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Item 2. Management’s Discussion and Analysis

2025-05-07 compared with 2024-11-07 · 396 added, 365 removed, 691 unchanged (52% of the section changed)

1 unchanged sentence

The following discussion should be read in conjunction with the Corporation’s Audited Consolidated Financial Statements and notes thereto included in the Annual Report on Form 10-K for the year ended December 31, 2024, and in conjunction with the condensed Unaudited Consolidated Financial Statements and notes thereto included in Item 1 of this report.

Operating results for the three and nine months ended September 30, 2024 are not necessarily indicative of the results for the full-year ended December 31, 2024 or any future period.

Operating results for the three months ended March 31, 2025 are not necessarily indicative of the results for the full-year ended December 31, 2025 or any future period.

Forward-Looking Statements

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Some of the factors that might cause these differences include the following:

• changes in general business and economic conditions on a national basis and in the local markets in which we operate;

• changes in customer behavior due to political, business, and economic conditions, including inflation and concerns about liquidity;

• changes in general business and economic conditions (including the impact of recently imposed tariffs by the U.S.

Administration and foreign governments, inflation and concerns about liquidity) on a national basis and in the local markets in which we operate;

• interest rate changes or volatility, as well as changes in the balance and mix of loans and deposits;

• changes in customer behavior due to political, business and economic conditions;

• changes in loan demand and collectability;

• the possibility that future credits losses are higher than currently expected due to changes in economic assumptions or adverse economic developments;

• the possibility that future credit losses are higher than currently expected due to changes in economic assumptions or adverse economic developments;

• ongoing volatility in national and international financial markets;

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• changes in the size and nature of our competition;

• changes in legislation or regulation and accounting principles, policies, and guidelines;

• changes in, and evolving interpretations of, existing and future laws, rules and regulations;

• changes in accounting principles, policies and guidelines;

• operational risks including, but not limited to, changes in information technology, cybersecurity incidents, fraud, natural disasters, war, terrorism, civil unrest and future pandemics;

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These forward-looking statements were based on information, plans, and estimates at the date of this report, and we assume no obligation to update any forward-looking statements to reflect changes in underlying assumptions or factors, new information, future events or other changes.

Management's Discussion and Analysis

Non-GAAP Financial Measures and Reconciliation to GAAP

In addition to evaluating the Corporation’s results of operations in accordance with GAAP, management supplements this evaluation with an analysis of certain non-GAAP financial measures, such as adjusted noninterest income, adjusted noninterest expense, adjusted income before income taxes, adjusted income tax expense, adjusted effective tax rate, adjusted net income, adjusted net income available to common shareholders, adjusted diluted earnings per common share, adjusted return on average assets and adjusted return on average equity.

We believe these non-GAAP financial measures are utilized by regulators and market analysts to evaluate the Corporation’s results of operations and financial condition, and therefore such information is useful to investors.

In addition, these non-GAAP financial measures remove the impact of infrequent items that may obscure trends in the Corporation’s underlying performance.

These disclosures should not be viewed as a substitute for financial results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures, which may be presented by other companies.

Because non-GAAP financial measures are not standardized, it may not be possible to compare these financial measures with other companies' non-GAAP financial measures having the same or similar names.

Each presentation below reconciles the “as reported” GAAP measure to the adjusted non-GAAP measure.

Management's Discussion and Analysis

The following table presents adjusted noninterest income, adjusted noninterest expense, adjusted income before income taxes, adjusted income tax expense, adjusted effective tax rate, adjusted net income, and adjusted net income available to common shareholders:

(Dollars in thousands, except per share amounts)

Three months ended March 31, 2025 2024

Adjusted Noninterest Income:

Noninterest income, as reported $22,643 $17,163

Less adjustments:

Gain on sale of bank-owned properties, net 6,994 —

Litigation settlement income — 2,100

Total adjustments, pre-tax 6,994 2,100

Adjusted noninterest income (non-GAAP)

$15,649 $15,063

Adjusted Noninterest Expense:

Noninterest expense, as reported $42,196 $34,363

Less adjustments:

Pension plan settlement charge 6,436 —

Total adjustments, pre-tax 6,436 —

Adjusted noninterest expense (non-GAAP) $35,760 $34,363

Adjusted Income Before Income Taxes:

Income before income taxes $15,669 $13,765

total adjustments, pre-tax 558 2,100

Adjusted income before income taxes (non-GAAP)

$15,111 $11,665

Adjusted Income Tax Expense:

Income tax expense, as reported $3,490 $2,829

tax on total adjustments 141 530

Adjusted income tax expense (non-GAAP)

$3,349 $2,299

Adjusted Effective Tax Rate:

Effective tax rate (1)

22.3 % 20.6 %

impact of total adjustments 0.1 0.9

Adjusted effective tax rate (non-GAAP) (2)

22.2 % 19.7 %

Adjusted Net Income:

Net income, as reported $12,179 $10,936

total adjustments, after-tax 417 1,570

Adjusted net income (non-GAAP)

$11,762 $9,366

Adjusted Net Income Available to Common Shareholders:

Net income available to common shareholders, as reported $12,179 $10,924

total adjustments available to common shareholders, after-tax 417 1,568

Adjusted net income available to common shareholders (non-GAAP)

$11,762 $9,356

(1) Calculated as income tax expense divided by income before income taxes.

(2) Calculated as income tax expense, adjusted for the tax impact of the adjustments as outlined in the table above, divided by income before income taxes, adjusted for the pre-tax impact of the adjustments as outlined in the table above.

Management's Discussion and Analysis

The following table presents adjusted diluted earnings per common share:

(Dollars in thousands, except per share amounts)

Three months ended March 31, 2025 2024

Adjusted Diluted Earnings per Common Share:

Diluted earnings per common share, as reported (1)

impact of total adjustments 0.02 0.09

Adjusted diluted earnings per common share (non-GAAP) (2)

(1) Net income available to common shareholders divided by weighted average diluted common and potential shares outstanding.

(2) Net income available to common shareholders, adjusted for the after-tax impact of adjustments as outlined in the table above, divided by weighted average diluted common and potential shares outstanding.

The following table presents adjusted return on average assets and adjusted return on average equity:

(Dollars in thousands)

Three months ended March 31, 2025 2024

Adjusted Return on Average Assets (1) :

Net income, as reported $12,179 $10,936

total adjustments, after-tax 417 1,570

Adjusted net income (non-GAAP)

Total average assets, as reported 6,765,057 7,231,835

Return on average assets (2)

0.73 % 0.61 %

Adjusted return on average assets (non-GAAP) (3)

0.71 % 0.52 %

Adjusted Return on Average Equity (1) :

Net income available to common shareholders, as reported $12,179 $10,924

total adjustments, after-tax 417 1,568

Adjusted net income available to common shareholders (non-GAAP)

Total average equity, as reported 513,048 471,096

Return on average equity (4)

9.63 % 9.33 %

Adjusted return on average equity (non-GAAP) (5)

9.30 % 7.99 %

(1) Annualized based on the actual number of days in the period.

(2) Net income divided by total average assets.

(3) Net income, adjusted for the after-tax impact of adjustments as outlined in the table above, divided by total average assets.

(4) Net income available to common shareholders divided by total average equity.

(5) Net income available to common shareholders, adjusted for the after-tax impact of adjustments as outlined in the table above, divided by total average equity.

Washington Trust offers a full range of financial services, including commercial, residential, and consumer lending, retail and commercial deposit products, and wealth management and trust services through its offices in Rhode Island, Massachusetts, and Connecticut.

Our largest source of operating income is net interest income, which is the difference between interest earned on loans and securities and interest paid on deposits and borrowings.

In addition, we generate noninterest income from a number of

Management's Discussion and Analysis

sources, including wealth management services, mortgage banking activities, and deposit services.

In addition, we generate noninterest income from a number of sources, including wealth management services, mortgage banking activities, and deposit services.

Our principal noninterest expenses include salaries and employee benefit costs, outsourced services provided by third-party vendors, occupancy and facility-related costs, and other administrative expenses.

Management's Discussion and Analysis

We continue to leverage our strong regional brand to build market share and remain steadfast in our commitment to provide superior service.

We believe the key to future growth is providing customers with convenient in-person service and digital banking solutions.

In January 2024, we opened a new full-service branch in Smithfield, Rhode Island, and in September 2024, we opened a new full-service branch in the Olneyville section of Providence.

Risk Management

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Strategic and reputation risk represent the risk of loss due to impairment of reputation, failure to fully develop and execute business plans, and failure to assess existing and new opportunities and threats in business, markets, and products.

Management's Discussion and Analysis

Operational risk is the risk of loss due to human behavior, inadequate or failed internal processes, systems and controls, information technology changes or failures, and external influences such as market conditions, fraudulent activities, cybersecurity incidents, natural disasters, and security risks.

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A framework approach is utilized to assign responsibility and to ensure that the various business units and activities involved in the risk management life-cycle are effectively integrated.

The Corporation has adopted the “three lines of defense” strategy that is an industry best practice for ERM.

The Corporation has adopted the “three lines of defense” strategy that is an industry best practice for

Management's Discussion and Analysis

Business units are the first line of defense in managing risk.

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The following table presents a summarized consolidated statement of operations:

(Dollars in thousands) Three Months Nine Months

Change Change

Periods ended September 30, 2024 2023 $ % 2024 2023 $ %

(Dollars in thousands)

Three months ended March 31, 2025 2024 $ %

Net interest income $36,422 $31,665 $4,757 15 %

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Net income $12,179 $10,936 $1,243 11 %

Adjusted net income (non-GAAP)

$11,762 $9,366 $2,396 26 %

Net income totaled $12.2 million for the three months ended March 31, 2025, compared to $10.9 million reported for the same period in 2024.

These results included the following:

• In the first quarter of 2025, sales-leaseback transactions were completed for five branch locations and a pre-tax net gain on the sale of the bank-owned properties totaling $7.0 million was recognized within noninterest income.

• Also in the first quarter of 2025 and in connection with the termination of the Corporation's qualified pension plan, a pre-tax non-cash pension plan settlement charge of $6.4 million was recognized within noninterest expenses.

• In the first quarter of 2024, noninterest income included income of $2.1 million associated with a litigation settlement.

Excluding these items, adjusted net income (non-GAAP) for the three months ended March 31, 2025 was $11.8 million, compared to $9.4 million for the same period in 2024, up by $2.4 million, or 26%.

This increase was driven by an increase in net interest income.

The following table presents a summary of performance metrics and ratios:

Three Months Nine Months

Periods ended September 30, 2024 2023 2024 2023

Three months ended March 31, 2025 2024

Diluted earnings per common share $0.63 $0.64

Adjusted diluted earnings per common share (non-GAAP)

Return on average assets (net income divided by average assets) 0.73 % 0.61 %

Adjusted return on average assets (non-GAAP)

0.71 % 0.52 %

Return on average equity (net income available for common shareholders divided by average equity)

9.63 % 9.33 %

Net interest income as a percentage of total revenues 66 % 69 % 66 % 71 %

Noninterest income as a percentage of total revenues 34 % 31 % 34 % 29 %

Net income totaled $11.0 million and $32.7 million, respectively, for the three and nine months ended September 30, 2024, compared to $11.2 million and $35.2 million, respectively, reported for the same periods in 2023.

Year-to-date results largely reflected lower net interest income and a modest increase in noninterest expenses, partially offset by higher noninterest income and a relatively lower provision for credit losses.

The decline in net interest income in 2024 was driven by higher rates paid on, and increases in, average interest-bearing liability balances, which offset the benefit of higher yields on, and increases in, average interest-earning asset balances.

