WASHINGTON TRUST BANCORP INC 10-Q

Item 1. Financial Statements Washington Trust Bancorp, Inc. and Subsidiaries Consolidated Balance Sheets (unaudited) (Dollars in thousands, except par value) March 31, 2025 December 31, 2024 Assets: Cash and due from banks $ 33,394 $ 21,534 Interest-earning deposits with correspondent banks 82,804 88,368 Short-term investments 4,041 3,987 Mortgage loans held for sale, at fair value 21,953 21,708 Mortgage loans held for sale, at lower of cost or market — 281,706 Premises and equipment held for sale, lower of cost or market — 4,788 Available for sale debt securities, at fair value (amortized cost of $ 1,033,901 , net of allowance for credit losses on securities of $ 0 at March 31, 2025; and amortized cost of $ 1,049,557 ; net of allowance for credit losses on securities of $ 0 at December 31, 2024) 917,545 916,305 Federal Home Loan Bank stock, at cost 38,899 49,817 Loans: Total loans 5,096,210 5,137,838 Less: allowance for credit losses on loans 41,056 41,960 Net loans 5,055,154 5,095,878 Premises and equipment, net 26,068 26,873 Operating lease right-of-use assets 36,048 26,943 Investment in bank-owned life insurance 107,546 106,777 Goodwill 63,909 63,909 Identifiable intangible assets, net 2,682 2,885 Other assets 195,972 219,169 Total assets $ 6,586,015 $ 6,930,647 Liabilities: Deposits: Noninterest-bearing deposits $ 625,590 $ 661,776 Interest-bearing deposits 4,414,991 4,454,024 Total deposits 5,040,581 5,115,800 Federal Home Loan Bank advances 850,000 1,125,000 Junior subordinated debentures 22,681 22,681 Operating lease liabilities 38,716 29,578 Other liabilities 112,357 137,860 Total liabilities 6,064,335 6,430,919 Commitments and contingencies (Note 17) Shareholders’ Equity: Common stock of $ .0625 par value; authorized 60,000,000 shares; 19,561,985 shares issued and 19,276,148 shares outstanding at March 31, 2025 and 19,561,985 shares issued and 19,273,583 shares outstanding at December 31, 2024 1,223 1,223 Paid-in capital 197,570 196,947 Retained earnings 435,233 434,014 Accumulated other comprehensive loss ( 99,179 ) ( 119,171 ) Treasury stock, at cost, 285,837 shares at March 31, 2025 and 288,402 shares at December 31, 2024 ( 13,167 ) ( 13,285 ) Total shareholders’ equity 521,680 499,728 Total liabilities and shareholders’ equity $ 6,586,015 $ 6,930,647 The accompanying notes are an integral part of these unaudited consolidated financial statements. -4- Washington Trust Bancorp, Inc. and Subsidiaries Consolidated Statements of Income (unaudited) (Dollars and shares in thousands, except per share amounts) Three months ended March 31, 2025 2024 Interest income: Interest and fees on loans $ 66,656 $ 75,636 Interest on mortgage loans held for sale 958 255 Taxable interest on debt securities 8,827 7,096 Nontaxable interest on debt securities 7 — Dividends on Federal Home Loan Bank stock 1,022 1,073 Other interest income 1,993 1,196 Total interest and dividend income 79,463 85,256 Interest expense: Deposits 31,748 38,047 Federal Home Loan Bank advances 10,946 15,138 Junior subordinated debentures 347 406 Total interest expense 43,041 53,591 Net interest income 36,422 31,665 Provision for credit losses 1,200 700 Net interest income after provision for credit losses 35,222 30,965 Noninterest income: Wealth management revenues 9,891 9,338 Mortgage banking revenues 2,304 2,506 Card interchange fees 1,509 1,145 Service charges on deposit accounts 744 685 Loan related derivative income 101 284 Income from bank-owned life insurance 769 739 Gain on sale of bank-owned properties, net 6,994 — Other income 331 2,466 Total noninterest income 22,643 17,163 Noninterest expense: Salaries and employee benefits 22,422 21,775 Outsourced services 4,346 3,780 Net occupancy 2,741 2,561 Equipment 891 1,020 Legal, audit, and professional fees 750 706 FDIC deposit insurance costs 1,262 1,441 Advertising and promotion 410 548 Amortization of intangibles 204 208 Pension plan settlement charge 6,436 — Other expenses 2,734 2,324 Total noninterest expense 42,196 34,363 Income before income taxes 15,669 13,765 Income tax expense 3,490 2,829 Net income $ 12,179 $ 10,936 Net income available to common shareholders $ 12,179 $ 10,924 Weighted average common shares outstanding - basic 19,276 17,033 Weighted average common shares outstanding - diluted 19,370 17,074 Per share information: Basic earnings per common share $ 0.63 $ 0.64 Diluted earnings per common share $ 0.63 $ 0.64 The accompanying notes are an integral part of these unaudited consolidated financial statements. -5- Washington Trust Bancorp, Inc. and Subsidiaries Consolidated Statements of Comprehensive Income (unaudited) (Dollars in thousands) Three months ended March 31, 2025 2024 Net income $ 12,179 $ 10,936 Other comprehensive income (loss), net of tax: Net change in fair value of available for sale debt securities 12,630 ( 10,988 ) Net change in fair value of cash flow hedges 593 3,205 Net change in defined benefit plan obligations 6,769 23 Total other comprehensive income (loss), net of tax 19,992 ( 7,760 ) Total comprehensive income $ 32,171 $ 3,176 The accompanying notes are an integral part of these unaudited consolidated financial statements. -6- Washington Trust Bancorp, Inc. and Subsidiaries Consolidated Statements of Changes in Shareholders' Equity (unaudited) (Dollars and shares in thousands, except per share amounts) For the three months ended March 31, 2025 Common Shares Outstanding Common Stock Paid-in Capital Retained Earnings Accumulated Other Comprehensive Loss Treasury Stock Total Balance at December 31, 2024 19,274 $ 1,223 $ 196,947 $ 434,014 ($ 119,171 ) ($ 13,285 ) $ 499,728 Net income — — — 12,179 — — 12,179 Total other comprehensive income, net of tax — — — — 19,992 — 19,992 Cash dividends declared ($ 0.56 per share) — — — ( 10,960 ) — — ( 10,960 ) Share-based compensation — — 780 — — — 780 Exercise of stock options, issuance of other compensation-related equity awards, net of awards surrendered 2 — ( 157 ) — — 118 ( 39 ) Balance at March 31, 2025 19,276 $ 1,223 $ 197,570 $ 435,233 ($ 99,179 ) ($ 13,167 ) $ 521,680 For the three months ended March 31, 2024 Common Shares Outstanding Common Stock Paid-in Capital Retained Earnings Accumulated Other Comprehensive Loss Treasury Stock Total Balance at December 31, 2023 17,031 $ 1,085 $ 126,150 $ 501,917 ($ 141,153 ) ($ 15,313 ) $ 472,686 Net income — — — 10,936 — — 10,936 Total other comprehensive loss, net of tax — — — — ( 7,760 ) — ( 7,760 ) Cash dividends declared ($ 0.56 per share) — — — ( 9,678 ) — — ( 9,678 ) Share-based compensation — — 753 — — — 753 Exercise of stock options, issuance of other compensation-related equity awards, net of awards surrendered 2 — ( 118 ) — — 101 ( 17 ) Balance at March 31, 2024 17,033 $ 1,085 $ 126,785 $ 503,175 ($ 148,913 ) ($ 15,212 ) $ 466,920 The accompanying notes are an integral part of these unaudited consolidated financial statements. -7- Washington Trust Bancorp, Inc. and Subsidiaries Consolidated Statement of Cash Flows (unaudited) (Dollars in thousands) Three months ended March 31, 2025 2024 Cash flows from operating activities: Net income $ 12,179 $ 10,936 Adjustments to reconcile net income to net cash provided by operating activities: Provision for credit losses 1,200 700 Gain on sale of bank-owned properties, net ( 6,994 ) — Depreciation of premises and equipment 894 1,001 Net amortization of premiums and discounts on debt securities and loans 94 265 Amortization of intangibles 204 208 Amortization of terminated cash flow hedge loss 2,116 2,138 Pension plan settlement charge 6,436 — Share-based compensation 780 753 Tax expense from stock option exercises and other equity awards ( 21 ) ( 7 ) Income from bank-owned life insurance ( 769 ) ( 739 ) Net gains on loan sales, including changes in fair value ( 1,709 ) ( 1,910 ) Proceeds from sales of loans, net 74,377 70,480 Loans originated for sale ( 72,919 ) ( 74,643 ) Decrease in operating lease right-of-use assets 898 148 Decrease in operating lease liabilities ( 866 ) ( 190 ) Decrease (increase) in other assets 6,066 ( 5,806 ) Decrease in other liabilities ( 13,516 ) ( 1,386 ) Net cash provided by operating activities 8,450 1,948 Cash flows from investing activities: Maturities, calls, and principal payments of: Available for sale debt securities: Mortgage-backed 15,400 15,265 Net redemptions (purchases) of Federal Home Loan Bank stock 10,918 ( 3,619 ) Net decrease (increase) in loans 38,469 ( 36,251 ) Net proceeds from sale of portfolio loans 283,182 — Purchases of loans ( 453 ) ( 597 ) Purchases of premises and equipment ( 88 ) ( 626 ) Net proceeds from the sale of bank-owned properties 11,780 — Equity investments in real