023 and were included in other assets in the Consolidated Balance Sheets.

The amortization of contract cost assets is recorded within salaries and employee benefits expense Consolidated Statements of Income.

The amortization of contract cost assets is recorded within salaries and employee benefits expense Consolidated Statements of Income (Loss).

Note 16 - Employee Benefits

Defined Benefit Pension Plans

Washington Trust maintains a qualified pension plan for the benefit of certain eligible employees who were hired prior to October 1, 2007.

Washington Trust has a qualified pension plan for the benefit of certain eligible employees who were hired prior to October 1, 2007.

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

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.

In the fourth quarter of 2023, the Corporation’s Board of Directors approved a resolution to terminate the qualified pension plan effective December 31, 2023 and participants were notified of the termination.

In the first quarter of 2025, the qualified pension plan liability will be settled after plan assets are distributed through a combination of lump sum payments to participants and the purchase of a group annuity contract from a highly-rated insurance company.

This results in a pre-tax non-cash pension settlement charge of approximately $ 6.4 million being recognized in the Consolidated Statements of Income (Loss) the first quarter of 2025.

The settlement charge includes the recognition of pre-tax actuarial losses accumulated in AOCL and the effects of the remeasurement of plan assets and and liability upon settlement.

As a result of the plan’s over-funded status, remaining surplus plan assets of approximately $ 10.3 million are expected to be transferred directly to the Corporation’s 401(k) Plan (a qualified replacement plan) to fund future non-elective employer contributions.

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

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Washington Trust evaluates these assumptions annually.

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

The actuarial assumptions also included considerations for the termination of the qualified pension plan.

Notes to Consolidated Financial Statements – (continued)

7 unchanged sentences

$ 75,284 $ 66,656 $ 13,195 $ 13,562

Service cost (1)

500 1,403 — 156

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$ 7,734 $ 7,553 ($ 12,720 ) ($ 13,195 )

(1) Service cost for 2024 represents administrative expenses related to the termination of the qualified pension plan.

(2) Funded status of the qualified pension plan is included in other assets in the Consolidated Balance Sheets.

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( 280 ) 353 816 772 1,099 1,333

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

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

Net loss (gain) 99 6,991 ( 2,074 ) ( 299 ) ( 516 ) ( 4,572 )

3 unchanged sentences

($ 181 ) $ 7,344 ($ 1,258 ) $ 473 $ 583 ($ 3,239 )

(1) Included in salaries and employee benefits expense in the Consolidated Statements of Income.

(2) Included in other expenses in the Consolidated Statements of Income.

(1) Included in salaries and employee benefits expense in the Consolidated Statements of Income (Loss).

Service cost for 2024 represents administrative expenses related to the termination of the qualified pension plan.

(2) Included in other expenses in the Consolidated Statements of Income (Loss).

The following table presents the measurement date and weighted-average assumptions used to determine benefit obligations at December 31, 2024 and 2023:

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Discount rate 4.53 % 4.51 % 5.60 % 5.10 %

Rate of compensation increase 0.50 5.00 N/A 5.00

Rate of compensation increase N/A 0.50 N/A N/A

The following table presents the measurement date and weighted-average assumptions used to determine net periodic benefit cost for the years ended December 31, 2024, 2023 and 2022:

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Equivalent single discount rate for service cost

5.60 3.11 2.86 5.61 3.16 2.94

N/A 5.60 3.11 5.27 5.61 3.16

Equivalent single discount rate for interest cost

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Rate of compensation increase

5.00 3.75 3.75 5.00 3.75 3.75

0.50 5.00 3.75 N/A 5.00 3.75

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 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.

Decreases in the long-term rate of return assumption on plan assets increase pension costs.

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

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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 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.

As early as possible each year, the trustee is advised of the projected schedule of employer contributions and estimations of benefit payments.

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

At December 31, 2024, the qualified pension plan was well-funded.

In addition, the plan termination process is expected to be completed in 2025 after the plan assets are distributed through lump sum payments to participants and the purchase of a group annuity contract from a highly-rated insurance company.

Our investment approach took into consideration the expected distribution of plan assets in the first quarter of 2025, and as a result we increased our allocation in cash and cash equivalents and reduced fixed income securities balances to more closely align with lump sum payments expected to be paid to plan participants.