Noninterest income benefited from a $2.1 litigation settlement received in the first quarter of 2024 and a net gain of $988 thousand recognized on the sale of a bank-owned operations facility in the second quarter of 2024.

In addition, the increase in noninterest income in 2024 reflected higher mortgage banking and wealth management revenues, partially offset by lower loan related derivative income.

Adjusted return on average equity (non-GAAP)

9.30 % 7.99 %

Management's Discussion and Analysis

Average Balances / Net Interest Margin - Fully Taxable Equivalent Basis

The following tables present daily average balance, interest, and yield/rate information, as well as net interest margin on an FTE basis.

The following table presents daily average balance, interest, and yield/rate information, as well as net interest margin on an FTE basis.

Tax-exempt income is converted to an FTE basis using the statutory federal income tax rate adjusted for applicable state income taxes net of the related federal tax benefit.

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Nonaccrual loans, as well as interest recognized on these loans, are included in amounts presented for loans.

Management's Discussion and Analysis

Three months ended September 30, 2024 2023 Change

Three months ended March 31, 2025 2024 Change

(Dollars in thousands) Average Balance Interest Yield/ Rate Average Balance Interest Yield/ Rate Average Balance Interest Yield/ Rate

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Commercial & industrial 538,083 7,874 5.93 610,747 9,892 6.51 (72,664) (2,018) (0.58)

573,400 9,368 6.50 609,604 9,896 6.44 (36,204) (528) 0.06

Total commercial 2,676,384 38,228 5.79 2,751,634 44,112 6.45 (75,250) (5,884) (0.66)

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Interest-bearing in-market deposits 4,308,451 29,402 2.77 3,974,458 28,970 2.93 333,993 432 (0.16)

Wholesale brokered demand deposits — — — — — — — — —

Wholesale brokered time deposits 188,386 2,346 5.05 699,605 9,077 5.22 (511,219) (6,731) (0.17)

Wholesale brokered deposits 458,114 6,071 5.27 659,624 8,352 5.02 (201,510) (2,281) 0.25

Total interest-bearing deposits 4,496,837 31,748 2.86 4,674,063 38,047 3.27 (177,226) (6,299) (0.41)

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Net interest margin 2.29 % 1.84 % 0.45 %

(1) Interest income includes adjustments for taxable equivalency of $234 thousand and $241 thousand, respectively, for the three months ended September 30, 2024 and 2023.

Management's Discussion and Analysis

Nine months ended September 30, 2024 2023 Change

(Dollars in thousands) Average Balance Interest Yield/ Rate Average Balance Interest Yield/ Rate Average Balance Interest Yield/ Rate

Cash, federal funds sold, and short-term investments $135,428 $5,667 5.59 $105,025 $3,693 4.70 $30,403 $1,974 0.89

Mortgage loans held for sale 20,042 1,013 6.75 18,315 725 5.29 1,727 288 1.46

Taxable debt securities 1,128,507 20,834 2.47 1,192,536 21,868 2.45 (64,029) (1,034) 0.02

Interest income amounts presented in the preceding table include the following adjustments for taxable equivalency:

(Dollars in thousands)

Three months ended March 31, 2025 2024 Change

Commercial loans $206 $223 ($17)

Nontaxable debt securities 1 — 1

Total debt securities 1,128,535 20,835 2.47 1,192,536 21,868 2.45 (64,001) (1,033) 0.02

58,890 3,459 7.85 45,605 2,333 6.84 13,285 1,126 1.01

Commercial real estate 2,150,686 103,445 6.42 1,931,196 85,626 5.93 219,490 17,819 0.49

Commercial & industrial (1)

595,564 29,096 6.53 618,415 28,423 6.14 (22,851) 673 0.39

Total commercial 2,746,250 132,541 6.45 2,549,611 114,049 5.98 196,639 18,492 0.47

Residential real estate 2,568,457 79,572 4.14 2,452,088 69,777 3.80 116,369 9,795 0.34

Home equity 305,364 15,769 6.90 293,957 12,355 5.62 11,407 3,414 1.28

Other 18,527 666 4.80 17,685 616 4.66 842 50 0.14

Total consumer 323,891 16,435 6.78 311,642 12,971 5.56 12,249 3,464 1.22

Total loans 5,638,598 228,548 5.41 5,313,341 196,797 4.95 325,257 31,751 0.46

Total interest-earning assets 6,981,493 259,522 4.97 6,674,822 225,416 4.52 306,671 34,106 0.45

Noninterest-earning assets 256,527 259,334 (2,807)

Total assets $7,238,020 $6,934,156 $303,864

Liabilities and Shareholders’ Equity:

Interest-bearing demand deposits (in-market) $533,163 $18,058 4.52 $385,180 $11,788 4.09 $147,983 $6,270 0.43

NOW accounts 709,115 1,168 0.22 781,546 1,177 0.20 (72,431) (9) 0.02

Money market accounts 1,116,879 32,571 3.90 1,208,436 26,807 2.97 (91,557) 5,764 0.93

Savings accounts 485,665 2,540 0.70 534,784 1,065 0.27 (49,119) 1,475 0.43

Time deposits (in-market) 1,165,370 35,756 4.10 971,333 22,417 3.09 194,037 13,339 1.01

Interest-bearing in-market deposits 4,010,192 90,093 3.00 3,881,279 63,254 2.18 128,913 26,839 0.82

Wholesale brokered demand deposits — — — 5,368 177 4.41 (5,368) (177) (4.41)

Wholesale brokered time deposits 558,015 21,870 5.24 579,871 19,931 4.60 (21,856) 1,939 0.64

Wholesale brokered deposits 558,015 21,870 5.24 585,239 20,108 4.59 (27,224) 1,762 0.65

Total interest-bearing deposits 4,568,207 111,963 3.27 4,466,518 83,362 2.50 101,689 28,601 0.77

FHLB advances

1,353,887 50,151 4.95 1,025,788 35,775 4.66 328,099 14,376 0.29

Junior subordinated debentures 22,681 1,213 7.14 22,681 1,132 6.67 — 81 0.47

Total interest-bearing liabilities 5,944,775 163,327 3.67 5,514,987 120,269 2.92 429,788 43,058 0.75

Noninterest-bearing demand deposits 663,355 792,706 (129,351)

Other liabilities 157,268 165,021 (7,753)

Shareholders’ equity 472,617 461,442 11,175

Total liabilities and shareholders’ equity $7,238,015 $6,934,156 $303,859

Net interest income (FTE)

$96,195 $105,147 ($8,952)

Interest rate spread 1.30 1.60 (0.30)

Net interest margin 1.84 2.11 (0.27)

(1) Interest income includes adjustments for taxable equivalency of $683 thousand and $703 thousand, respectively, for the nine months ended September 30, 2024 and 2023.

Total $207 $223 ($16)

Net Interest Income

Net interest income, the primary source of our operating income, totaled $32.3 million and $95.5 million, respectively, for the three and nine months ended September 30, 2024, compared to $33.8 million and $104.4 million, respectively, for the same periods in 2023.

Net interest income is affected by the level of and changes in interest rates, and changes in the amount and

Management's Discussion and Analysis

composition of interest-earning assets and interest-bearing liabilities.

Prepayment penalty income associated with loan payoffs is included in net interest income.

The following discussion presents net interest income on an FTE basis by adjusting income and yields on tax-exempt loans to be comparable to taxable loans.

Net interest income, the primary source of our operating income, totaled $36.4 million for the three months ended March 31, 2025, compared to $31.7 million for the same period in 2024.

Net interest income is affected by the level of and changes in interest rates, and changes in the amount and composition of interest-earning assets and interest-bearing liabilities.

Net interest income includes the periodic recognition of prepayment penalty fee income associated with commercial loan payoffs.

There was no prepayment penalty fee income recognized in the three months ended September 30, 2024.

Prepayment penalty fee income amounted to $66 thousand for the nine months ended September 30, 2024 and had essentially no benefit to NIM.

This compared to $71 thousand (or 0 basis point benefit to NIM) and $245 thousand (or 1 basis point benefit to NIM), respectively, for the three and nine months ended in September 30, 2023.

Prepayment penalty fee income amounted to $8 thousand and $20 thousand, respectively, in the three months ended March 31, 2025 and 2024, and had essentially no benefit to NIM in either period.

The analysis of net interest income, NIM, and the yield on loans is also impacted by changes in the level of net amortization of premiums and discounts on securities and loans, which is included in interest income.

Changes in market interest rates affect the level of loan prepayments and the receipt of payments on mortgage-backed securities.

Prepayment speeds generally increase as market interest rates decline and decrease as market interest rates rise.

Prepayment speeds generally increase as longer-term market interest rates decline and decrease as longer-term market interest rates rise.

Changes in prepayment speeds could increase or decrease the level of net amortization of premiums and discounts, thereby affecting interest income.

As noted in the Unaudited Consolidated Statements of Cash Flows, net amortization of premiums and discounts on securities and loans (a net reduction to net interest income) amounted to $878 thousand for the nine months ended September 30, 2024, compared to $1.0 million for the same period in 2023.

FTE net interest income for the three and nine months ended September 30, 2024 amounted to $32.5 million and $96.2 million, respectively, down by $1.5 million and $9.0 million, respectively, from the same periods in 2023.

For the three and nine months ended September 30, 2024, increases in average interest-bearing liability balances, net of increased average interest-earning assets, reduced net income by $493 thousand, and $4.9 million, respectively.

Increases in funding costs outpaced increases in asset yields, reducing net interest income by $1.0 million and $4.1 million, respectively, for the three and nine months ended September 30, 2024.

NIM was 1.85% and 1.84%, respectively, for the three and nine months ended September 30, 2024, compared to 1.97% and 2.11%, respectively, for the same periods in 2023.

While NIM benefited from higher market interest rates on loans, it was adversely impacted by a higher cost of funds.

Total average securities for the three and nine months ended September 30, 2024 decreased by $72.1 million and $64.0 million, respectively, from the average balances for the same periods a year earlier primarily due to routine pay-downs.

The FTE rate of return on the securities portfolio for the three and nine months ended September 30, 2024 was 2.44% and 2.47%, respectively, compared to 2.44% and 2.45% respectively, for the same periods in 2023.

Total average loan balances for the three and nine months ended September 30, 2024 increased by $88.8 million and $325.3 million, respectively, from the average loan balances for the comparable 2023 periods, largely reflecting growth in average balances of CRE loans.

The increase in average loan balances for the year-to-date period also reflected growth in the average balance of residential real estate loans.

The yield on total loans for the three and nine months ended September 30, 2024 was 5.44% and 5.41%, respectively, compared to 5.14% and 4.95%, respectively, in the corresponding periods in 2023, reflecting higher market interest rates between periods.

Higher levels of wholesale funding were used to fund balance sheet growth.

The average balance of FHLB advances for the three and nine months ended September 30, 2024 increased by $370.4 million and $328.1 million, respectively, compared to the average balances for the same periods in 2023.

Due to increases in market interest rates between periods, the average rate paid on such advances for both the three and nine months ended September 30, 2024 was 4.95%, up from 4.71% and 4.66%, respectively, for the same periods in 2023.

Included in total average interest-bearing deposits were wholesale brokered deposits, which decreased by $201.5 million and $27.2 million, respectively, from the same periods in 2023.

The average rate paid on wholesale brokered deposits for the three and nine months ended September 30, 2024 was 5.27% and 5.24%, respectively, up from 5.02% and 4.59%, respectively, for the same periods in 2023.

As market interest rates rose between periods, deposit balances shifted from lower-cost deposits to higher-cost deposits.