estate limited partnerships — ( 758 ) Purchases of other equity investments ( 250 ) ( 125 ) Net cash provided by (used in) investing activities 358,958 ( 26,711 ) Cash flows from financing activities: Net decrease in deposits ( 75,219 ) ( 267 ) Proceeds from Federal Home Loan Bank advances 270,000 860,000 Repayments of Federal Home Loan Bank advances ( 545,000 ) ( 810,000 ) Net proceeds from stock option exercises and issuance of other equity awards, net of awards surrendered ( 39 ) ( 17 ) Cash dividends paid ( 10,800 ) ( 9,549 ) Net cash (used in) provided by financing activities ( 361,058 ) 40,167 Net increase in cash and cash equivalents 6,350 15,404 Cash and cash equivalents at beginning of period 113,889 90,184 Cash and cash equivalents at end of period $ 120,239 $ 105,588 Noncash Investing and Financing Activities: Loans charged-off $ 2,522 $ 70 Supplemental Disclosures: Interest payments $ 49,732 $ 54,584 Income tax payments 23 3,416 The accompanying notes are an integral part of these unaudited consolidated financial statements. -8- Condensed Notes to Unaudited Consolidated Financial Statements Note 1 - Basis of Presentation Nature of Operations The Bancorp is a publicly-owned registered bank holding company that has elected to be a financial holding company. The Bancorp’s principal subsidiary is the Bank, a Rhode Island chartered financial institution founded in 1800. The Bank is the oldest community bank in the nation and the largest state-chartered bank headquartered in Rhode Island. 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. Basis of Presentation The accounting and reporting policies of the Washington Trust conform to GAAP and to general practices of the banking industry. The Corporation’s Unaudited Consolidated Financial Statements include the accounts of the Bancorp and its wholly-owned subsidiaries, except subsidiaries that are not deemed necessary to be consolidated. Through consolidation, intercompany balances and transactions have been eliminated. The Unaudited Consolidated Financial Statements of the Corporation presented herein have been prepared pursuant to the rules of the SEC for quarterly reports on Form 10-Q and do not include all of the information and note disclosures required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) and disclosures considered necessary for the fair presentation of the accompanying Unaudited Consolidated Financial Statements have been included. Interim results are not necessarily indicative of the results of the entire year. The accompanying Unaudited Consolidated Financial Statements should be read in conjunction with the Audited Consolidated Financial Statements and notes thereto included in the Annual Report on Form 10-K for the fiscal year ended December 31, 2024. Reclassification Certain previously reported amounts have been reclassified to conform to the current year’s presentation. Use of Estimates In preparing the financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the balance sheet and revenues and expenses for the period. Actual results could differ from those estimates. Management considers the ACL on loans to be a material estimate that is particularly susceptible to change. Note 2 - Recently Issued Accounting Pronouncements Accounting Standards Pending Adoption Income Taxes - Topic 740 Accounting Standards Update No. 2023-09, “Income Taxes (Topic 740) - Improvements to Income Tax Disclosures” (“ASU 2023-09”), was issued in December 2023 to enhance and provide additional transparency on income tax disclosures. ASU 2023-09 is effective for annual periods beginning after December 15, 2024. The provisions under ASU 2023-09 should be applied on a prospective basis, however retrospective application is also permitted. ASU 2023-09 is not expected to have a material impact on the Corporation’s financial statements. Income Statement - Reporting Comprehensive Income - Subtopic 220 Accounting Standards Update No. 2024-03, “Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40) - Disaggregation of Income Statement Expenses” (“ASU 2024-03”), was issued in November 2024 to enhance and provide additional disclosure on certain costs and expenses. The effective date of ASU 2024-03 was further clarified in a subsequent ASU issued in January 2025. ASU 2024-03 is effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027, with early adoption permitted. The provisions under ASU 2024-03 can be applied on either a prospective or retrospective basis. ASU 2024-03 is not expected to have a material impact on the Corporation’s financial statements. -9- Condensed Notes to Unaudited Consolidated Financial Statements – (continued) Note 3 - Securities Available for Sale Debt Securities The following tables present the amortized cost, gross unrealized holding gains, gross unrealized holding losses, ACL on securities, and fair value of securities by major security type and class of security: (Dollars in thousands) March 31, 2025 Amortized Cost Unrealized Gains Unrealized Losses ACL Fair Value Available for Sale Debt Securities: Obligations of U.S. government agencies and U.S. government-sponsored enterprises $ 41,752 $ 65 ($ 2,565 ) $ — $ 39,252 Mortgage-backed securities issued by U.S. government agencies and U.S. government-sponsored enterprises 968,881 604 ( 113,925 ) — 855,560 Obligations of states and political subdivisions 650 — ( 8 ) — 642 Individual name issuer trust preferred debt securities 9,418 — ( 169 ) — 9,249 Corporate bonds 13,200 — ( 358 ) — 12,842 Total available for sale debt securities $ 1,033,901 $ 669 ($ 117,025 ) $ — $ 917,545 (Dollars in thousands) December 31, 2024 Amortized Cost Unrealized Gains Unrealized Losses ACL Fair Value Available for Sale Debt Securities: Obligations of U.S. government agencies and U.S. government-sponsored enterprises $ 41,751 $ — ($ 3,139 ) $ — $ 38,612 Mortgage-backed securities issued by U.S. government agencies and U.S. government-sponsored enterprises 984,546 52 ( 129,451 ) — 855,147 Obligations of states and political subdivisions 650 5 — — 655 Individual name issuer trust preferred debt securities 9,414 — ( 193 ) — 9,221 Corporate bonds 13,196 — ( 526 ) — 12,670 Total available for sale debt securities $ 1,049,557 $ 57 ($ 133,309 ) $ — $ 916,305 Available for sale debt securities balances exclude accrued interest receivable of $ 3.2 million at both March 31, 2025 and December 31, 2024. At March 31, 2025 and December 31, 2024, securities with a fair value of $ 361.0 million and $ 310.5 million, respectively, were pledged as collateral for FHLB borrowings, potential borrowings with the FRBB, certain public deposits, and for other purposes. See Note 10 for additional discussion on FHLB borrowings. The schedule of maturities of available for sale debt securities is presented below. Mortgage-backed securities are included based on weighted average maturities, adjusted for anticipated prepayments. All other debt securities are included based on contractual maturities. Actual maturities may differ from amounts presented because certain issuers have the right to call or prepay obligations with or without call or prepayment penalties. -10- Condensed Notes to Unaudited Consolidated Financial Statements – (continued) (Dollars in thousands) March 31, 2025 Amortized Cost Fair Value Due in one year or less $ 79,350 $ 70,131 Due after one year to five years 319,664 286,004 Due after five years to ten years 246,297 217,490 Due after ten years 388,590 343,920 Total debt securities $ 1,033,901 $ 917,545 Included in the above table are debt securities with an amortized cost balance of $ 50.0 million and a fair value of $ 46.9 million at March 31, 2025 that are callable at the discretion of the issuers. Final maturities of the callable securities range from 4 months to 20 years, with call features ranging from 1 month to 8 years. Assessment of Available for Sale Debt Securities for Impairment Management assesses the decline in fair value of investment securities on a regular basis. Unrealized losses on debt securities may occur from current market conditions, increases in interest rates since the time of purchase, a structural change in an investment, volatility of earnings of a specific issuer, or deterioration in credit quality of the issuer. Management evaluates both qualitative and quantitative factors to assess whether an impairment exists. The following tables summarize available for sale debt securities in an unrealized loss position, for which an ACL on securities has not been recorded, segregated by length of time that the securities have been in a continuous unrealized loss position: (Dollars in thousands) Less than 12 Months 12 Months or Longer Total March 