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

As early as possible each year, the trustee is advised of the estimations of benefit payments.

Contributions

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Years ending December 31, 2025 (1) $ 69,667 $ 978

2025 (1) 76,626 873

2030 and thereafter — 4,806

(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.

In addition, substantially all employees hired after September 30, 2007, who are ineligible for participation in the qualified defined benefit pension plan, receive a non-elective employer contribution of 4 % of compensation.

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.

(1) As noted above, the termination of the qualified pension plan is expected to be completed in 2025.

The Corporation’s 401(k) Plan, which covers substantially all employees, provides a matching contribution of up to a maximum of 3 % of an employee’s eligible compensation.

In addition, effective January 1, 2024, participating employees receive a non-elective employer contribution of 4 % of eligible compensation.

Prior to January 1, 2024, only employees who were ineligible for participation in the qualified defined benefit pension plan received the non-elective employer contribution of 4%.

Total employer contributions under this plan amounted to $ 4.2 million, $ 3.5 million and $ 3.2 million in 2024, 2023 and 2022, 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.

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 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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Share-based Compensation Expense

The following table presents share-based compensation expense and the related income tax benefits recognized in the Consolidated Statements of Income for stock options, restricted stock units and performance share units:

The following table presents share-based compensation expense and the related income tax benefits recognized in the Consolidated Statements of Income (Loss) for stock options, restricted stock units and performance share units:

(Dollars in thousands)

3 unchanged sentences

$ 441 $ 492 $ 857

(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.

(1) Includes $ 183 thousand and $ 34 thousand, respectively, of excess tax expense recognized upon the settlement of share-based compensation awards in 2024 and 2023, compared to $ 78 thousand of excess tax benefits in 2022.

As of December 31, 2024, there was $ 4.1 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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Total 432,220 6.08 $ 42.84 271,270 $ 47.25

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.

The total intrinsic value of stock options exercised in 2024 was $ 56 thousand.

There were no stock options exercised in 2023.

The total intrinsic value of stock options exercised in 2022 was $ 142 thousand.

Restricted Stock Units

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

Notes to Consolidated Financial Statements – (continued)

Note 18 - Business Segments

The Corporation manages its operations through two reportable business segments, consisting of Commercial Banking and Wealth Management Services.

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

The Corporation’s reportable business segments are determined by the Senior Executive Vice President, Chief Financial Officer and Treasurer, the designated CODM.

An allocation methodology is utilized to allocate income and expenses to the business segments.

Direct activities are assigned to the appropriate business segment to which the activity relates.

Indirect activities, such as corporate, technology and other support functions, are allocated to business segments primarily based upon full-time equivalent employee computations.

Commercial Banking

The Commercial Banking segment includes commercial, residential, and consumer lending activities;

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cash management activities;

banking activities, including customer support and the operation of

Notes to Consolidated Financial Statements – (continued)

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

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

as well as investment portfolio and wholesale funding activities.

Wealth Management Services

The Wealth Management Services segment includes investment management;

3 unchanged sentences

and institutional trust services, including custody and fiduciary services.

The following tables present the statement of operations and total assets for Washington Trust’s reportable business segments.

The CODM evaluates the financial performance of each business segment, which is measured based upon the business segment’s net income.

Components of net income for the business segments that are reviewed by the CODM include net interest income, provision for credit losses, noninterest income, noninterest expense, and income tax expense.

The CODM, in conjunction with management committees (such as the ALCO) and certain members of executive management, evaluates financial performance to make decisions related to the products and services that are offered, pricing, and the allocation of resources, for each business segment.

Notes to Consolidated Financial Statements – (continued)

The following tables presents the components of net income (loss), as well as other supplemental information for Washington Trust’s reportable business segments:

(Dollars in thousands)

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Services Consolidated

Total interest income and dividend income $ 340,678 $ — $ 340,678

Total interest expense 212,230 — 212,230

Net interest income 128,448 — 128,448

1 unchanged sentence

Net interest income after provision for credit losses 126,048 — 126,048

Noninterest income 20,006 36,134 56,140

Noninterest (loss) income ( 69,609 ) 41,812 ( 27,797 )

Noninterest expenses:

Depreciation and amortization expense 3,460 1,388 4,848

Other noninterest expenses 99,506 29,203 128,709

Total noninterest expenses 102,966 30,591 133,557

Income before income taxes 50,901 5,580 56,481

Income tax expense 7,028 1,277 8,305

Net income $ 43,873 $ 4,303 $ 48,176

Salaries and employee benefits 66,482 19,778 86,260

Outsourced services 12,340 3,918 16,258

Net occupancy 8,726 1,059 9,785

Equipment 3,486 352 3,838

Legal, audit and professional fees 2,473 655 3,128

FDIC deposit insurance costs

5,513 — 5,513

Advertising and promotion 2,252 374 2,626

Amortization of intangibles — 826 826

Other expenses 7,517 1,318 8,835

Total noninterest expense 108,789 28,280 137,069

(Loss) income before income taxes ( 52,350 ) 13,532 ( 38,818 )

Income tax (benefit) expense ( 13,530 ) 2,771 ( 10,759 )

Net (loss) income ($ 38,820 ) $ 10,761 ($ 28,059 )

Supplemental Information:

Total assets at period end $ 6,870,612 $ 60,035 $ 6,930,647

Expenditures for long-lived assets 3,862 139 4,001

Depreciation expense (1)

3,530 404 3,934

(1) Included in net occupancy and equipment expenses in the table above.

The sale of securities and reclassification of residential mortgage loans to held for sale in connection with the balance sheet repositioning transactions that were executed in December 2024 impacted the results for the Commercial Banking segment.

See additional discussion of the impact of these transactions in Notes 3 and 10.

Notes to Consolidated Financial Statements – (continued)

(Dollars in thousands)

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Services Consolidated

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

Total interest and dividend income $ 308,622 $ 37 $ 308,659

Total interest expense 171,561 — 171,561

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

Noninterest expenses:

Depreciation and amortization expense 2,948 1,377 4,325

Other noninterest expenses 94,025 30,372 124,397

Total noninterest expenses 96,973 31,749 128,722

Salaries and employee benefits 62,013 20,445 82,458

Outsourced services 10,972 3,549 14,521

Net occupancy 8,313 1,323 9,636

Equipment 3,841 477 4,318

Legal, audit and professional fees 2,751 1,140 3,891

FDIC deposit insurance costs

4,667 — 4,667

Advertising and promotion 2,140 422 2,562

Amortization of intangibles — 843 843

Other expenses 8,269 2,392 10,661

Total noninterest expense 102,966 30,591 133,557

Income before income taxes 50,901 5,580 56,481

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Net income $ 43,873 $ 4,303 $ 48,176

Supplemental Information:

Total assets at period end $ 7,146,096 $ 56,751 $ 7,202,847

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

Depreciation expense (1)

3,460 545 4,005

(1) Included in net occupancy and equipment expenses in the statement of operations above.

Notes to Consolidated Financial Statements – (continued)

3 unchanged sentences

Services Consolidated

Total interest and dividend income $ 194,449 $ 16 $ 194,465

Total interest expense 38,409 66 38,475

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

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Noninterest expenses:

Depreciation and amortization expense 2,827 1,474 4,301

Other noninterest expenses 101,029 30,134 131,163

Total noninterest expenses 103,856 31,608 135,464

Salaries and employee benefits 62,026 21,778 83,804

Outsourced services 10,333 3,404 13,737

Net occupancy 7,696 1,430 9,126

Equipment 3,324 473 3,797

Legal, audit and professional fees 2,344 783 3,127

FDIC deposit insurance costs

1,687 — 1,687

Advertising and promotion 2,138 449 2,587

Amortization of intangibles — 860 860

Other expenses 7,425 2,572 9,997

Total noninterest expense 96,973 31,749 128,722

Income before income taxes 83,455 7,715 91,170

1 unchanged sentence

Net income $ 65,898 $ 5,783 $ 71,681

Supplemental Information:

Total assets at period end $ 6,585,310 $ 74,741 $ 6,660,051

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

Depreciation expense (1)

2,948 517 3,465

(1) Included in net occupancy and equipment expenses in the statement of operations above.