Average in-market interest-bearing deposits, which excludes wholesale brokered deposits, for the three and nine months ended September 30, 2024 increased by $70.7 million and $128.9 million, respectively, from the average balances for the

As noted in the Unaudited Consolidated Statements of Cash Flows, net amortization of premiums and discounts on securities and loans (a net reduction to net interest income) amounted to $94 thousand for the three months ended March 31, 2025, compared to $265 thousand for the same period in 2024.

The improvement in net interest income, FTE net interest income and NIM discussed below largely reflected benefits from the balance sheet repositioning transactions previously announced in December 2024, which included the sale of lower-yielding debt securities and residential real estate loans, reinvestment into higher-yielding debt securities, and pay-down of higher-cost FHLB advances and wholesale brokered time deposits.

The following discussion presents net interest income on an FTE basis by adjusting income and yields on tax-exempt loans to be comparable to taxable loans.

FTE net interest income for the three months ended March 31, 2025 amounted to $36.6 million up by $4.7 million from the same period in 2024.

For the three months ended March 31, 2025, decreases in average interest-bearing liability balances, net of decreases in average interest-earning assets, increased net income by $1.3 million.

Decreases in funding costs outpaced decreases in asset yields, increasing net interest income by $3.4 million for the three months ended March 31, 2025.

NIM was 2.29% for the three months ended March 31, 2025, compared to 1.84% for the same period in 2024.

Total average securities for the three months ended March 31, 2025 decreased by $103.1 million from the average balances for the same period a year earlier primarily due to routine pay-downs.

The FTE rate of return on the securities portfolio for the three months ended March 31, 2025 was 3.43% compared to 2.49% for the same period in 2024.

Total average loan balances for the three months ended March 31, 2025 decreased by $562.8 million from the average loan balances for the comparable 2024 period, largely reflecting a decrease in average balances of residential real estate loans.

The yield on total loans for the three months ended March 31, 2025 was 5.31% compared to 5.38% in the corresponding period in 2024.

FHLB advances and brokered time deposits are utilized as wholesale funding sources.

The average balance of FHLB advances for the three months ended March 31, 2025 decreased by $280.1 million compared to the average balances for the same period in 2024.

The average rate paid on such advances for the three months ended March 31, 2025 was 4.62%, down from 4.91% for the same period in 2024, reflecting lower short-term market interest rates.

Included in total average interest-bearing deposits were wholesale brokered deposits, which decreased by $511.2 million from the same period in 2024.

Management's Discussion and Analysis

same periods in 2023, with increases in time deposits and interest-bearing demand deposits.

The average rate paid on in-market interest-bearing deposits for the three and nine months ended September 30, 2024 was 3.06% and 3.00%, respectively, up from 2.57% and 2.18%, respectively, for the same periods in 2023.

The average balance of noninterest-bearing demand deposits for the three and nine months ended September 30, 2024 decreased by $100.3 million and $129.4 million, respectively, from the average balances for the same periods in 2023.

average rate paid on wholesale brokered deposits for the three months ended March 31, 2025 was 5.05% down from 5.22% for the same period in 2024.

Average in-market interest-bearing deposits, which excludes wholesale brokered deposits, for the three months ended March 31, 2025 increased by $334.0 million from the average balances for the same periods in 2024, largely reflecting increases in interest-bearing demand deposits and money market account balances.

The average rate paid on in-market interest-bearing deposits for the three months ended March 31, 2025 was 2.77% down from 2.93% for the same period in 2024.

The average balance of noninterest-bearing demand deposits for the three months ended March 31, 2025 decreased by $43.8 million from the average balances for the same period in 2024.

Volume / Rate Analysis - Interest Income and Expense (FTE Basis)

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The net change attributable to both volume and rate has been allocated proportionately.

(Dollars in thousands) Three Months Ended September 30, 2024 vs.

2023 Nine Months Ended September 30, 2024 vs.

Change Due to Change Due to

Volume Rate Net Change Volume Rate Net Change

(Dollars in thousands) Three Months Ended March 31, 2025 vs.

Change Due to

Volume Rate Net Change

Interest on Interest-Earning Assets:

22 unchanged sentences

Interest-bearing in-market deposits 2,989 (2,557) 432

Wholesale brokered demand deposits — — — (89) (88) (177)

Wholesale brokered time deposits (6,377) (354) (6,731)

Wholesale brokered deposits (2,656) 375 (2,281) (863) 2,625 1,762

Total interest-bearing deposits (3,388) (2,911) (6,299)

5 unchanged sentences

$1,323 $3,416 $4,739

Management's Discussion and Analysis

Provision for Credit Losses

The provision for credit losses results from management’s review of the adequacy of the ACL.

The ACL is management’s estimate, at the reporting date, of expected lifetime credit losses and includes consideration of current forecasted economic

Management's Discussion and Analysis

The ACL is management’s estimate, at the reporting date, of expected lifetime credit losses and includes consideration of current forecasted economic conditions.

Estimating an appropriate level of ACL necessarily involves a high degree of judgment.

The following table presents the provision for credit losses:

(Dollars in thousands) Three Months Nine Months

Change Change

Periods ended September 30, 2024 2023 $ % 2024 2023 $ %

(Dollars in thousands)

Three months ended March 31, 2025 2024 $ %

Provision for credit losses on loans $1,400 $900 $500 56 %

1 unchanged sentence

Provision for credit losses $1,200 $700 $500 71 %

The provision for credit losses in 2024 largely reflected continued, yet subsiding, slowdown of loan prepayment speeds and modest specific reserve allocations on an individually analyzed nonaccrual commercial loan, partially offset by a decline in loan balances and relatively stable to improving forecasted economic conditions.

The provision for credit losses recognized in 2023 provided for loan growth and largely reflected slowdown of loan prepayment speeds and stable to improving forecasted economic conditions.

Net charge-offs totaled $48 thousand for the three months ended September 30, 2024, compared to net charge-offs of $30 thousand for the same period in 2023.

For the nine months ended September 30, 2024, net charge-offs totaled $127 thousand, compared to net charge-offs of $114 thousand for the same period in 2023.

The ACL on loans was $42.6 million, or 0.77% of total loans, at September 30, 2024, compared to $41.1 million, or 0.73% of total loans, at December 31, 2023.

See additional discussion under the caption “Asset Quality” for further information on asset quality metrics and the ACL on loans.

The provision for credit losses for the three months ended March 31, 2025 included the impact of losses on individually analyzed nonaccrual commercial loans and reflected our estimate of forecasted economic conditions.

The provision for credit losses recognized three months ended March 31, 2024 provided for loan growth and was reflective of continued slowdown of loan prepayment speeds and estimated forecasted economic conditions.

Net charge-offs totaled $2.3 million for the three months ended March 31, 2025, compared to net charge-offs of $52 thousand for the same period in 2024.

See additional discussion under the caption “Asset Quality.”

The ACL on loans was $41.1 million, or 0.81% of total loans, at March 31, 2025, compared to $42.0 million, or 0.82% of total loans, at December 31, 2024.

Noninterest Income

1 unchanged sentence

The principal categories of noninterest income are shown in the following table:

(Dollars in thousands) Three Months Nine Months

Change Change

Periods ended September 30, 2024 2023 $ % 2024 2023 $ %

(Dollars in thousands)

Three months ended March 31, 2025 2024 $ %

Noninterest income:

7 unchanged sentences

Income from bank-owned life insurance 769 739 30 4

Gain on sale of bank-owned properties, net 6,994 — 6,994 100

Other income 331 2,466 (2,135) (87)

1 unchanged sentence

$22,643 $17,163 $5,480 32 %

Adjusted noninterest income (non-GAAP) $15,649 $15,063 $586 4 %

Noninterest Income Analysis

Revenue from wealth management services represented 58% of total noninterest income for the nine months ended September 30, 2024, compared to 62% for the same period in 2023.

Noninterest income amounted to $22.6 million for the three months ended March 31, 2025, compared $17.2 million for the same period in 2024.

Noninterest income for the three months ended March 31, 2025 included the recognition of a $7.0 million net gain associated with sales-leaseback transactions.

Included in other noninterest income in 2024 was income of $2.1 million associated with a litigation settlement.

Excluding the impact of these transactions, adjusted noninterest income (non-GAAP) was $15.6 million for the three months ended March 31, 2025, compared to $15.1 million in the same period in 2024, up by $586 thousand, or 4%.

Management's Discussion and Analysis

Wealth management services represent our largest source of non interest income.

A substantial portion of wealth management revenues is dependent on the value of wealth management AUA and is closely tied to the performance of the financial markets.

1 unchanged sentence

Wealth management revenues also include “transaction-based” revenues that are not primarily derived from the value of assets.

Management's Discussion and Analysis

The categories of wealth management revenues are shown in the following table:

(Dollars in thousands) Three Months Nine Months

Change Change

Periods ended September 30, 2024 2023 $ % 2024 2023 $ %

(Dollars in thousands)

Three months ended March 31, 2025 2024 $ %

Wealth management revenues:

2 unchanged sentences

Total wealth management revenues $9,891 $9,338 $553 6 %

Wealth management revenues for the three and nine months ended September 30, 2024 increased by $1.0 million and $2.3 million, respectively, from the same periods in 2023, reflecting an increase in asset-based revenues.

Wealth management revenues for the three months ended March 31, 2025 increased by $553 thousand, or 6%, from the same period in 2024, reflecting an increase in asset-based revenues.

The change in asset-based revenues correlated with the change in average AUA balances.

The average balance of AUA for the three and nine months ended September 30, 2024 increased by 9% and 10%, respectively, from the average balance for the same periods in 2023.

The end of period AUA balance amounted to $7.1 billion at September 30, 2024.

The average balance of AUA for the three months ended March 31, 2025 increased by 5% from the average balance for the same period in 2024.

The end of period AUA balance amounted to $6.8 billion at March 31, 2025, down by $259.4 million, or 4%, from December 31, 2024, including net investment depreciation that reflected financial market declines in March 2025.

The following table presents the changes in wealth management AUA balances:

(Dollars in thousands)

Three Months Nine Months

Periods ended September 30, 2024 2023 2024 2023

Three months ended March 31, 2025 2024

Wealth management assets under administration:

Balance at the beginning of period $7,077,802 $6,588,406

Net investment appreciation & income 372,027 (154,269) 844,800 391,781

Net investment (depreciation) appreciation & income (148,748) 364,244

Net client asset outflows (110,664) (94,328)

Balance at the end of period $6,818,390 $6,858,322

Mortgage banking revenues represented 16% of total noninterest income for nine months ended September 30, 2024, compared to 12% for the same period in 2023.

These revenues are dependent on mortgage origination volume and are sensitive to interest rates and the condition of housing markets.

While loan origination and refinancing activities decreased in response to increases in market interest rates, a larger proportion of loans were originated for sale in 2024.

Mortgage banking revenues are dependent on mortgage origination volume and are sensitive to interest rates and the condition of housing markets.

The composition of mortgage banking revenues and the volume of loans sold to the secondary market are shown in the following table:

(Dollars in thousands) Three Months Nine Months

Change Change

Periods ended September 30, 2024 2023 $ % 2024 2023 $ %

Management's Discussion and Analysis

(Dollars in thousands)

Three months ended March 31, 2025 2024 $ %

Mortgage banking revenues:

4 unchanged sentences

Loan servicing fee income, net (3)

402 533 (131) (25) 1,534 1,660 (126) (8)

Total mortgage banking revenues $2,304 $2,506 ($202) (8 %)

5 unchanged sentences

(4) Includes brokered loans (loans originated for others).

Management's Discussion and Analysis

For the three and nine months ended September 30, 2024, mortgage banking revenues were up by $758 thousand and $3.0 million, respectively, compared to the same periods in 2023.

The increase in mortgage banking revenues was mainly attributable to increases in both sales volume and sales yield.