31, 2025 # Fair Value Unrealized Losses # Fair Value Unrealized Losses # Fair Value Unrealized Losses Obligations of U.S. government agencies and U.S. government-sponsored enterprises 1 $ 296 ($ 2 ) 6 $ 23,888 ($ 2,563 ) 7 $ 24,184 ($ 2,565 ) Mortgage-backed securities issued by U.S. government agencies and U.S. government-sponsored enterprises 18 67,326 ( 304 ) 93 469,625 ( 113,621 ) 111 536,951 ( 113,925 ) Obligations of states and political subdivisions 1 642 ( 8 ) — — — 1 642 ( 8 ) Individual name issuer trust preferred debt securities — — — 3 9,249 ( 169 ) 3 9,249 ( 169 ) Corporate bonds — — — 4 12,842 ( 358 ) 4 12,842 ( 358 ) Total 20 $ 68,264 ($ 314 ) 106 $ 515,604 ($ 116,711 ) 126 $ 583,868 ($ 117,025 ) (Dollars in thousands) Less than 12 Months 12 Months or Longer Total December 31, 2024 # Fair Value Unrealized Losses # Fair Value Unrealized Losses # Fair Value Unrealized Losses Obligations of U.S. government agencies and U.S. government-sponsored enterprises 2 $ 15,289 ($ 12 ) 6 $ 23,323 ($ 3,127 ) 8 $ 38,612 ($ 3,139 ) Mortgage-backed securities issued by U.S. government agencies and U.S. government-sponsored enterprises 57 384,164 ( 3,632 ) 93 466,741 ( 125,819 ) 150 850,905 ( 129,451 ) Individual name issuer trust preferred debt securities — — — 3 9,221 ( 193 ) 3 9,221 ( 193 ) Corporate bonds — — — 4 12,670 ( 526 ) 4 12,670 ( 526 ) Total 59 $ 399,453 ($ 3,644 ) 106 $ 511,955 ($ 129,665 ) 165 $ 911,408 ($ 133,309 ) -11- Condensed Notes to Unaudited Consolidated Financial Statements – (continued) There were no debt securities on nonaccrual status at March 31, 2025 and 2024 and, therefore there was no accrued interest related to debt securities reversed against interest income for the three months ended March 31, 2025 and 2024. As of March 31, 2025, the Corporation does not intend to sell the debt securities in an unrealized loss position and has determined that it is more-likely-than-not that the Corporation will not be required to sell each security before the recovery of its amortized cost basis. In addition, management does not believe that any of the securities are impaired due to reasons of credit quality. As further described below, management believes the unrealized losses on these debt securities are primarily attributable to changes in the investment spreads and interest rates. Therefore, no ACL was recorded at both March 31, 2025 and December 31, 2024. Obligations of U.S. Government Agency and U.S. Government-Sponsored Enterprise Securities, including Mortgage-Backed Securities The contractual cash flows for these securities are either explicitly or implicitly guaranteed by the U.S. government, are highly rated by major credit rating agencies, and have a long history of no credit losses. The issuers of these securities continue to make timely principal and interest payments, and none of these securities were past due at March 31, 2025. Additionally, the Corporation utilizes a zero credit loss estimate for these securities. Obligations of States and Political Subdivisions Obligations of states and political subdivisions consist of a high credit quality (rated AA or higher) state and municipal bond. High credit quality obligations of state and political subdivisions have a history of zero to near-zero credit losses. Individual Name Issuer Trust Preferred Debt Securities These securities in an unrealized loss position at March 31, 2025 included three trust preferred securities issued by three individual companies in the banking sector. Management reviewed the collectability of these securities taking into consideration such factors as the financial condition of the issuers, reported regulatory capital ratios of the issuers, credit ratings, including ratings in effect as of the reporting period date, as well as credit rating changes between the reporting period date and the filing date of this report, and other information. As of March 31, 2025, there was one individual name issuer trust preferred debt security with an amortized cost of $ 2.0 million and unrealized losses of $ 74 thousand that was rated below investment grade by S&P. We noted no downgrades to below investment grade between March 31, 2025 and the filing date of this report. Based on the information available through the filing date of this report, all individual name issuer trust preferred debt securities continue to accrue interest and make payments as expected with no payment deferrals or defaults on the part of the issuers. Corporate Bonds These securities in an unrealized loss position at March 31, 2025 included four corporate bond holdings issued by three individual companies in the financial services industry. Management reviewed the collectability of these securities taking into consideration such factors as the financial condition of the issuers, reported regulatory capital ratios of the issuers, credit ratings, including ratings in effect as of the reporting period date, as well as credit rating changes between the reporting period date and the filing date of this report, and other information. As of March 31, 2025, there was one corporate bond debt security with an amortized cost of $ 2.0 million and unrealized losses of $ 10 thousand that was rated below investment grade by S&P. We noted no downgrades to below investment grade between March 31, 2025 and the filing date of this report. Based on the information available through the filing date of this report, all corporate bond debt securities continue to accrue interest and make payments as expected with no payment deferrals or defaults on the part of the issuers. -12- Condensed Notes to Unaudited Consolidated Financial Statements – (continued) Note 4 - Loans The following table presents the carrying value of loans, segregated by class of loans: (Dollars in thousands) March 31, 2025 December 31, 2024 Commercial: Commercial real estate (1) $ 2,134,107 $ 2,154,504 Commercial & industrial (2) 535,030 542,474 Total commercial 2,669,137 2,696,978 Residential Real Estate: Residential real estate (3) 2,113,307 2,126,171 Consumer: Home equity 296,563 297,119 Other (4) 17,203 17,570 Total consumer 313,766 314,689 Total loans (5) $ 5,096,210 $ 5,137,838 (1) CRE consists of commercial mortgages primarily secured by non-owner occupied income-producing property, as well as construction and development loans. Construction and development loans are made to businesses for land development or the on-site construction of industrial, commercial, or residential buildings. (2) C&I consists of loans to businesses and individuals, a portion of which are fully or partially collateralized by owner occupied real estate. (3) Residential real estate consists of mortgage and homeowner construction loans secured by one- to four-family residential properties. Also, 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 for additional disclosure. (4) Other consists of loans to individuals secured by general aviation aircraft and other personal installment loans. (5) Includes net unamortized loan origination costs of $ 11.3 million and $ 10.9 million, respectively, at March 31, 2025 and December 31, 2024 and net unamortized premiums on loans purchased from and serviced by other financial institutions of $ 233 thousand and $ 242 thousand, respectively, at March 31, 2025 and December 31, 2024. The carrying value of loans excludes accrued interest receivable of $ 20.8 million and $ 22.1 million, respectively, as of March 31, 2025 and December 31, 2024. As of both March 31, 2025 and December 31, 2024, loans amounting to $ 2.8 billion were pledged as collateral to the FHLB under a blanket pledge agreement and to the FRBB for the discount window. See Note 10 for additional disclosure regarding borrowings. Concentrations of Credit Risk A significant portion of our loan portfolio is concentrated among borrowers in southern New England, and a substantial portion of the portfolio is collateralized by real estate in this area. The ability of single family residential and consumer borrowers to honor their repayment commitments is generally dependent on the level of overall economic activity within the market area and real estate values. The ability of commercial borrowers to honor their repayment commitments is dependent on the general economy, as well as the health of the real estate economic sector in the Corporation’s market area. -13- Condensed Notes to Unaudited Consolidated Financial Statements – (continued) Past Due Loans Past due status is based on the contractual payment terms of the loan. The following tables present an aging analysis of past due loans, segregated by class of loans: (Dollars in thousands) Days Past Due March 31, 2025 Current 30-59 60-89 