Notes to Consolidated Financial Statements – (continued)

Note 19 - Other Comprehensive Income (Loss)

1 unchanged sentence

(Dollars in thousands)

Year ended December 31, 2023 Pre-tax Amounts Income Tax Benefit (Expense) Net of Tax

Year ended December 31, 2024 Pre-tax Amounts Income Tax Expense Net of Tax

Available for Sale Debt Securities:

1 unchanged sentence

($ 12,050 ) $ 2,657 ($ 9,393 )

Net realized losses on securities reclassified into earnings 31,047 ( 7,502 ) 23,545

Net change in fair value of available for sale debt securities 18,997 ( 4,845 ) 14,152

Cash Flow Hedges:

2 unchanged sentences

Net cash flow hedge losses reclassified into earnings 6,830 ( 1,737 ) 5,093

7,563 ( 1,838 ) 5,725

Net change in the fair value of cash flow hedges 10,336 ( 2,655 ) 7,681

1 unchanged sentence

Defined benefit plan obligation adjustment

( 6,712 ) 1,712 ( 5,000 )

Amortization of net actuarial losses (2)

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Total other comprehensive income $ 29,533 ($ 7,551 ) $ 21,982

(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)

Year ended December 31, 2022 Pre-tax Amounts Income Tax Benefit (Expense) Net of Tax

Year ended December 31, 2023 Pre-tax Amounts Income Tax Expense Net of Tax

Available for Sale Debt Securities:

5 unchanged sentences

Net cash flow hedge losses reclassified into earnings 7,563 ( 1,838 ) 5,725

2,828 ( 679 ) 2,149

Net change in the fair value of cash flow hedges 9,210 ( 2,184 ) 7,026

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Amortization of net actuarial losses 237 ( 58 ) 179

1,712 ( 411 ) 1,301

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.

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

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

Notes to Consolidated Financial Statements – (continued)

(Dollars in thousands)

Year ended December 31, 2021 Pre-tax Amounts Income Tax (Expense)Benefit Net of Tax

Year ended December 31, 2022 Pre-tax Amounts Income Tax Benefit Net of Tax

Available for Sale Debt Securities:

5 unchanged sentences

Net cash flow hedge gains reclassified into earnings 2,828 ( 679 ) 2,149

( 310 ) 75 ( 235 )

Net change in the fair value of cash flow hedges ( 24,516 ) 5,884 ( 18,632 )

3 unchanged sentences

Amortization of net actuarial losses 1,712 ( 411 ) 1,301

2,844 ( 683 ) 2,161

Net change in defined benefit plan obligations 6,646 ( 1,595 ) 5,051

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)

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

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

(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, 2023 ($ 116,591 ) ($ 15,619 ) ($ 8,943 ) ($ 141,153 )

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

Other comprehensive (loss) income before reclassifications ( 9,393 ) 2,588 58 ( 6,747 )

Amounts reclassified from AOCL

23,545 5,093 91 28,729

Net other comprehensive income 14,152 7,681 149 21,982

Balance at December 31, 2024 ($ 102,439 ) ($ 7,938 ) ($ 8,794 ) ($ 119,171 )

1 unchanged sentence

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

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

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 )

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

Amounts reclassified from AOCL

— 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 )

Notes to Consolidated Financial Statements – (continued)

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

1 unchanged sentence

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

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

Amounts reclassified from AOCL

— 2,149 1,301 3,450

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

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

Notes to Consolidated Financial Statements – (continued)

Note 20 - Earnings per Common Share

2 unchanged sentences

Years ended December 31, 2024 2023 2022

Earnings per basic and diluted earnings per common share:

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

Earnings for basic and diluted EPS calculations:

Net (loss) income ($ 28,059 ) $ 48,176 $ 71,681

dividends and undistributed earnings allocated to participating securities 21 ( 85 ) ( 202 )

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

Net (loss) income available to common shareholders ($ 28,038 ) $ 48,091 $ 71,479

Shares for basic and diluted EPS calculations:

Weighted average common shares outstanding for basic EPS

1 unchanged sentence

Dilutive effect of common stock equivalents — 29 135

Weighted average common shares outstanding for diluted EPS

17,062 17,381 17,455

$ 2.82 $ 4.14 $ 4.43

Weighted average common and potential common shares outstanding for diluted EPS

17,149 17,062 17,381

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.