Loan related derivative income from interest rate swap contracts with commercial borrowers for the three and nine months ended September 30, 2024, decreased by $956 thousand and $819 thousand, respectively, from the same periods in 2023, reflecting a decline in volume.

Income from BOLI for the nine months ended September 30, 2024, was down by $492 thousand from the same period in 2023, reflecting the recognition of $658 thousand in non-taxable income in the first six months of 2023 associated with the receipt of life insurance proceeds.

Other income for the nine months ended September 30, 2024 was up by $3.0 million from the same period in 2023.

Included in other income in 2024 was a net gain of $988 thousand recognized on the sale of a bank-owned operations facility in the second quarter and $2.1 million associated with a litigation settlement in the first quarter.

Excluding the impact of these items, other income for the nine months ended September 30, 2024 was down modestly by $83 thousand from the same period in 2023.

For the three months ended March 31, 2025, mortgage banking revenues were down by $202 thousand, or 8%, compared to the same period in 2024.

An increase in the volume of loans sold was offset by a decline in the sales yield.

The decrease in mortgage banking revenues also included changes in the fair value on mortgage loans held for sale and forward loan commitments.

Card interchange fee income or the three months ended March 31, 2025 was up by $364 thousand, or 32%, from the same period in 2024 This included the receipt of a third-party contract incentive, as well as revenue generated from debit card transaction volume.

Loan related derivative income from interest rate swap contracts with commercial borrowers for the three months ended March 31, 2025, decreased by $183 thousand, or 64%, from the same period in 2024, reflecting a decline in volume.

Noninterest Expense

The following table presents noninterest expense comparisons:

(Dollars in thousands) Three Months Nine Months

Change Change

Periods ended September 30, 2024 2023 $ % 2024 2023 $ %

(Dollars in thousands)

Three months ended March 31, 2025 2024 $ %

Noninterest expense:

8 unchanged sentences

Amortization of intangibles 204 208 (4) (2)

Pension plan settlement charge 6,436 — 6,436 100

Other 2,734 2,324 410 18

Total noninterest expense $42,196 $34,363 $7,833 23 %

Adjusted noninterest expense (non-GAAP) $35,760 $34,363 $1,397 4 %

Noninterest Expense Analysis

Salaries and employee benefits expense, the largest component of noninterest expense, for the three and nine months ended September 30, 2024 decreased by $272 thousand and increased by $391 thousand respectively, compared to the same periods in 2023.

The changes included the impact of adjustments to performance-based compensation accruals, merit increases, and lower staffing levels.

Outsourced services expense for the three and nine months ended September 30, 2024 increased by $448 thousand and $1.2 million, respectively, compared to the same periods in the prior year.

The increases reflected changes to and expansion of services, including software as a service, that are provided by third-party vendors.

Legal, audit and professional fees for the three and nine months ended September 30, 2024 decreased by $222 thousand and $649 thousand, respectively, compared to the same periods in 2023, reflecting lower legal fees.

FDIC deposit insurance costs for the three and nine months ended September 30, 2024 increased by $217 thousand and $819 thousand, respectively, compared to the same periods in 2023, reflecting the impact of increases in average assets from a year ago and a higher FDIC deposit assessment rate.

Noninterest expense amounted to $42.2 million for the three months ended March 31, 2025, compared $34.4 million for the same period in 2024.

Noninterest expense for the three months ended March 31, 2025 included a pre-tax non-cash pension

Management's Discussion and Analysis

Advertising and promotion expense for the nine months ended September 30, 2024 increased by $442 thousand due to an increase in such activities.

plan settlement charge of $6.4 million in connection with the termination of the Corporation's qualified pension plan.

Excluding the impact of this transaction, adjusted noninterest expense (non-GAAP) was $35.8 million for the three months ended March 31, 2025, up by $1.4 million, or 4%, from the same period in 2024.

Salaries and employee benefits expense, the largest component of noninterest expense, for the three months ended March 31, 2025 increased by $647 thousand, or 3%, compared to the same period in 2024.

Increases in compensation were partially offset by lower staffing levels.

Outsourced services expense for the three months ended March 31, 2025 increased by $566 thousand, or 15%, compared to the same period in the prior year.

The increases reflected expansion of and volume-related changes to third-party vendor provided software-as-a-service.

The following table presents the Corporation’s income tax provision and applicable tax rates for the periods indicated:

(Dollars in thousands)

Three Months Nine Months

Periods ended September 30, 2024 2023 2024 2023

Three months ended March 31, 2025 2024

Income tax expense $3,490 $2,829

Adjusted income tax expense (non-GAAP) 3,349 2,299

Effective income tax rate 22.3 % 20.6 %

Adjusted effective income tax rate (non-GAAP) 22.2 % 19.7 %

Blended statutory rate 25.3 % 25.5 %

The effective income tax rates in the table above differed from the blended statutory rates, primarily due to tax benefits related to income from BOLI, federal tax credits, and tax-exempt income.

The effective income tax rates differed from the federal rate of 21%, primarily due to state income tax, partially offset by benefits from tax-exempt income, income from BOLI, and federal tax credits.

The blended statutory rates include the federal income tax rate of 21% and a blended state income tax rate net of a federal tax benefit.

The increase in the blended statutory rates in the table above reflect the impact of a fourth quarter 2023 Massachusetts tax law change.

The Corporation’s net deferred tax assets amounted to $46.0 million at September 30, 2024, compared to $53.8 million at December 31, 2023.

This decline largely reflected decreases in deferred tax assets associated with increases in fair value of securities available for sale due to changes in market interest rates.

The increase in the effective income tax rate on both a GAAP and non-GAAP basis largely reflected an increase in state tax expense and a higher proportion of taxable income to pre-tax book income.

The Corporation’s net deferred tax assets are reported in other assets and amounted to $41.5 million at March 31, 2025, down from $63.0 million at December 31, 2024.

This decrease included the realization of a deferred tax asset associated with the loans that were reclassified to held for sale and written down to fair value in December 2024 and then sold in January 2025.

Management believes deferred tax assets, net of the valuation allowance, are more-likely-than-not to be realized.

Segment Reporting

1 unchanged sentence

See Note 14 to the Unaudited Consolidated Financial Statements for additional disclosure related to business segments.

Management's Discussion and Analysis

Commercial Banking

The following table presents a summarized statement of operations for the Commercial Banking business segment:

(Dollars in thousands) Three Months Nine Months

Change Change

Periods ended September 30, 2024 2023 $ % 2024 2023 $ %

(Dollars in thousands)

Three months ended March 31, 2025 2024 $ %

Net interest income $36,422 $31,665 $4,757 15 %

7 unchanged sentences

Net income $11,964 $7,598 $4,366 57 %

Net interest income for the Commercial Banking segment for the three and nine months ended September 30, 2024 decreased by $1.5 million and $8.9 million, respectively, from the same periods in 2023.

Net interest income was adversely impacted by higher rates paid on, and increases in, average interest-bearing liability balances, which offset the benefit of higher yields on, and increases in, average interest-earning asset balances.

The provision for credit losses for the three and nine months ended September 30, 2024 decreased by $300 thousand and $600 thousand, respectively from the same periods in 2023.

Net interest income for the Commercial Banking segment for the three months ended March 31, 2025 increased by $4.8 million from the same period in 2024.

This improvement reflected benefits from the balance sheet repositioning transactions previously announced in December 2024.

See additional discussion under the caption “Net Interest Income” above.

The provision for credit losses for the three months ended March 31, 2025 increased by $500 thousand from the same period in 2024.

See additional discussion under the caption “Provision for Credit Losses” above.

Management's Discussion and Analysis

Noninterest income derived from the Commercial Banking segment for the three and nine months ended September 30, 2024 was up by $72 thousand and $2.7 million, respectively, from the comparable periods in 2023.

The year-to-date increase in Commercial Banking noninterest income reflected higher mortgage banking revenues and a net gain recognized in the second quarter of 2024 on the sale of a bank-owned operations facility.

These were partially offset by lower income from loan related derivatives and BOLI.

Noninterest income derived from the Commercial Banking segment for the three months ended March 31, 2025 was up by $7.1 million from the comparable period in 2024, largely due a first quarter 2025 net gain of $7.0 million associated with sales-leaseback transactions that were completed for five branch locations..

See additional discussion under the caption “Noninterest Income” above.

Commercial Banking noninterest expenses for the three and nine months ended September 30, 2024 were up by $790 thousand and $4.0 million, respectively, from the same periods in 2023, largely reflecting increases in salaries and employee benefits expense, outsourced services, and FDIC deposit insurance costs, as well as reductions in legal fees.

Commercial Banking noninterest expenses for the three months ended March 31, 2025 were up by $5.5 million from the same period in 2024.

Approximately $4.9 million of the total pension plan settlement charge of $6.4 million that was recognized in the first quarter of 2025 was allocated to the Commercial Banking segment.

The remaining increase in Commercial Banking noninterest expenses reflected increases in salaries and employee benefits expense and outsourced services.

See additional discussion under the caption “Noninterest Expense” above.

1 unchanged sentence

The following table presents a summarized statement of operations for the Wealth Management Services business segment:

(Dollars in thousands) Three Months Nine Months

Change Change

Periods ended September 30, 2024 2023 $ % 2024 2023 $ %

(Dollars in thousands)

Three months ended March 31, 2025 2024 $ %

Net interest income $— $— $— — %

4 unchanged sentences

Net income $215 $3,338 ($3,123) (94 %)

For the three and nine months ended September 30, 2024, noninterest income derived from the Wealth Management Services segment increased by $974 thousand and $4.5 million, respectively, from the same periods in 2023, reflecting an increase in asset-based revenues.

The year-to-date increase also included income of $2.1 million associated with a litigation settlement in the first quarter of 2024.

For the three months ended March 31, 2025, noninterest income derived from the Wealth Management Services segment decreased by $1.6 million from the same period in 2024.

Included in noninterest income in 2024 was income of $2.1 million associated with a litigation settlement.

Excluding this item, Wealth Management noninterest income increased by $517 thousand, largely reflecting an increase in asset-based revenues.

See further discussion under the caption “Noninterest Income” above.

For the three and nine months ended September 30, 2024, noninterest expenses for the Wealth Management Services segment decreased by $676 thousand and $2.2 million, respectively, from the comparable periods in 2023, largely reflecting decreases in salaries and employee benefits expense and legal fees.

Management's Discussion and Analysis

For the three months ended March 31, 2025, noninterest expenses for the Wealth Management Services segment increased by $2.3 million from the comparable period in 2024.

Approximately $1.5 million of the total pension plan settlement charge of $6.4 million that was recognized in the first quarter of 2025 was allocated to the Wealth Management Services segment.

The remaining increase in Wealth Management Services noninterest expenses included increases in salaries and employee benefits expense and outsourced services expense.

See additional discussion under the caption “Noninterest Expense” above.

2 unchanged sentences

(Dollars in thousands) Change

September 30,

2025 December 31,

Cash and due from banks $206,971 $86,824 $120,147 138 %

Total securities 973,266 1,000,380 (27,114) (3)

Mortgage loans held for sale, lower of cost or market $— $281,706 ($281,706) (100 %)

Available for sale debt securities 917,545 916,305 1,240 —

Total loans 5,096,210 5,137,838 (41,628) (1)

5 unchanged sentences

Total shareholders’ equity 521,680 499,728 21,952 4

Total assets amounted to $7.1 billion at September 30, 2024, down by $61.3 million, or 1%, from the end of 2023.

Management's Discussion and Analysis

Cash and due from banks increased by $120.1 million, or 138%, from December 31, 2023, reflecting temporarily higher cash balances on deposit at correspondent banks.