90 or More Total Past Due Total Loans Commercial: Commercial real estate $ 2,134,107 $ — $ — $ — $ — $ 2,134,107 Commercial & industrial 533,884 6 334 806 1,146 535,030 Total commercial 2,667,991 6 334 806 1,146 2,669,137 Residential Real Estate: Residential real estate 2,106,868 2,528 2,706 1,205 6,439 2,113,307 Consumer: Home equity 293,985 1,643 312 623 2,578 296,563 Other 17,171 31 1 — 32 17,203 Total consumer 311,156 1,674 313 623 2,610 313,766 Total loans $ 5,086,015 $ 4,208 $ 3,353 $ 2,634 $ 10,195 $ 5,096,210 (Dollars in thousands) Days Past Due December 31, 2024 Current 30-59 60-89 90 or More Total Past Due Total Loans Commercial: Commercial real estate $ 2,154,504 $ — $ — $ — $ — $ 2,154,504 Commercial & industrial 541,574 518 382 — 900 542,474 Total commercial 2,696,078 518 382 — 900 2,696,978 Residential Real Estate: Residential real estate 2,118,430 3,476 1,892 2,373 7,741 2,126,171 Consumer: Home equity 294,172 1,630 410 907 2,947 297,119 Other 17,176 44 350 — 394 17,570 Total consumer 311,348 1,674 760 907 3,341 314,689 Total loans $ 5,125,856 $ 5,668 $ 3,034 $ 3,280 $ 11,982 $ 5,137,838 Included in past due loans as of March 31, 2025 and December 31, 2024, were nonaccrual loans of $ 7.4 million and $ 6.4 million, respectively. In addition, all loans 90 days or more past due at March 31, 2025 and December 31, 2024 were classified as nonaccrual. Nonaccrual Loans Loans, with the exception of certain well-secured loans that are in the process of collection, are placed on nonaccrual status and interest recognition is suspended when such loans are 90 days or more overdue with respect to principal and/or interest, or sooner if considered appropriate by management. Well-secured loans are permitted to remain on accrual status provided that full collection of principal and interest is assured and the loan is in the process of collection. Loans are also placed on nonaccrual status when, in the opinion of management, full collection of principal and interest is doubtful. When loans are placed on nonaccrual status, interest previously accrued but not collected is reversed against current period income. Subsequent interest payments received on nonaccrual loans are applied to the outstanding principal balance of the loan or recognized as interest income depending on management’s assessment of the ultimate collectability of the loan. Loans are removed from nonaccrual status when they have been current as to principal and interest (generally for six months), the borrower has demonstrated an ability to comply with repayment terms, and when, in management’s opinion, the loans are considered to be fully collectible. -14- Condensed Notes to Unaudited Consolidated Financial Statements – (continued) The following table is a summary of nonaccrual loans, segregated by class of loans: (Dollars in thousands) March 31, 2025 December 31, 2024 Nonaccrual Loans Nonaccrual Loans With an ACL Without an ACL Total With an ACL Without an ACL Total Commercial: Commercial real estate $ 3,257 $ 4,348 $ 7,605 $ 10,053 $ — $ 10,053 Commercial & industrial 334 806 1,140 515 — 515 Total commercial 3,591 5,154 8,745 10,568 — 10,568 Residential Real Estate: Residential real estate 10,084 1,018 11,102 9,743 1,024 10,767 Consumer: Home equity 1,779 — 1,779 1,972 — 1,972 Other — — — — — — Total consumer 1,779 — 1,779 1,972 — 1,972 Total nonaccrual loans $ 15,454 $ 6,172 $ 21,626 $ 22,283 $ 1,024 $ 23,307 Accruing loans 90 days or more past due $ — $ — Nonaccrual loans of $ 14.3 million and $ 16.9 million, respectively, at March 31, 2025 and December 31, 2024 were current as to the payment of principal and interest. As of March 31, 2025 and December 31, 2024, nonaccrual loans secured by one- to four-family residential properties amounting to $ 1.3 million and $ 1.0 million, respectively, were in process of foreclosure. There were no significant commitments to lend additional funds to borrowers whose loans were on nonaccrual status at March 31, 2025. The following table presents interest income recognized on nonaccrual loans: (Dollars in thousands) Interest Income Recognized Three months ended March 31, 2025 2024 Commercial: Commercial real estate $ — $ — Commercial & industrial 2 4 Total commercial 2 4 Residential Real Estate: Residential real estate 153 116 Consumer: Home equity 37 35 Other — — Total consumer 37 35 Total $ 192 $ 155 Troubled Loan Modifications A loan that has been modified is considered a TLM when the modification is made to a borrower experiencing financial difficulty and the modification has a direct impact to the contractual cash flows. If both of the aforementioned criteria are met, then the modification is considered a TLM and subject to the enhanced disclosure requirements. In the course of resolving problem loans, the Corporation may choose to modify the contractual terms of loans to borrowers -15- Condensed Notes to Unaudited Consolidated Financial Statements – (continued) who are experiencing financial difficulty. Such modifications to borrowers experiencing financial difficulty may include modified contractual terms that have a direct impact to contractual cash flows, including principal forgiveness, interest rate reductions, maturity extensions, other-than-insignificant payment delays, or any combination thereof. Debt could be bifurcated with separate terms for each tranche of the TLM. Executing a TLM in lieu of aggressively enforcing the collection of the loan may benefit the Corporation by increasing the ultimate probability of collection. Nonaccrual loans that become TLMs generally remain on nonaccrual status for six months, subsequent to being modified, before management considers their return to accrual status. If a TLM is on accrual status prior to being modified, it is reviewed to determine if the modified loan should remain on accrual status. If the TLM successfully meets all repayment terms according to the modification documents for a specified period of time (generally 12 months) and the borrower is no longer experiencing financial difficulty, it would be declassified from TLM status. The following table presents the carrying value of TLMs made during the three months ended March 31, 2025, segregated by class of loans and type of concession granted: (Dollars in thousands) Maturity Extension Other-than-Insignificant Payment Delay Total % of Loan Class (1) Residential Real Estate: Residential real estate $ — $ 1,431 $ 1,431 — % Total $ — $ 1,431 $ 1,431 — % (1) Percentage of TLMs to the total loans outstanding within the respective loan class. The following table presents the carrying value of TLMs made during the three months ended March 31, 2024, segregated by class of loans and type of concession granted: (Dollars in thousands) Maturity Extension Other-than-Insignificant Payment Delay Total % of Loan Class (1) Commercial: Commercial real estate $ — $ — $ — — % Commercial & industrial 668 — 668 — Total commercial 668 — 668 — Total $ 668 $ — $ 668 — % (1) Percentage of TLMs to the total loans outstanding within the respective loan class. The following table describes the financial effect of TLMs made during the three months ended March 31, 2025, segregated by class of loans: Three months ended March 31, 2025 Financial Effect Other-than-Insignificant Payment Delay: Residential real estate Provided payment delay for a weighted average period of 6 months -16- Condensed Notes to Unaudited Consolidated Financial Statements – (continued) The following table describes the financial effect of TLMs made during the three months ended March 31, 2024, segregated by class of loans: Financial Effect Maturity Extension: Commercial & industrial Provided maturity extension for a weighted average period of 120 months Management closely monitors the performance of TLMs to understand the effectiveness of the modifications. As of the dates indicated, the following tables present an aging analysis of TLMs that have been modified in the past 12 months: (Dollars in thousands) Days Past Due March 31, 2025 Current 30-59 60-89 90 or More Total Past Due Total Loans Commercial: Commercial real estate $ 7,605 $ — $ — $ — $ — $ 7,605 Commercial & industrial 5,000 — — — — 5,000 Total commercial 12,605 — — — — 12,605 Residential Real Estate: Residential real estate 1,686 — — — — 1,686 Total loans $ 14,291 $ — $ — $ — $ — $ 14,291 At March 31, 2025, there were no TLMs made in the previous 12 months for which there was a subsequent payment default. (Dollars in thousands) Days Past Due March 31, 2024 Current 30-59 60-89 90 or More Total Past Due Total Loans Commercial: Commercial real estate $ 21,692 $ — $ — $ — $ — $ 21,692 Commercial & industrial 668 — — — — 668 Total commercial 22,360 — — — — 22,360 Total loans $ 22,360 $ — $ — $ — $ — $ 22,360 At March 31, 2024, there were no TLMs made in the previous 12 months for which there was a subsequent payment default. There were no significant commitments to lend additional funds to borrowers experiencing financial difficulty whose loans were TLMs at March 31, 2025. Individually Analyzed Loans Individually analyzed loans include nonaccrual commercial loans, TLMs, as well as certain other loans based on the underlying risk characteristics and the discretion of management to individually analyze such loans. As of March 31, 2025 and December 31, 2024, the carrying value of individually analyzed loans amounted to $ 16.2 million and $ 16.6 million, respectively. The carrying value of collateral dependent individually analyzed loans was $ 11.2 million and $ 11.6 million, respectively, at March 31, 2025 and December 31, 2024. For collateral dependent loans where management has determined that foreclosure of the collateral is probable, or where the borrower is experiencing financial difficulty and repayment of the loan is to be provided substantially through the operation or sale of the collateral, the ACL is measured based on the difference between the fair value of the collateral and the amortized cost basis of the loan as of the measurement date. See Note 8 for additional disclosure regarding fair value of individually analyzed collateral dependent loans. -17- Condensed Notes to Unaudited Consolidated Financial Statements – (continued) The following table presents the carrying value of collateral dependent individually analyzed loans: (Dollars in thousands) March 31, 2025 December 31, 2024 Carrying Value Related Allowance Carrying Value Related Allowance Commercial: Commercial real estate (1) $ 7,605 $ 423 $ 10,053 $ 1,252 Commercial & industrial (2) 1,140 278 515 259 Total commercial 8,745 701 10,568 1,511 Residential Real Estate: Residential real estate (3) 2,449 — 1,023 — Total $ 11,194 $ 701 $ 11,591 $ 1,511 (1) Secured by income-producing property. (2) Secured by business assets. (3) Secured by one- to four-family residential properties. Credit Quality Indicators Commercial The Corporation utilizes an internal rating system to assign a risk to each of its commercial loans. Loans are rated on a scale of 1 to 10. This scale can be assigned to three broad categories including “pass” for ratings 1 through 6, “special mention” for 7-rated loans, and “classified” for loans rated 8, 9 or 10. The loan risk rating system takes into consideration parameters including the borrower’s financial condition, the borrower’s performance with respect to loan terms, the adequacy of collateral, the adequacy of guarantees, and other credit quality characteristics. The Corporation takes the risk rating into consideration along with other credit attributes in the establishment of an appropriate ACL on loans. See Note 5 for additional information. A description of the commercial loan categories is as follows: Pass - Loans with acceptable credit quality, defined as ranging from superior or very strong to a status of lesser stature. Superior or very strong credit quality is characterized by a high degree of cash collateralization or strong balance sheet liquidity. Lesser stature loans have an acceptable level of credit quality, but may exhibit some weakness in various credit metrics such as collateral adequacy, cash flow, performance or may be in an industry or of a loan type known to have a higher degree of risk. These weaknesses may be mitigated by secondary sources of repayment, including SBA guarantees. Special Mention - Loans with potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the asset or in the Bank’s position as creditor at some future date. Special Mention assets are not adversely classified and do not expose the Bank to sufficient risk to warrant adverse classification. Examples of these conditions include but are not limited to outdated or poor quality financial data, strains on liquidity and leverage, losses or negative trends in operating results, marginal cash flow, weaknesses in occupancy rates or trends in the case of commercial real estate, and frequent delinquencies. Classified - Loans identified as “substandard,” “doubtful” or “loss” based on criteria consistent with guidelines provided by banking regulators. A “substandard” loan has defined weaknesses which make payment default or principal exposure likely, but not yet certain. Such loans are apt to be dependent upon collateral liquidation, a secondary source of repayment or an event outside of the normal course of business. The loans are closely watched and are either already on nonaccrual status or may be placed on nonaccrual status when management determines there is uncertainty of collectability. A “doubtful” loan is placed on nonaccrual status and has a high probability of loss, but the extent of the loss is difficult to quantify due to dependency upon collateral having a value that is difficult to determine or upon some near-term event which lacks certainty. A loan in the “loss” category is considered generally uncollectible or the timing or amount of payments cannot be determined. “Loss” is not intended to imply that the loan has no recovery value, but rather, it is not practical or desirable to continue to carry the asset. The Corporation’s procedures call for loan risk ratings and classifications to be revised whenever information becomes available that indicates a change is warranted. On a quarterly basis, management reviews a watched asset list, which generally consists of commercial loans that are risk-rated 6 or worse, highly leveraged transaction loans, high-volatility -18- Condensed Notes to Unaudited Consolidated Financial Statements – (continued) commercial real estate, and other selected loans. Management’s review focuses on the current status of the loans, the appropriateness of risk ratings and strategies to improve the credit. An annual credit review program is conducted by a third party to provide an independent evaluation of the creditworthiness of the commercial loan portfolio, the quality of the underwriting and credit risk management practices, and the appropriateness of the risk rating classifications. This review is supplemented with selected targeted internal reviews of the commercial loan portfolio. Residential and Consumer Management monitors the relatively homogeneous residential real estate and consumer loan portfolios on an ongoing basis using delinquency information by loan type. In addition, other techniques are utilized to monitor indicators of credit deterioration in the residential real estate loans and home equity consumer loans. Among these techniques is the periodic tracking of loans with an updated Fair Isaac Corporation (commonly known as “FICO”) score and an updated estimated LTV ratio. LTV is estimated based on such factors as geographic location, the original appraised value, and changes in median home prices, and takes into consideration the age of the loan. The results of these analyses and other credit review procedures, including selected targeted internal reviews, are taken into account in the determination of qualitative loss factors for residential real estate and home equity consumer credits. -19- Condensed Notes to Unaudited Consolidated Financial Statements – (continued) The following table includes information on credit quality indicators and gross charge-offs for the Corporation’s loan portfolio, segregated by class of loans as of March 31, 2025: (Dollars in thousands) Term Loans Amortized Cost by Origination Year 2025 2024 2023 2022 2021 Prior Revolving Loans Amortized Cost Revolving Loans Converted to Term Loans Total Commercial: CRE: Pass $ 25,074 $ 153,946 $ 449,104 $ 588,539 $ 341,127 $ 514,620 $ 11,505 $ 977 $ 2,084,892 Special mention — — 6,319 5,389 — 2,217 — — 13,925 Classified — 29,051 — — — 6,239 — — 35,290 Total CRE 25,074 182,997 455,423 593,928 341,127 523,076 11,505 977 2,134,107 Gross charge-offs — — — — — 2,450 — — 2,450 C&I: Pass 10,120 37,757 50,099 136,744 22,345 187,972 69,286 441 514,764 Special mention — 808 — 3,555 1,266 7,720 5,625 — 18,974 Classified — 382 423 — 153 334 — — 1,292 Total C&I 10,120 38,947 50,522 140,299 23,764 196,026 74,911 441 535,030 Gross charge-offs 7 — — — — — — — 7 Residential Real Estate: Residential real estate: Current (1) 25,464 72,611 377,854 736,928 369,409 525,301 — — 2,107,567 Past due — — 395 642 — 5,402 — — 6,439 Total residential real estate 25,464 72,611 378,249 737,570 369,409 530,703 — — 2,114,006 Gross charge-offs — — — — — — — — — Consumer: Home equity: Current 3,171 11,899 17,754 12,414 6,035 6,909 223,891 11,912 293,985 Past