Basic (loss) earnings per common share ($ 1.63 ) $ 2.82 $ 4.14

Diluted (loss) earnings per common share ($ 1.63 ) $ 2.82 $ 4.11

Awards excluded from the calculation of diluted EPS:

Weighted average anti-dilutive common stock equivalents (1)

(1) For 2024, the dilutive effect of common stock equivalents was excluded from the calculation of diluted EPS because the Corporation reported a net loss and the inclusion would have an anti-dilutive effect.

For 2023 and 2022, weighted average anti-dilutive common stock equivalents represent share-based compensation awards not included in the calculation of common shares outstanding for purposes of calculating diluted EPS as the grant prices were greater than the average market price of Bancorp’s common stock, and therefore were anti-dilutive.

Notes to Consolidated Financial Statements – (continued)

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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.

The activity in the ACL on unfunded commitments for the year ended December 31, 2024 is presented below:

11 unchanged sentences

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

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

(Dollars in thousands) Commercial Consumer

Total Commercial Residential Real Estate Home Equity Other Total Consumer Total

Beginning Balance $ 1,267 $ 816 $ 2,083 $ 62 $ — $ 16 $ 16 $ 2,161

Provision ( 31 ) 172 141 ( 12 ) — — — 129

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

Other Contingencies

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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.

Under the settlement, the Bank agreed to 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.

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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 Bank also agreed to 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 are being recorded in the period in which the activities occur and are consistent with historical spending levels.

In addition, the Bank committed 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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Washington Trust has experienced an insignificant number of repurchase demands over a period of many years.

As of December 31, 2023 and 2022, the carrying value of loans repurchased due to representation and warranty claims was $ 1.5 million and $ 1.0 million, respectively.

The carrying value of loans repurchased due to representation and warranty claims was $ 1.5 million as of both December 31, 2024 and 2023.

Washington Trust has recorded a reserve for its exposure to losses for premium recapture and the obligation to indemnify or repurchase previously sold residential real estate mortgage loans.

The reserve balance amounted to $ 245 thousand and $ 265 thousand at December 31, 2023 and 2022, respectively, and is included in other liabilities in the Consolidated Balance Sheets.

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

The reserve balance amounted to

Notes to Consolidated Financial Statements – (continued)

$ 245 thousand at both December 31, 2024 and 2023, and is included in other liabilities in the Consolidated Balance Sheets.

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

Note 22 - Parent Company Financial Statements

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Income tax benefit 456 542 273

Income before equity in undistributed earnings (losses) of subsidiaries 36,886 52,203 44,879

Equity in undistributed earnings (losses) of subsidiaries:

Income before equity in undistributed (losses) earnings of subsidiaries 39,081 36,886 52,203

Equity in undistributed (losses) earnings of subsidiaries:

Bank ( 67,139 ) 11,290 19,565

Non-bank ( 1 ) — ( 87 )

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

Net (loss) income ($ 28,059 ) $ 48,176 $ 71,681

Notes to Consolidated Financial Statements – (continued)

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Cash flows from operating activities:

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

Adjustments to reconcile net income to net cash provided by operating activities:

Net (loss) income ($ 28,059 ) $ 48,176 $ 71,681

Adjustments to reconcile net (loss) income to net cash provided by operating activities:

Equity in undistributed (earnings) losses of subsidiaries:

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Deferred income tax (benefit) expense ( 7 ) ( 56 ) 5

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

(Increase) decrease in dividend receivable ( 275 ) 653 2,386

Decrease (increase) in other assets 77 8 ( 175 )

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Cash flows from investing activities:

Equity investment in subsidiary bank ( 70,500 ) — —

Repayment of equity investment in subsidiary — — 1,096

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

Net proceeds from issuance of common stock in public offering 70,521 — —

Net proceeds from stock option exercises and issuance of other equity awards, net of awards surrendered ( 31 ) ( 754 ) ( 821 )

Cash dividends paid ( 38,397 ) ( 38,631 ) ( 37,647 )

Net cash used in financing activities ( 48,199 ) ( 47,947 ) ( 36,526 )

Net (decrease) increase in cash ( 10,856 ) 7,267 6,632

Net cash provided by (used in) financing activities 32,093 ( 48,199 ) ( 47,947 )

Net increase (decrease) in cash 398 ( 10,856 ) 7,267

Cash at beginning of year 4,701 15,557 8,290

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

What changed 10-K

Item 8. Financial Statements and Supplementary Data