The securities portfolio decreased by $27.1 million, or 3%, from the end of 2023, reflecting routine pay-downs on mortgage-backed securities, partially offset by an increase in fair value of available for sale securities due to changes in market interest rates.

Total loans decreased by $132.8 million, or 2%, from the end of 2023, with the largest decline in the residential real estate portfolio.

Total deposit balances decreased by $176.3 million from the end of 2023, reflecting a decline in wholesale brokered time deposits that was partially offset by in-market deposit growth.

FHLB advances increased by $110.0 million, or 9%, from December 31, 2023.

Shareholders’ equity increased by $29.5 million, or 6%.

Net income and an increase in the AOCL component of shareholders' equity were partially offset by dividend declarations.

Mortgage loans held for sale at lower of cost or market decreased from the end of 2024.

As part of the previously announced balance sheet repositioning transactions, residential mortgage loans that were held in portfolio were reclassified to held for sale at December 31, 2024.

On January 24, 2025, the sale was completed and the cash proceeds received, along with in-market deposit growth, were used to pay down FHLB and wholesale brokered time deposits in the first quarter of 2025.

I nvestment security activity is monitored by the Investment Committee, the members of which also sit on the ALCO.

15 unchanged sentences

If the prices appear unusual, they are re-examined and the value is either confirmed or revised.

In addition, management periodically performs independent price tests of securities to ensure proper valuation and to verify our understanding of how securities are priced.

As of September 30, 2024 and December 31, 2023, management did not make any adjustments to the prices provided by the pricing service.

In addition, management periodically performs independent price tests of securities to ensure proper valuation and to verify our

Management's Discussion and Analysis

understanding of how securities are priced.

As of March 31, 2025 and December 31, 2024, management did not make any adjustments to the prices provided by the pricing service.

Our fair value measurements generally utilize Level 2 inputs, representing quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in inactive markets, and model-derived valuations in which all significant input assumptions are observable in active markets.

See Notes 3 and 8 to the Unaudited Consolidated Financial Statements for additional information regarding the determination of fair value of investment securities.

Management's Discussion and Analysis

Securities Portfolio

The carrying amounts of securities held are as follows:

(Dollars in thousands) September 30, 2024 December 31, 2023

(Dollars in thousands) March 31, 2025 December 31, 2024

Amount % of Total Amount % of Total

1 unchanged sentence

Obligations of U.S.

government-sponsored enterprises

$231,944 24 % $225,742 23 %

government agencies and government-sponsored enterprises $39,252 4 % $38,612 4 %

Mortgage-backed securities issued by U.S.

6 unchanged sentences

Total available for sale debt securities $917,545 100 % $916,305 100 %

The securities portfolio represented 14% of total assets at both September 30, 2024 and December 31, 2023.

The securities portfolio represented 14% of total assets at March 31, 2025, compared to 13% of total assets at December 31, 2024.

The largest component of the securities portfolio is mortgage-backed securities, all of which are issued by U.S.

1 unchanged sentence

government-sponsored enterprises.

The securities portfolio decreased by $27.1 million, or 3%, from the end of 2023.

This decrease included $54.1 million of routine pay-downs on mortgage-backed securities and an increase of $26.9 million (pre-tax) in the fair value of available for sale securities.

As of September 30, 2024, the carrying amount of available for sale debt securities included net unrealized losses of $125.4 million, compared to net unrealized losses of $152.2 million as of December 31, 2023.

The securities portfolio increased by $1.2 million, or 0.1%, from the end of 2024.

This included an increase of $16.9 million (pre-tax) in the fair value of available for sale securities, partially offset by $15.4 million of routine pay-downs on mortgage-backed securities.

As of March 31, 2025, the carrying amount of available for sale debt securities included net unrealized losses of $116.4 million, compared to net unrealized losses of $133.3 million as of December 31, 2024.

The net unrealized losses were primarily concentrated in obligations of U.S.

2 unchanged sentences

See Note 3 to the Unaudited Consolidated Financial Statements for additional information.

Total loans amounted to $5.5 billion at September 30, 2024, down by $132.8 million, or 2.4%, from the end of 2023.

The following is a summary of loans:

(Dollars in thousands) September 30, 2024 December 31, 2023

Total loans amounted to $5.1 billion at March 31, 2025, down by $41.6 million, or 1%, from the end of 2024.

Management's Discussion and Analysis

The following table sets forth the composition of the Corporation’s loan portfolio:

(Dollars in thousands) March 31, 2025 December 31, 2024

Amount % of Total Amount % of Total

9 unchanged sentences

Total loans $5,096,210 100 % $5,137,838 100 %

(1) Includes a $19 thousand negative basis adjustment associated with fair value hedges at September 30, 2024.

(1) Includes negative basis adjustments associated with fair value hedges of $699 thousand and $1.5 million, respectively, at March 31, 2025 and December 31, 2024.

See Note 7 to the Unaudited Consolidated Financial Statements for additional disclosure.

Commercial Loans

The commercial loan portfolio represented 48% of total loans at both September 30, 2024 and December 31, 2023.

Management's Discussion and Analysis

The commercial loan portfolio represented 52% of total loans at both March 31, 2025 and December 31, 2024.

In making commercial loans, we may occasionally solicit the participation of other banks.

1 unchanged sentence

In such cases, these loans are individually underwritten by us using standards similar to those employed for our self-originated loans.

Our participation in commercial loans originated by other banks amounted to $679.2 million and $652.7 million, respectively, at September 30, 2024 and December 31, 2023.

Our participation in commercial loans originated by other banks amounted to $673.5 million and $685.7 million, respectively, at March 31, 2025 and December 31, 2024.

Our participation in commercial loans originated by other banks also includes shared national credits.

10 unchanged sentences

Commercial Real Estate Loans

CRE loans totaled $2.1 billion at September 30, 2024, down by $4.3 million, or 0.2%, from the balance at December 31, 2023.

In the first nine months of 2024, CRE advances and originations amounted to $183.2 million and were more than offset by payments.

Construction and development loans included in the CRE loan portfolio amounted to $131.3 million and $214.6 million, respectively, as of September 30, 2024 and December 31, 2023.

Shared national credit balances outstanding included in the CRE loan portfolio at September 30, 2024 and December 31, 2023, totaled $82.8 million and $47.4 million, respectively.

At September 30, 2024 and December 31, 2023, balances of $62.3 million and $29.0 million, respectively, were included in the pass-rated category of commercial loan credit quality and balances of $20.5 million and $18.4 million, respectively, were included in the classified category.

CRE loans totaled $2.1 billion at March 31, 2025, down by $20.4 million, or 1%, from the balance at December 31, 2024.

In the first three months of 2025, CRE advances and originations amounted to $43.8 million and were more than offset by payments.

Construction and development loans included in the CRE loan portfolio amounted to $105.3 million and $102.2 million, respectively, as of March 31, 2025 and December 31, 2024.

Shared national credit balances outstanding included in the CRE loan portfolio at March 31, 2025 and December 31, 2024, totaled $85.2 million and $84.7 million, respectively.

At March 31, 2025 and December 31, 2024, balances of $63.8 million

Management's Discussion and Analysis

and $63.7 million, respectively, were included in the pass-rated category of commercial loan credit quality and balances of $21.4 million and $21.0 million, respectively, were included in the classified category.

All of these loans were current with respect to contractual payment terms at both dates.

The following table presents a geographic summary of CRE loans by property location:

(Dollars in thousands) September 30, 2024 December 31, 2023

(Dollars in thousands) March 31, 2025 December 31, 2024

Outstanding Balance % of Total Outstanding Balance % of Total

5 unchanged sentences

Total $2,134,107 100 % $2,154,504 100 %

Management's Discussion and Analysis

Management considers the CRE portfolio to be well-diversified with loans across several property types.

Other than the multi-family segment that is discussed further below, there were no other property types within the CRE portfolio that exceeded 10% of total loans.

The following table presents a summary of CRE loans by property type segmentation:

(Dollars in thousands) September 30, 2024 December 31, 2023

(Dollars in thousands) March 31, 2025 December 31, 2024

Outstanding Balance (1)

15 unchanged sentences

$65,489 $65,482

(1) Does not include unfunded commitments of $198.1 million and $351.5 million, respectively, as of September 30, 2024 and December 31, 2023.

(1) Does not include unfunded commitments of $138.9 million and $168.3 million, respectively, as of March 31, 2025 and December 31, 2024.

(2) Total commitment (outstanding loan balance plus unfunded commitments) divided by number of loans.

Multi-family totaled $540.8 million as of September 30, 2024, and is our largest single CRE segment, representing 26% of the total CRE portfolio.

Multi-family, our largest single CRE segment, totaled $580.2 million as of March 31, 2025, representing 11% of total loans and 27% of the total CRE portfolio.

This segment includes non-owner occupied residential properties consisting of four or more units that are rented to tenants.

At September 30, 2024, the credit quality of the multi-family segment was 100% pass-rated.

Also, there were no nonaccrual loans and all loans were current with respect to payment terms at September 30, 2024.

In 2024, there continues to be heightened focus in the banking industry on the CRE office sector, given the continuation of remote work and an increase in vacancies across the office market.

As of September 30, 2024, Washington Trust’s CRE office loan segment totaled $296.5 million, or 5% of total loans and 14% of the total CRE loans.

At March 31, 2025, the credit quality of the multi-family segment was 100% pass-rated.

Also, there were no nonaccrual loans and all loans were current with respect to payment terms at March 31, 2025.

There continues to be heightened focus in the banking industry on the CRE office sector, given the continuation of remote work and elevated vacancies across the office market.

As of March 31, 2025, Washington Trust’s CRE office loan segment totaled $275.8 million, or 5% of total loans and 13% of the total CRE loans.

The loans are secured by non-owner occupied office properties, including medical office and lab space, located in our primary lending market area of southern New England - Connecticut, Massachusetts, and Rhode Island.

Furthermore, approximately 67% of the CRE office segment balance of $275.8 million is secured by properties located in suburban areas.

As of September 30, 2024, 96% of the CRE office segment was current with respect to payment terms, and 94% of the CRE office segment was on accruing status.

Additionally, the credit quality of the CRE office loan segment was 84% pass-rated, 2% special mention-rated, and 14% classified as of September 30, 2024.

As of March 31, 2025, 100% of the CRE office segment was current with respect to payment terms, and 97% of the CRE office segment was on accruing status.

Additionally, the credit quality of the CRE office loan segment was 84% pass-rated, 3% special mention-rated, and 13%

Management's Discussion and Analysis

classified as of March 31, 2025.

Commercial and Industrial Loans

C&I loans amounted to $566.3 million at September 30, 2024, down by $38.8 million, or 6%, from the balance at December 31, 2023.

In the first nine months of 2024, C&I originations, advances and line utilization amounted to $50.8 million and were more than offset by payments.

Shared national credit balances outstanding included in the C&I loan portfolio totaled $71.9 million and $66.3 million, respectively, at September 30, 2024 and December 31, 2023.

C&I loans amounted to $535.0 million at March 31, 2025, down by $7.4 million, or 1%, from the balance at December 31, 2024.

In the first three months of 2025, C&I originations, advances and line utilization amounted to $14.0 million and were more than offset by payments.

Shared national credit balances outstanding included in the C&I loan portfolio totaled $95.1 million and $71.0 million, respectively, at March 31, 2025 and December 31, 2024.

All of these loans were included in the pass-rated category of commercial loan credit quality and were current with respect to contractual payment terms at both dates.

Management's Discussion and Analysis

Management considers the C&I portfolio to be well-diversified with loans across several industries.