due — — 93 — — 571 669 1,245 2,578 Total home equity 3,171 11,899 17,847 12,414 6,035 7,480 224,560 13,157 296,563 Gross charge-offs — — — — — — — — — Other: Current 1,482 3,441 4,081 2,201 2,125 3,604 237 — 17,171 Past due 31 — — — — — 1 — 32 Total other 1,513 3,441 4,081 2,201 2,125 3,604 238 — 17,203 Gross charge-offs 65 — — — — — — — 65 Total loans, amortized cost $ 65,342 $ 309,895 $ 906,122 $ 1,486,412 $ 742,460 $ 1,260,889 $ 311,214 $ 14,575 $ 5,096,909 Total gross charge-offs $ 72 $ — $ — $ — $ — $ 2,450 $ — $ — $ 2,522 (1) Excludes a $ 699 thousand negative basis adjustment associated with fair value hedges. See Note 7 for additional disclosure. -20- Condensed Notes to Unaudited Consolidated Financial Statements – (continued) The following table includes information on credit quality indicators and gross charge-offs for the Corporation’s loan portfolio, segregated by class of loans as of December 31, 2024: (Dollars in thousands) Term Loans Amortized Cost by Origination Year 2024 2023 2022 2021 2020 Prior Revolving Loans Amortized Cost Revolving Loans Converted to Term Loans Total Commercial: CRE: Pass $ 172,931 $ 432,763 $ 598,805 $ 362,292 $ 125,834 $ 405,381 $ 9,879 $ 989 $ 2,108,874 Special mention — 6,116 — — — 2,237 — — 8,353 Classified 31,010 — — — — 6,267 — — 37,277 Total CRE 203,941 438,879 598,805 362,292 125,834 413,885 9,879 989 2,154,504 Gross charge-offs — — — — — 1,961 — — 1,961 C&I: Pass 38,128 51,162 136,449 23,474 36,954 159,522 76,857 469 523,015 Special mention — — 3,593 1,172 1,398 6,428 5,381 — 17,972 Classified 811 — — 161 — 515 — — 1,487 Total C&I 38,939 51,162 140,042 24,807 38,352 166,465 82,238 469 542,474 Gross charge-offs 33 — — — — 175 — — 208 Residential Real Estate: Residential real estate: Current (1) 74,458 383,983 746,566 375,848 173,676 365,380 — — 2,119,911 Past due — 287 1,434 — 1,290 4,730 — — 7,741 Total residential real estate 74,458 384,270 748,000 375,848 174,966 370,110 — — 2,127,652 Gross charge-offs — — — — — — — — — Consumer: Home equity: Current 12,850 18,301 12,749 6,165 2,282 4,815 225,522 11,488 294,172 Past due — 61 — — 142 630 871 1,243 2,947 Total home equity 12,850 18,362 12,749 6,165 2,424 5,445 226,393 12,731 297,119 Gross charge-offs — — — — — — — — — Other: Current 4,176 4,497 2,331 2,175 757 2,989 251 — 17,176 Past due 24 — 370 — — — — — 394 Total other 4,200 4,497 2,701 2,175 757 2,989 251 — 17,570 Gross charge-offs 229 10 — — 2 3 — — 244 Total loans, amortized cost $ 334,388 $ 897,170 $ 1,502,297 $ 771,287 $ 342,333 $ 958,894 $ 318,761 $ 14,189 $ 5,139,319 Total gross charge-offs $ 262 $ 10 $ — $ — $ 2 $ 2,139 $ — $ — $ 2,413 (1) Excludes a $ 1.5 million negative basis adjustment associated with fair value hedges. See Note 7 for additional disclosure. -21- Condensed Notes to Unaudited Consolidated Financial Statements – (continued) Washington Trust may renew commercial loans at or immediately prior to their maturity. In the tables above, renewals subject to full credit evaluation before being granted are reported as originations in the period renewed. In addition, loans with extensions of maturity dates of more than three months are reported as originations in the period extended. Note 5 - 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. The level of the ACL on loans is based on management’s ongoing review of all relevant information, from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts. The following table presents the activity in the ACL on loans for the three months ended March 31, 2025: (Dollars in thousands) Commercial Consumer CRE C&I Total Commercial Residential Real Estate Home Equity Other Total Consumer Total Beginning Balance $ 26,485 $ 7,277 $ 33,762 $ 6,832 $ 1,031 $ 335 $ 1,366 $ 41,960 Charge-offs ( 2,450 ) ( 7 ) ( 2,457 ) — — ( 65 ) ( 65 ) ( 2,522 ) Recoveries 200 4 204 — 1 13 14 218 Provision 972 382 1,354 ( 56 ) 25 77 102 1,400 Ending Balance $ 25,207 $ 7,656 $ 32,863 $ 6,776 $ 1,057 $ 360 $ 1,417 $ 41,056 The following table presents the activity in the ACL on loans for the three months ended March 31, 2024: (Dollars in thousands) Commercial Consumer CRE C&I Total Commercial Residential Real Estate Home Equity Other Total Consumer Total Beginning Balance $ 24,144 $ 8,088 $ 32,232 $ 7,403 $ 1,048 $ 374 $ 1,422 $ 41,057 Charge-offs — ( 8 ) ( 8 ) — — ( 62 ) ( 62 ) ( 70 ) Recoveries — 9 9 — 1 8 9 18 Provision 712 ( 469 ) 243 632 8 17 25 900 Ending Balance $ 24,856 $ 7,620 $ 32,476 $ 8,035 $ 1,057 $ 337 $ 1,394 $ 41,905 Note 6 - Leases The Corporation has committed to rent premises used in business operations under non-cancelable operating leases and determines if an arrangement meets the definition of a lease upon inception. Upon commencement of a new lease, a ROU asset and corresponding lease liability is recognized. The Corporation recognizes an adjustment to the ROU asset and lease liability when lease agreements are amended and executed. The discount rate used in determining the present value of lease payments is based on the lessor’s implicit rate in the lease if known or the Corporation’s incremental borrowing rate for borrowing terms similar to the lease upon commencement date. Operating lease ROU assets amounted to $ 36.0 million and $ 26.9 million, respectively, as of March 31, 2025 and December 31, 2024. Operating lease liabilities totaled $ 38.7 million and $ 29.6 million, respectively, as of March 31, 2025 and December 31, 2024. 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 in noninterest income. In addition, operating lease ROU assets of $ 10.0 million and operating lease liabilities of $ 10.0 million were recorded on the balance sheet. The leases expire in 17 years and include options to renew for two additional 15 -year terms. As of both March 31, 2025 and December 31, 2024, there were no operating leases that had not yet commenced. -22- Condensed Notes to Unaudited Consolidated Financial Statements – (continued) The following table presents information regarding the Corporation’s operating leases: Mar 31, 2025 Dec 31, 2024 Weighted average discount rate 5.27 % 3.80 % Range of lease expiration dates 1 month - 22 years 4 months - 23 years Range of lease renewal options 1 year - 15 years 1 year - 5 years Weighted average remaining lease term 13.7 years 12.6 years The following table presents the undiscounted annual lease payments under the terms of the Corporation’s operating leases at March 31, 2025, including a reconciliation to the present value of operating lease liabilities recognized in the Consolidated Balance Sheets: (Dollars in thousands) April 1, 2025 to December 31, 2025 $ 3,582 2026 4,554 2027 4,029 2028 3,707 2029 3,597 2030 and thereafter 35,641 Total operating lease payments 55,110 Less: interest 16,394 Present value of operating lease liabilities (1) $ 38,716 (1) Includes short-term operating lease liabilities of $2.9 million. The following table presents the components of total lease expense and operating cash flows: (Dollars in thousands) Three months ended March 31, 2025 2024 Lease Expense: Operating lease expense $ 1,271 $ 1,123 Variable lease expense 45 40 Total lease expense (1) $ 1,316 $ 1,163 Cash Paid: Cash paid reducing operating lease liabilities $ 1,239 $ 1,165 (1) Included in net occupancy expenses in the Consolidated Statements of Income. Note 7 - Derivative Financial Instruments The Corporation’s derivative financial instruments are used to manage differences in the amount, timing, and duration of the Corporation’s known or expected cash receipts and its known or expected cash payments, principally to manage the Corporation’s interest rate risk. Additionally, the Corporation enters into interest rate derivatives to accommodate the business requirements of its customers. Derivatives are measured at fair value. Derivative assets are included in other assets. and derivative liabilities are included in other liabilities in the Unaudited Consolidated Balance Sheets. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative and resulting designation. Interest Rate Risk Management Agreements Interest rate risk management agreements, such as swaps, caps, floors, and collars, are used from time to time as part of the Corporation’s interest rate risk management strategy. Interest rate swaps are agreements in which the Corporation and another party agree to exchange interest payments (e.g., fixed-rate for variable-rate payments or variable-rate for fixed-rate payments) computed on a notional principal amount. Interest rate caps and floors represent options purchased by the Corporation to manage the interest rate paid throughout the term of the option contract. An interest rate collar is a derivative instrument that represents simultaneously buying an interest rate cap and selling an interest rate floor. The credit risk -23- Condensed Notes to Unaudited Consolidated Financial Statements – (continued) associated with these derivative transactions is the risk of default by the counterparty. To minimize this risk, the Corporation enters into interest rate agreements only with highly rated counterparties that management believes to be creditworthy. The notional amounts of these agreements do not represent amounts exchanged by the parties and, thus, are not a measure of the potential loss exposure. Cash Flow Hedging Instruments As of March 31, 2025 and December 31, 2024, the Corporation had interest rate swap contracts and an interest rate collar that were designated as cash flow hedges. These cash flow hedges were executed to hedge the interest rate risk associated with short-term borrowings. See Note 10 for additional disclosure on borrowings. The changes in fair value of these derivatives designated as cash flow hedges are recorded in other comprehensive income (loss) and subsequently reclassified to earnings when gains or losses are realized (i.e., in the same period during which the hedged transactions affect earnings.) The Corporation also had an interest rate swap contract that was designated as a cash flow hedge to hedge the interest rate risk associated with a pool of variable rate commercial loans. On March 31, 2023, the Corporation terminated this interest rate swap contract and the derivative liability was derecognized. The loss on this interest rate swap included in the AOCL component of shareholders’ equity was updated to its termination date fair value of $ 26.5 million, or $ 20.1 million after tax. This loss is being amortized into earnings as a reduction of interest income on a straight-line basis over the remaining life of the original interest rate swap term, or through May 1, 2026. At March 31, 2025, the remaining unamortized balance of the loss included in the AOCL component of shareholders’ equity was $ 9.3 million, or $ 7.0 million after tax. Fair Value Hedging Instruments As of March 31, 2025 and December 31, 2024, the Corporation had interest rate swap contracts that were designated as fair value hedges. The fair value hedges were executed to hedge the interest rate risk associated with a closed-pool of fixed-rate residential real estate loans (the “hedged item”). The hedged item is measured at fair value through a basis adjustment recognized on the balance sheet. The changes in fair value of derivatives designated as fair value hedges, as well as the offsetting changes in fair value of the hedged item are recognized in earnings. Loan Related Derivative Contracts Interest Rate Derivative Contracts with Customers The Corporation enters into interest rate swap and interest rate cap contracts to help commercial loan borrowers manage their interest rate risk. These interest rate swap contracts allow borrowers to convert variable-rate loan payments to fixed-rate loan payments, while interest rate cap contracts allow borrowers to limit their interest rate exposure in a rising rate environment. When the Corporation enters into an interest rate derivative contract with a commercial loan borrower, it simultaneously enters into a “mirror” interest rate contract with a third party. For interest rate swaps, the third party exchanges the client’s fixed-rate loan payments for variable-rate loan payments. The Corporation’s credit policies with respect to interest rate contracts with commercial borrowers are similar to those used for loans. The Corporation retains the risk that is associated with the potential failure of counterparties and the risk inherent in originating loans. The interest rate contracts with counterparties are generally subject to bilateral collateralization terms. These derivatives are not designated as hedges and therefore, changes in fair value are recognized in earnings. Risk Participation Agreements The Corporation has entered into risk participation agreements with other banks in commercial loan arrangements. Participating banks guarantee the performance on borrower-related interest rate swap contracts. These derivatives are not designated as hedges and therefore, changes in fair value are recognized in earnings. Under a risk participation-out agreement, a derivative asset, the Corporation participates out a portion of the credit risk associated with the interest rate swap position executed with the commercial borrower for a fee paid to the participating bank. Under a risk participation-in agreement, a derivative liability, the Corporation assumes, or participates in, a portion of the credit risk associated with the interest rate swap position with the commercial borrower for a fee received from the other bank. Mortgage Loan Commitments Interest rate lock commitments are extended to borrowers and relate to the origination of mortgage loans held for sale. To mitigate the interest rate risk and pricing risk associated with rate locks and mortgage loans that are originated and intended for sale, the Corporation enters into forward sale commitments. Forward sale commitments are contracts for delayed delivery or net settlement of the underlying instrument, such as a residential mortgage loan, where the seller agrees to deliver on a -24- Condensed Notes to Unaudited Consolidated Financial Statements – (continued) specified future date, either a specified instrument at a specified price or yield or the net cash equivalent of an underlying instrument. Both interest rate lock commitments and forward sale commitments are derivative financial instruments, but do not meet criteria for hedge accounting and therefore, the changes in fair value of these commitments are recognized in earnings. The following table presents the notional amounts and fair values of derivative instruments in the Unaudited Consolidated Balance Sheets: (Dollars in thousands) March 31, 2025 December 31, 2024 Fair Value Fair Value Notional Amounts Derivative Assets Derivative Liabilities Notional Amounts Derivative Assets Derivative Liabilities Derivatives Designated as Cash Flow Hedging Instruments: Interest rate risk management contracts: Interest rate swaps (1) $ 120,000 $ 577 $ 637 $ 120,000 $ 1,529 $ 229 Interest rate collar 50,000 — 39 50,000 — 30 Derivatives Designated as Fair Value Hedging Instruments: Interest rate risk management contracts: Interest rate swaps 100,000 698 — 100,000 1,477 — Derivatives not Designated as Hedging Instruments: Loan related derivative contracts: Interest rate contracts with customers 820,536 4,392 39,355 886,912 2,468 51,372 Mirror contracts with counterparties 820,536 39,178 4,468 886,912 51,176 2,529 Risk participation agreements 329,827 36 — 343,935 29 — Mortgage loan commitments: Interest rate lock commitments 45,349 819 1 20,238 248 — Forward sale commitments 79,973 3 794 52,100 163 291 Gross amounts 45,703 45,294 57,090 54,451 Less: amounts offset (2) 5,044 5,044 2,788 2,788 Derivative balances, net of offset 40,659 40,250 54,302 51,663 Less: collateral pledged (3) — — — — Net amounts $ 40,659 $ 40,250 $ 54,302 $ 51,663 (1) The fair value of derivative assets includes accrued interest receivable of $ 75 thousand and $ 120 thousand, respectively, at March 31, 2025 and December 31, 2024. There was no accrued interest payable included in the fair value of derivative liabilities at March 31, 2025 or at December 31, 2024. (2) Interest rate risk management contracts and loan related derivative contracts with counterparties are subject to master netting arrangements. (3) Collateral contractually required to be pledged to derivative counterparties is in the form of cash. Washington Trust may need to post additional collateral in the future in proportion to potential increases in unrealized loss positions. The following table presents the balance sheet location, carrying value, and cumulative basis adjustment of the hedged item associated with fair value hedges: (Dollars in thousands) March 31, 2025 December 31, 2024 Balance Sheet Location Carrying Value of Hedged Item (1) Cumulative Basis Adjustment Carrying Value of Hedged Item (1) Cumulative Basis Adjustment Residential real estate loans $ 99,301 ($ 699 ) $ 98,519 ($ 1,481 ) (1) Represents the carrying value of the hedged item associated with fair value hedges on a closed-pool of fixed-rate residential real estate loans that are expected to be outstanding for the designated hedged periods. The amortized cost balance of the closed-pool of residential real estate loans used in the fair value hedges was $ 644.8 million and $ 733.2 million, respectively, at March 31, 2025 and December 31, 2024. -25- Condensed