The following table presents a summary of C&I loan by industry segmentation:

(Dollars in thousands) September 30, 2024 December 31, 2023

(Dollars in thousands) March 31, 2025 December 31, 2024

Outstanding Balance (1)

5 unchanged sentences

53,849 10 55,784 10

Manufacturing 48,239 9 54,905 9

Educational services 42,860 8 41,968 7

Retail trade 52,928 10 41,132 8

Finance and insurance

Educational services 49,432 9 47,092 9

Manufacturing 22,741 4 32,140 6

22,088 4 22,265 4

Finance and insurance

19,735 4 26,557 5

12 unchanged sentences

$25,119 $25,333

(1) Does not include unfunded commitments of $341.8 million and $341.9 million, respectively, as of September 30, 2024 and December 31, 2023.

(1) Does not include unfunded commitments of $290.7 million and $307.9 million, respectively, as of March 31, 2025 and December 31, 2024.

(2) Total commitment (outstanding loan balance plus unfunded commitments) divided by number of loans.

Healthcare and social assistance totaled $131.1 million as of September 30, 2024, and is our largest single C&I segment, representing 23% of the total C&I portfolio.

Healthcare and social assistance, our largest single C&I segment, totaled $121.0 million as of March 31, 2025, representing 2% of total loans and 23% of the total C&I portfolio.

This segment includes specialty medical practices, elder services, and community and mental health centers.

At September 30, 2024, the credit quality of the healthcare and social assistance segment was 86% pass-rated and 14% was special mention.

Also, there were no nonaccrual loans and all loans were current with respect to payment terms at September 30, 2024.

At March 31, 2025, the credit quality of the healthcare and social assistance segment was 86% pass-rated and 14% was special mention.

Also, there were no nonaccrual loans and all loans were current with respect to payment terms at March 31, 2025.

Residential Real Estate Loans

The residential real estate loan portfolio represented 46% of total loans at both September 30, 2024 and December 31, 2023.

Residential real estate loans amounted to $2.5 billion at September 30, 2024, down by $75.1 million, or 3%, from the balance at December 31, 2023, as total origination activity declined and a lower proportion of loans was originated for portfolio.

The residential real estate loan portfolio represented 41% of total loans at both March 31, 2025 and December 31, 2024.

Residential real estate loans amounted to $2.1 billion at March 31, 2025, down by $12.9 million, or 1%, from the balance at December 31, 2024.

Management's Discussion and Analysis

The following is a geographic summary of residential real estate loans by property location:

(Dollars in thousands) September 30, 2024 December 31, 2023

(Dollars in thousands) March 31, 2025 December 31, 2024

Amount % of Total Amount % of Total

6 unchanged sentences

$2,113,307 100 % $2,126,171 100 %

(1) Includes residential mortgage loans purchased from and serviced by other financial institutions totaling $48.0 million and $53.4 million, respectively, as of September 30, 2024 and December 31, 2023.

Management's Discussion and Analysis

(1) Includes residential mortgage loans purchased from and serviced by other financial institutions totaling $44.1 million and $46.8 million, respectively, as of March 31, 2025 and December 31, 2024.

Residential real estate loans are originated both for sale to the secondary market as well as for retention in the Bank’s loan portfolio.

We also originate residential real estate loans for various investors in a broker capacity, including conventional mortgages and reverse mortgages.

Residential real estate loan origination and refinancing activities are sensitive to interest rates and the condition of housing markets.

The table below presents residential real estate loan origination activity:

(Dollars in thousands) Three Months Nine Months

Periods ended September 30, 2024 2023 2024 2023

Amount % of Total Amount % of Total Amount % of Total Amount % of Total

(Dollars in thousands)

Three months ended March 31, 2025 2024

Amount % of Total Amount % of Total

Originations for retention in portfolio (1)

5 unchanged sentences

(2) Includes brokered loans (loans originated for others).

Residential real estate loan origination and refinancing activities decreased in response to increases in market interest rates and changes in the housing markets.

The proportion of residential real estate loans originated for portfolio has decreased for balance sheet management purposes.

The table below presents residential real estate loan sales activity:

(Dollars in thousands)

Three Months Nine Months

Periods ended September 30, 2024 2023 2024 2023

Amount % of Total Amount % of Total Amount % of Total Amount % of Total

Three months ended March 31, 2025 2024

Amount % of Total Amount % of Total

Loans sold with servicing rights retained $16,819 22 % $24,057 33 %

8 unchanged sentences

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

The net balance of capitalized servicing rights amounted to $7.8 million and $8.5 million, respectively, as of September 30, 2024 and December 31, 2023.

The balance of residential mortgage loans serviced for others, which are not included in the Unaudited Consolidated Balance Sheets, amounted to $1.4 billion and $1.5 billion, respectively, as of September 30, 2024 and December 31, 2023.

The net balance of capitalized servicing rights amounted to $7.5 million and $7.7 million, respectively, as of March 31, 2025 and December 31, 2024.

The balance of residential mortgage loans serviced for others, which are not included in the Unaudited Consolidated Balance Sheets, amounted to $1.4 billion at both March 31, 2025 and December 31, 2024.

Management's Discussion and Analysis

Consumer Loans

The consumer loan portfolio represented 6% of total loans at both September 30, 2024 and December 31, 2023.

The consumer loan portfolio represented 7% of total loans at both March 31, 2025 and December 31, 2024.

Consumer loans include home equity loans and lines of credit and personal installment loans.

Home equity lines of credit and home equity loans represented 94% of the total consumer portfolio at September 30, 2024.

Home equity lines of credit and home equity loans represented 95% of the total consumer portfolio at March 31, 2025.

Our home equity line and home equity loan origination activities are conducted primarily in southern New England.

The Bank estimates that approximately 45% of the combined home equity lines of credit and home equity loan balances are first lien positions or subordinate to other Washington Trust mortgages.

Management's Discussion and Analysis

The consumer loan portfolio totaled $317.1 million at September 30, 2024, down by $14.7 million, or 4%, from December 31, 2023, largely reflecting a decrease in home equity lines.

The consumer loan portfolio totaled $313.8 million at March 31, 2025, down by $923 thousand, or 0.3%, from December 31, 2024, largely reflecting a decrease in home equity lines.

Asset Quality

7 unchanged sentences

The following table presents nonperforming assets and additional asset quality data:

(Dollars in thousands) September 30,

(Dollars in thousands) March 31,

2025 December 31,

2 unchanged sentences

Total commercial

18,875 33,509

Residential Real Estate:

11 unchanged sentences

Nonaccrual Loans

During the nine months ended September 30, 2024, the Corporation made no changes in its practices or policies concerning the placement of loans into nonaccrual status.

During the three months ended March 31, 2025, the Corporation made no changes in its practices or policies concerning the placement of loans into nonaccrual status.

Management's Discussion and Analysis

The following table presents the activity in nonaccrual loans:

(Dollars in thousands) Three Months Nine Months

For the periods ended September 30, 2024 2023 2024 2023

(Dollars in thousands)

For the three months ended March 31, 2025 2024

Balance at beginning of period $23,307 $44,618

6 unchanged sentences

The following table presents additional detail on nonaccrual loans:

(Dollars in thousands) September 30, 2024 December 31, 2023

(Dollars in thousands) March 31, 2025 December 31, 2024

Days Past Due Days Past Due

13 unchanged sentences

(1) Percentage of nonaccrual loans to the total loans outstanding within the respective loan class.

There were no significant commitments to lend additional funds to borrowers whose loans were on nonaccrual status at September 30, 2024.

As of September 30, 2024, the composition of nonaccrual loans was 61% commercial and 39% residential and consumer.

This compared to 75% commercial and 25% residential and consumer as of December 31, 2023.

Total nonaccrual loans decreased by $13.5 million from the end of 2023, reflecting a decline in nonaccrual commercial real estate loans.

Nonaccrual commercial real estate loans decreased by $14.6 million from the balance at December 31, 2023, primarily due to one loan secured by a healthcare facility that returned to accruing status in the first quarter of 2024.

As of September 30, 2024, the balance of nonaccrual commercial real estate loans consisted of two collateral dependent loans.

One loan for $10.5 million is secured by an office property in Massachusetts and is past due, as the loan matured in the third quarter of 2024.

The other loan for $7.8 million is secured by an office property in Connecticut, is current with respect to payment terms and was modified as a TLM in 2023.

These loans were individually assessed for credit impairment and based on the estimated fair value of the collateral less estimated costs to sell (when appropriate), specific reserves of $500 thousand were deemed necessary at September 30, 2024.

As of September 30, 2024, the balance of nonaccrual residential mortgage loans was predominately secured by properties in Connecticut, Massachusetts, and Rhode Island.

Included in total nonaccrual residential real estate loans at September 30,

There were no significant commitments to lend additional funds to borrowers whose loans were on nonaccrual status at March 31, 2025.

As of March 31, 2025, the composition of nonaccrual loans was 60% residential and consumer and 40% commercial.

This compared to 55% residential and consumer and 45% commercial as of December 31, 2024.

Nonaccrual loans at March 31, 2025 totaled $21.6 million, down by $1.7 million from the end of 2024.

This reflected a decline in nonaccrual commercial real estate loans of $2.4 million due to the recognition of a partial charge-off on one CRE office segment loan discussed further below.

As of March 31, 2025, the balance of nonaccrual commercial real estate loans consisted of two individually analyzed collateral dependent loans secured by office properties in our primary lending area of southern New England.

Both of these loans are current with respect to payment terms at March 31, 2025.

One loan, which was previously modified as a TLM in 2023, had a carrying value of $4.3 million at March 31, 2025.

Based on the estimated fair value of the collateral less costs to sell, a partial charge-off of $2.4 million was recognized on this loan in the first quarter of 2025 and no additional specific reserves were deemed necessary at March 31, 2025.

The second loan, which was previously modified as a TLM in 2024, had a carrying value of $3.3 million at March 31, 2025.

Based on the estimated fair value of the collateral less estimated costs to sell, specific reserves of $423 thousand on this loan were deemed necessary at March 31, 2025.

Management's Discussion and Analysis

2024 were four loans purchased for portfolio and serviced by others amounting to $933 thousand.

Nonaccrual residential real estate mortgage loans amounted to $11.1 million at March 31, 2025, up by $335 thousand from the end of 2024.

As of March 31, 2025, the balance of nonaccrual residential mortgage loans was predominately secured by properties in Massachusetts, Connecticut, and Rhode Island.

Included in total nonaccrual residential real estate loans at March 31, 2025 were two loans purchased for portfolio and serviced by others amounting to $524 thousand.

Management monitors the collection efforts of its third-party servicers as part of its assessment of the collectability of nonperforming loans.

Past Due Loans

The following table presents past due loans by category:

(Dollars in thousands) September 30, 2024 December 31, 2023

The following table presents past due loans by class:

(Dollars in thousands) March 31, 2025 December 31, 2024

Commercial real estate $— — % $— — %

8 unchanged sentences

(1) Percentage of past due loans to the total loans outstanding within the respective loan class.

The composition of past due loans (loans past due 30 days or more) was 52% commercial and 48% residential and consumer as of September 30, 2024 and essentially all residential and consumer as of December 31, 2023.

Total past due loans increased by $9.0 million from the end of 2023, largely due to the $10.5 million nonaccrual commercial real estate loan discussed above under the caption “Nonaccrual Loans.”

Total past due loans included $18.1 million of nonaccrual loans as of September 30, 2024, compared to $6.9 million as of December 31, 2023.

All loans 90 days or more past due at September 30, 2024 and December 31, 2023 were classified as nonaccrual.

The composition of past due loans (loans past due 30 days or more) was 89% residential and consumer and 11% commercial as of March 31, 2025, compared to 92% residential and consumer and 8% commercial as of December 31, 2024.

Total past due loans decreased by $1.8 million from the end of 2024, reflecting a decline in past due residential mortgage loans.

Total past due loans included $7.4 million of nonaccrual loans as of March 31, 2025, compared to $6.4 million as of December 31, 2024.

All loans 90 days or more past due at March 31, 2025 and December 31, 2024 were classified as nonaccrual.

Potential Problem Loans

The Corporation classifies certain loans as “substandard,” “doubtful,” or “loss” based on criteria consistent with guidelines provided by banking regulators.

Potential problem loans include classified accruing commercial loans that were less than 90 days past due at September 30, 2024 and other loans for which known information about possible credit problems of the related borrowers causes management to have doubts as to the ability of such borrowers to comply with the present loan repayment terms and which may result in disclosure of such loans as nonperforming at some time in the future.

Potential problem loans include classified accruing commercial loans that were less than 90 days past due at March 31, 2025 and other loans for which known information about possible credit problems of the related borrowers causes management to have doubts as to the ability of such borrowers to comply with the present loan repayment terms and which may result in disclosure of such loans as nonperforming at some time in the future.

Potential problem loans are not included in the amounts of nonaccrual loans presented above.

1 unchanged sentence

Accordingly, there can be no assurance that other loans will not become 90 days or more past due, be placed on nonaccrual, become modified, or require an increased allowance coverage and provision for credit losses on loans.

Management has identified $25.1 million in potential problem loans at September 30, 2024, compared to $22.9 million at December 31, 2023.

The balances of potential problem loans largely consisted of two CRE loans secured by office properties in Massachusetts and Connecticut.

At September 30, 2024 and December 31, 2023, these loans were current with respect to payment terms.

Management has identified $27.8 million in potential problem loans at March 31, 2025, compared to $28.2 million at December 31, 2024.

As of March 31, 2025, the balance of potential problem loans largely consisted of two CRE loans secured by office properties in Massachusetts.

At March 31, 2025, these loans were current with respect to payment terms.

Management's Discussion and Analysis

Allowance for Credit Losses on Loans

The ACL on loans is management’s estimate of expected lifetime credit losses on loans carried at amortized cost.

Management's Discussion and Analysis

on loans is established through a provision for credit losses recognized in earnings.

The ACL on loans is established through a provision for credit losses recognized in earnings.

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

The Corporation’s general practice is to identify problem credits early and recognize full or partial charge-offs as promptly as practicable when it is determined that the collection of loan principal is unlikely.

Full or partial charge-offs on collateral dependent individually analyzed loans are recognized when the collateral is deemed to be insufficient to support the carrying value of the loan.

The Corporation does not recognize a recovery when new appraisals indicate a subsequent increase in value.

Appraisals are generally obtained with values determined on an “as is” basis from independent appraisal firms for real estate collateral dependent commercial loans in the process of collection or when warranted by other deterioration in the borrower’s credit status.

There were no significant changes in our modeling methodology to determine the ACL on loans during the three months ended March 31, 2025.

The Corporation’s general practice is to identify problem credits early.

To determine if a loan should be charged-off, all possible sources of repayment are analyzed.

Possible sources of repayment include the potential for future cash flows, the value of underlying collateral, and the strength of guarantors.

Full or partial charge-offs are recognized as promptly as practicable when available information confirms that the collection of loan principal is unlikely.

For collateral dependent loans, this confirming information may include an appraisal that reflects a shortfall between the value of the collateral and the carrying value of the loan or a deficiency balance following the sale of the collateral.

Appraisals are generally obtained with values determined on an “as is” basis from independent appraisal firms for real estate collateral dependent loans in the process of collection or when warranted by other deterioration in the borrower’s credit status.

New appraisals are generally obtained for nonaccrual loans or when management believes it is warranted.

The Corporation has continued to maintain appropriate professional standards regarding the professional qualifications of appraisers and has an internal review process to monitor the quality of appraisals.

For residential real estate loans and real estate collateral dependent consumer loans that are in the process of collection, valuations are obtained from independent appraisal firms with values determined on an “as is” basis.

The Corporation does not recognize a recovery when new appraisals indicate a subsequent increase in value.

The following table presents additional detail on the Corporation’s loan portfolio and associated allowance:

(Dollars in thousands) September 30, 2024 December 31, 2023

(Dollars in thousands) March 31, 2025 December 31, 2024

Loans Related Allowance Allowance / Loans Loans Related Allowance Allowance / Loans

3 unchanged sentences

Total $5,096,909 $41,056 0.81 % $5,139,319 $41,960 0.82 %

(1) The amount reported for pooled loans excludes a $19 thousand negative basis adjustment associated with fair value hedges at September 30, 2024.

(1) The amount reported for pooled loans excludes negative basis adjustments associated with fair value hedges of $699 thousand and $1.5 million, respectively, at March 31, 2025 and December 31, 2024.

See Note 7 to the Unaudited Consolidated Financial Statements for additional disclosure.

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

The methodology for evaluating quantitative factors consists of two basic components.

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

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

The ACL for individually analyzed loans 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 was collateral dependent, at the fair value of the collateral.

The ACL for pooled loans is measured utilizing a DCF methodology to estimate credit losses for each pooled portfolio segment.

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

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

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

Management utilizes forecasted econometric factors with a one-year reasonable and supportable forecast period and one-year straight-line reversion period in order to estimate the probability of default for each loan portfolio segment.

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

The sum of all the loan level reserves are aggregated for each portfolio segment and a loss rate factor is derived.

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

The ACL on loans amounted to $42.6 million at September 30, 2024, up by $1.6 million, or 4%, from the balance at December 31, 2023.

The ACL on loans as a percentage of total loans, also known as the reserve coverage ratio, was 0.77% at September 30, 2024, compared to 0.73% at December 31, 2023.

The Corporation recorded a provision for credit losses on loans of $300 thousand and $1.7 million, respectively, for the three and nine months ended September 30, 2024.

The provision for credit losses in 2024 largely reflected continued, yet

Management's Discussion and Analysis

subsiding, slowdown of loan prepayment speeds and modest specific reserve allocations on an individually analyzed nonaccrual commercial loan, partially offset by a decline in loan balances and relatively stable to improving forecasted economic conditions.

Net charge-offs totaled $48 thousand for the three months ended September 30, 2024, compared to $30 thousand for the same period in 2023.

For the nine months ended September 30, 2024, net charge-offs totaled $127 thousand, compared to net charge-offs of $114 thousand for the same period in 2023.

Various loan loss allowance coverage ratios are affected by the timing and extent of charge-offs, particularly with respect to individually analyzed collateral dependent loans.

The ACL on loans amounted to $41.1 million at March 31, 2025, down by $904 thousand, or 2%, from the balance at December 31, 2024.

The ACL on loans as a percentage of total loans, also known as the reserve coverage ratio, was 0.81% at March 31, 2025, compared to 0.82% at December 31, 2024.

The Corporation recorded a provision for credit losses on loans of $1.4 million for the three months ended March 31, 2025.

Net charge-offs totaled $2.3 million for the three months ended March 31, 2025, compared to $52 thousand for the same period in 2024.

The increase in net charge-offs was primarily due to partial charge-off on one CRE office segment loan discussed above under the caption “Nonaccrual Loans.”

The ACL on loans is an estimate and ultimate losses may vary from management’s estimate.

1 unchanged sentence

conversely, improving conditions or assumptions could lead to further reductions in the ACL on loans.

Management's Discussion and Analysis

The following table presents the allocation of the ACL on loans by portfolio segment.

The total ACL on loans is available to absorb losses from any segment of the loan portfolio.

(Dollars in thousands) September 30, 2024 December 31, 2023

(Dollars in thousands) March 31, 2025 December 31, 2024

Allocated ACL

18 unchanged sentences

Deposits provide an important source of funding for the Bank, as well as an ongoing stream of fee revenue.

The Bank is a participant in the DDM program, ICS program, and the CDARS program.

The Bank is a participant in the DDM, ICS and CDARS programs.

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

2 unchanged sentences

We consider these reciprocal deposit balances to be in-market deposits as distinguished from traditional wholesale brokered deposits.

Management's Discussion and Analysis

The following table presents a summary of deposits:

(Dollars in thousands) September 30, 2024 December 31, 2023 Change in Balance

(Dollars in thousands) March 31, 2025 December 31, 2024 Change in Balance

Amount % of Total Amount % of Total $ %

6 unchanged sentences

Total in-market deposits (1)

5,013,353 99 4,818,262 94 195,091 4

Wholesale brokered time deposits 27,228 1 297,538 6 (270,310) (91)

Total deposits $5,040,581 100 % $5,115,800 100 % ($75,219) (1 %)

Total deposits amounted to $5.2 billion at September 30, 2024, compared to $5.3 billion at December 31, 2023.

Wholesale brokered time deposits decreased by $274.1 million, or 42%, from December 31, 2023, reflecting maturities and a shift in wholesale funding mix based on pricing.

See disclosure regarding FHLB advances under the caption “Borrowings” below.

In-market deposits, which exclude wholesale brokered time deposits, were up by $97.8 million, or 2%, from the balance at December 31, 2023.

Growing deposits continues to be highly competitive in our market area and demand for higher-cost deposit products is strong.

(1) As of March 31, 2025, in-market deposits were approximately 60% retail and 40% commercial and the average size was approximately $38 thousand.

Management's Discussion and Analysis

Total deposits amounted to $5.0 billion at March 31, 2025, down by $75.2 million, or 1%, from December 31, 2024, driven by a decline in wholesale brokered time deposits of $270.3 million, or 91%.

See disclosure regarding wholesale funding under the caption “Borrowings” below.

Our in-market deposits, which exclude wholesale brokered time deposits, are well-diversified by industry and customer type.

In-market deposits were up by $195.1 million, or 4%, from the balance at December 31, 2024, largely due to increases in high-rate savings account balances.

Growing deposits continues to be highly competitive in our market area and demand for higher-cost deposit products is intense.

Washington Trust has made recent investments in technology to enhance our customers’ experience and we remain focused on maintaining and growing depositor relationships.

As of September 30, 2024, in-market deposits were approximately 59% retail and 41% commercial.

Our in-market deposits are well-diversified by industry and customer type.

The average size of our in-market deposit accounts was approximately $36 thousand at September 30, 2024.

The following table presents a summary of the Bank’s uninsured deposits:

(Dollars in thousands) September 30, 2024 December 31, 2023

(Dollars in thousands) March 31, 2025 December 31, 2024

Balance % of Total Deposits Balance % of Total Deposits

13 unchanged sentences

Borrowings primarily consist of FHLB advances, which are used as a source of funding for liquidity and interest rate risk management purposes.

FHLB advances totaled $1.3 billion at September 30, 2024, up by $110.0 million, or 9%, from the balance at the end of 2023, reflecting a shift to utilize higher levels of FHLB advances and lower levels of wholesale brokered time certificates as a wholesale funding source.

FHLB advances totaled $850.0 million at March 31, 2025, down by $275.0 million, or 24%, from the balance at the end of 2024.

For additional information regarding FHLB advances see Note 10 to the Unaudited Consolidated Financial Statements.

Management's Discussion and Analysis

Both FHLB and wholesale brokered time deposits decreased for the three months ended March 31, 2025, reflecting increases in in-market deposits and the redeployment of cash resulting from the previously disclosed balance sheet repositioning transactions.

Liquidity and Capital Resources

1 unchanged sentence

Liquidity is the ability of a financial institution to meet maturing liability obligations and customer loan demand.

The Corporation’s primary source of liquidity is in-market deposits, which funded approximately 65% of total average assets in the nine months ended September 30, 2024.

The Corporation’s primary source of liquidity is in-market deposits, which funded approximately 73% of total average assets in the three months ended March 31, 2025.

While the generally preferred funding strategy is to attract and retain low-cost deposits, the ability to do so is affected by competitive interest rates and terms in the marketplace.

12 unchanged sentences

and (3) maturing time deposits.

The Corporation has established collateralized borrowing capacity with the FRBB and also maintains additional collateralized borrowing capacity with the FHLB in excess of levels used in the ordinary course of business.

The Corporation has established

Management's Discussion and Analysis

collateralized borrowing capacity with the FRBB and also maintains additional collateralized borrowing capacity with the FHLB in excess of levels used in the ordinary course of business.

Borrowing capacity is impacted by the amount and type of assets available to be pledged.

1 unchanged sentence

(Dollars in thousands)

September 30,

2025 December 31,

4 unchanged sentences

113,746 70,286

Noninterest-bearing cash 33,694 54,970

Available cash liquidity (3)

43,350 36,647

Unencumbered securities 548,483 597,771

2 unchanged sentences

Percentage of total contingent liquidity to uninsured deposits, after exclusions 161.4 % 136.1 %

(1) As of September 30, 2024 and December 31, 2023, loans with a carrying value of $3.2 billion and $3.4 billion, respectively, and securities available for sale with carrying values of $90.4 million and $94.3 million, respectively, were pledged to the FHLB resulting in this additional borrowing capacity.

(2) As of September 30, 2024 and December 31, 2023, loans with a carrying value of $85.6 million and $71.0 million, respectively, and securities available for sale with a carrying value of $13.8 million and $13.1 million, respectively, were pledged to the FRBB for the discount window resulting in this additional unused borrowing capacity.

In addition to the amounts presented above, the Bank also had access to a $40.0 million unused line of credit with the FHLB at September 30, 2024 and December 31, 2023.

(1) As of March 31, 2025 and December 31, 2024, loans with a carrying value of $2.8 billion and $2.8 billion, respectively, and securities available for sale with carrying values of $74.6 million and $74.2 million, respectively, were pledged to the FHLB resulting in this additional borrowing capacity.

(2) As of March 31, 2025 and December 31, 2024, loans with a carrying value of $66.2 million and $68.5 million, respectively, and securities available for sale with a carrying value of $62.8 million and $13.9 million, respectively, were pledged to the FRBB for the discount window resulting in this additional unused borrowing capacity.

(3) Available cash liquidity excludes amounts restricted for collateral purposes and designated for operating needs.

Borrowing capacity at December 31, 2024 was reduced by the reclassification of residential mortgage loan collateral to held for sale as part of the previously disclosed balance sheet repositioning transactions.

On January 24, 2025, the sale was completed and the cash proceeds received were used to pay down FHLB advances and wholesale brokered time deposits in the first quarter of 2025.

In addition to the amounts presented above, the Bank also had access to a $40.0 million unused line of credit with the FHLB at March 31, 2025 and December 31, 2024.

The ALCO establishes and monitors internal liquidity measures to manage liquidity exposure.

Liquidity remained within target ranges established by the ALCO during the nine months ended September 30, 2024.

Liquidity remained within target ranges established by the ALCO during the three months ended March 31, 2025.

Based on its assessment of the liquidity considerations described above, management believes the Corporation’s sources of funding meet anticipated funding needs.

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Also, in the ordinary course of business, the Corporation engages in a variety of financial transactions that, in accordance with GAAP, are not recorded in the financial statements, or are recorded in amounts that differ from the notional amounts.

These financial

Management's Discussion and Analysis

transactions include commitments to extend credit, standby letters of credit, forward loan commitments, loan related derivative contracts and interest rate risk management contracts.

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

For additional information on derivative financial instruments and financial instruments with off-balance sheet risk see Notes 7 and 17 to the Unaudited Consolidated Financial Statements.

Capital Resources

Total shareholders’ equity amounted to $502.2 million at September 30, 2024, up by $29.5 million from December 31, 2023.

Net income of $32.7 million and an increase of $24.0 million in the AOCL component of shareholders' equity were partially offset by $29.0 million in dividend declarations.

The increase in AOCL largely reflected increases in the fair value of available for sale debt securities due to changes in market interest rates.

See Note 6 to the Unaudited Consolidated Financial Statements for additional discussion regarding the previously terminated cash flow hedge.

Washington Trust declared a quarterly dividend of 56 cents per share for the three months ended September 30, 2024, unchanged from the 56 cents per share declared for the same period in 2023.

On a year-to-date basis, dividend declarations totaled $1.68 per share in 2024, unchanged from the $1.68 per share declared in 2023.

The ratio of total equity to total assets amounted to 7.03% and 6.56%, respectively, at September 30, 2024 and December 31, 2023.

Book value per share was $29.44 at September 30, 2024, compared to $27.75 at December 31, 2023.

The Bancorp and the Bank are subject to various regulatory capital requirements and are considered “well capitalized,” with a total risk-based capital ratio of 12.21% at September 30, 2024, compared to 11.58% at December 31, 2023.

Total shareholders’ equity amounted to $521.7 million at March 31, 2025, up by $22.0 million from December 31, 2024.

Net income of $12.2 million and improvement of $20.0 million in the AOCL component of shareholders' equity were partially offset by $11.0 million in dividend declarations.

The improvement in AOCL included an increase in fair value of available for sale debt securities, as well as the effects of the remeasurement of the qualified pension plan upon settlement and the reclassification of the after-tax pension plan settlement charge to noninterest expenses.

See Note 15 to the Unaudited Consolidated Financial Statements for additional disclosure regarding changes in AOCL.

Management's Discussion and Analysis

Washington Trust declared a quarterly dividend of 56 cents per share for the three months ended March 31, 2025, unchanged from the 56 cents per share declared for the same period in 2024.

The ratio of total equity to total assets amounted to 7.92% at March 31, 2025, compared to a ratio of 7.21% at December 31, 2024.

Book value per share was $27.06 at March 31, 2025, compared to $25.93 at December 31, 2024.

The Bancorp and the Bank are subject to various regulatory capital requirements and are considered “well capitalized,” with a total risk-based capital ratio of 13.13% at March 31, 2025, compared to 12.47% at December 31, 2024.

See Note 11 to the Unaudited Consolidated Financial Statements for additional discussion regarding shareholders’ equity.

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The ALCO uses income simulation to measure interest rate risk inherent in the Corporation’s financial instruments at a given point in time by showing the effect of interest rate shifts on net interest income over a 12-month horizon and a 13- to 24-month horizon.

The simulations assume that the size and general composition of the Corporation’s balance sheet remain static over the simulation horizons, with the exception of certain deposit mix shifts from low-cost savings to higher-cost time deposits in selected interest rate scenarios.

The simulations assume that the size and general composition of the Corporation’s balance sheet remain static over the simulation horizons, with the exception of certain deposit mix shifts from lower-cost to higher-cost deposits in selected interest rate scenarios.

The simulations at December 31, 2024 incorporated the reclassification of residential mortgage loans from portfolio to held for sale and the sale of these loans completing in January 2025.

The simulations at December 31, 2024 assume the proceeds from the sale of loans are used to pay down maturing wholesale funding balances.

Additionally, the simulations take into account the specific repricing, maturity, call options, and prepayment characteristics of differing financial instruments that may vary under different interest rate scenarios.

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Another significant simulation assumption is the sensitivity of savings deposits to fluctuations in interest rates.

Income simulation results assume that changes in both savings

Management's Discussion and Analysis

deposit rates and balances are related to changes in short-term interest rates.

Income simulation results assume that changes in both savings deposit rates and balances are related to changes in short-term interest rates.

The relationship between short-term interest rate changes and deposit rate and balance changes may differ from the ALCO’s estimates used in income simulation.

The ALCO reviews simulation results to determine whether the Corporation’s exposure to a decline in net interest income remains within established tolerance levels over the simulation horizons and to develop appropriate strategies to manage this exposure.

As of September 30, 2024 and December 31, 2023, net interest income simulations indicated that exposure to changing interest rates over the simulation horizons remained within tolerance levels established by the Corporation.

As of March 31, 2025 and December 31, 2024, net interest income simulations indicated that exposure to changing interest rates over the simulation horizons remained within tolerance levels established by the Corporation.

All changes are measured in comparison to the projected net interest income that would result from an “unchanged” rate scenario where both interest rates and the composition of the Corporation’s balance sheet remain stable.

Management's Discussion and Analysis

The ALCO regularly reviews a wide variety of interest rate shift scenario results to evaluate interest rate risk exposure, including parallel changes in interest rates and scenarios showing the effect of steepening or flattening changes in the yield curve.

Because income simulations assume that the Corporation’s balance sheet will remain static over the simulation horizon, the results do not reflect adjustments in strategy that the ALCO could implement in response to rate shifts.

Because income simulations assume that the Corporation’s balance sheet will generally remain static over the simulation horizon, the results do not reflect adjustments in strategy that the ALCO could implement in response to rate shifts.

It should also be noted that the static balance sheet assumption does not necessarily reflect the Corporation’s expectation for future balance sheet growth, which is a function of the business environment and customer behavior.

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Over time, the repricing, maturity, and prepayment characteristics of financial instruments and the composition of the Corporation’s balance sheet may change to a different degree than estimated.

The following table sets forth the estimated change in net interest income from an unchanged rate scenario over the periods indicated for parallel changes in market interest rates using the Corporation’s on- and off-balance sheet financial instruments as of September 30, 2024 and December 31, 2023.

Interest rates are assumed to shift by parallel rate changes as shown in the table below.

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It should be noted that the rate scenarios shown do not necessarily reflect the ALCO’s view of the “most likely” change in interest rates over the periods indicated.

September 30, 2024 December 31, 2023

March 31, 2025 December 31, 2024

Months 1 - 12 Months 13 - 24 Months 1 - 12 Months 13 - 24

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The relative change in interest rate sensitivity from December 31, 2024, as shown in the above table, was attributable to changes in balance sheet composition and market interest rates.

The changes in balance sheet composition included a temporary increase in rate-sensitive cash balances on deposit at correspondent banks, reductions in loans, and a lower level of wholesale funding given in-market deposit growth.

Furthermore, additional interest rate management derivative contracts were executed to hedge interest rate risk.

The changes included in-market deposit growth and also reflected the balance sheet repositioning transactions previously announced in December 2024 that included a reduction in loans and a lower level of wholesale funding.

The ALCO estimates that as interest rates change, interest-earning assets would reprice more quickly than interest-bearing liabilities.

In-market deposit rate changes are modeled to lag behind other market interest rates in both pace and magnitude.

Additionally, prepayments of loans and securities generally increase as market interest rates decline and decrease as market interest rates rise.

In addition, prepayments of loans and securities generally increase as market interest rates decline and decrease as market interest rates rise.

Additionally, the Corporation monitors the potential change in market value of its available for sale debt securities in changing interest rate environments.

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Management's Discussion and Analysis

The following table summarizes the potential change in market value of the Corporation’s available for sale debt securities as of September 30, 2024 and December 31, 2023 resulting from immediate parallel rate shifts:

The following table summarizes the potential change in market value of the Corporation’s available for sale debt securities as of March 31, 2025 and December 31, 2024 resulting from immediate parallel rate shifts:

(Dollars in thousands)

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Trust preferred debt and other corporate debt securities 85 (162)

Total change in market value as of September 30, 2024 $51,670 ($110,975)

Total change in market value as of March 31, 2025 $49,907 ($119,200)

Total change in market value as of December 31, 2024 $75,007 ($140,027)

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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-Q

Item 2. Management’s Discussion and Analysis