Notes to Unaudited Consolidated Financial Statements – (continued) The following table presents the effect of derivative instruments in the Unaudited Consolidated Statements of Changes in Shareholders’ Equity: (Dollars in thousands) Amounts Recognized in Other Comprehensive Income (Loss), Net of Tax Three months ended March 31, 2025 2024 Derivatives Designated as Cash Flow Hedging Instruments: Interest rate risk management contracts: Interest rate swaps $ 600 $ 3,205 Interest rate collar ( 7 ) — Total $ 593 $ 3,205 The following table presents the effect of derivative instruments in the Unaudited Consolidated Statements of Income: (Dollars in thousands) Amount of Gain (Loss) Recognized in the Unaudited Consolidated Statements of Income Three months ended March 31, Statement of Income Location 2025 2024 Derivatives Designated as Cash Flow Hedging Instruments: Interest rate risk management contracts: Interest rate swaps Interest income: Interest and fees on loans ($ 2,116 ) ($ 2,138 ) Interest rate swaps Interest expense: FHLB advances 193 493 Derivatives Designated as Fair Value Hedging Instruments: Interest rate risk management contracts: Interest rate swaps Interest income: Interest and fees on loans ( 779 ) — Hedged item Interest income: Interest and fees on loans 782 — Derivatives not Designated as Hedging Instruments: Loan related derivative contracts: Interest rate contracts with customers Loan related derivative income $ 9,797 ($ 19,009 ) Mirror interest rate contracts with counterparties Loan related derivative income ( 9,728 ) 19,310 Risk participation agreements Loan related derivative income 32 ( 17 ) Mortgage loan commitments: Interest rate lock commitments Mortgage banking revenues 570 248 Forward sale commitments Mortgage banking revenues ( 639 ) 66 Total ($ 1,888 ) ($ 1,047 ) For derivatives designated as cash flow hedging instruments in the table above, the amounts represent the pre-tax reclassifications from AOCL into earnings. Note 8 - Fair Value Measurements The Corporation uses fair value measurements to record fair value adjustments on certain assets and liabilities and to determine fair value disclosures. Items recorded at fair value on a recurring basis include securities available for sale, mortgage loans that are originated and intended for sale to the secondary market, and derivatives. Additionally, from time to time, we may be required to record other assets at fair value on a nonrecurring basis, such as collateral dependent individually analyzed loans, loan servicing rights, property acquired through foreclosure or repossession, and mortgage loans reclassified to held for sale from portfolio. Fair value is a market-based measurement, not an entity-specific measurement. Fair value measurements are determined based on the assumptions the market participants would use in pricing the asset or liability. In addition, GAAP specifies a hierarchy of valuation techniques based on whether the types of valuation information, or “inputs”, are observable or -26- Condensed Notes to Unaudited Consolidated Financial Statements – (continued) unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Corporation’s market assumptions. These two types of inputs have created the following fair value hierarchy: • Level 1 – Quoted prices for identical assets or liabilities in active markets. • Level 2 – 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 inputs and significant value drivers are observable in active markets. • Level 3 – Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable in the markets and which reflect the Corporation’s market assumptions. Fair Value Option Election GAAP allows for the irrevocable option to elect fair value accounting for the initial and subsequent measurement for certain financial assets and liabilities on a contract-by-contract basis. The Corporation has elected the fair value option for mortgage loans that are originated and intended for sale to the secondary market to better match changes in fair value of the loans with changes in the fair value of the forward sale commitment contracts used to economically hedge them. The following table presents a summary of mortgage loans held for sale accounted for under the fair value option: (Dollars in thousands) March 31, 2025 December 31, 2024 Aggregate fair value $ 21,953 $ 21,708 Aggregate principal balance 21,440 21,420 Difference between fair value and principal balance $ 513 $ 288 Changes in fair value of mortgage loans held for sale accounted for under the fair value option election are included in mortgage banking revenues in the Unaudited Consolidated Statements of Income. Changes in fair value amounted to an increase in mortgage banking revenues of $ 225 thousand for the three months ended March 31, 2025. This compared to a decrease in mortgage banking revenues of $ 69 thousand for the three months ended March 31, 2024. There were no mortgage loans held for sale 90 days or more past due as of March 31, 2025 and December 31, 2024. Valuation Techniques for Items Recorded at Fair Value on a Recurring Basis Available for Sale Debt Securities Available for sale debt securities are recorded at fair value on a recurring basis. When available, the Corporation uses quoted market prices to determine the fair value of debt securities; such items are classified as Level 1. There were no Level 1 debt securities held at March 31, 2025 and December 31, 2024. Level 2 debt securities are traded less frequently than exchange-traded instruments. The fair value of these securities is determined using matrix pricing with inputs that are observable in the market or can be derived principally from or corroborated by observable market data. This category includes obligations of U.S. government-sponsored enterprises, including mortgage-backed securities, individual name issuer trust preferred debt securities, and corporate bonds. Debt securities not actively traded whose fair value is determined through the use of cash flows utilizing inputs that are unobservable are classified as Level 3. There were no Level 3 debt securities held at March 31, 2025 and December 31, 2024. Mortgage Loans Held for Sale, at Fair Value The Corporation has elected the fair value option for mortgage loans that are originated and intended for sale to the secondary market. The fair value is estimated based on current market prices for similar loans in the secondary market and therefore are classified as Level 2 assets. Derivatives Interest rate derivative contracts are traded in over-the-counter markets where quoted market prices are not readily available. Fair value measurements are determined using independent valuation software, which utilizes the present value of future cash flows discounted using market observable inputs such as forward rate assumptions. The Corporation evaluates -27- Condensed Notes to Unaudited Consolidated Financial Statements – (continued) the credit risk of its counterparties, as well as that of the Corporation. Accordingly, factors such as the likelihood of default by the Corporation and its counterparties, its net exposures, and remaining contractual life are considered in determining if any fair value adjustments related to credit risk are required. Counterparty exposure is evaluated by netting positions that are subject to master netting agreements, as well as considering the amount of collateral securing the position, if any. The Corporation has determined that the majority of the inputs used to value its derivative positions fall within Level 2 of the fair value hierarchy. However, the credit valuation adjustments utilize Level 3 inputs. As of March 31, 2025 and December 31, 2024, the Corporation has assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and has determined that the credit valuation adjustments are not significant to the overall valuation. As a result, the Corporation has classified its derivative valuations in their entirety as Level 2. Fair value measurements of forward loan commitments (interest rate lock commitments and forward sale commitments) are primarily based on current market prices for similar assets in the secondary market and therefore are classified as Level 2 assets. The fair value of interest rate lock commitments is also dependent on the ultimate closing of the loans. Pull-through rates are based on the Corporation’s historical data and reflect the Corporation’s best estimate of the likelihood that a commitment will result in a closed loan. Although the pull-through rates are Level 3 inputs, the Corporation has assessed the significance of the impact of pull-through rates on the overall valuation of its interest rate lock commitments and has determined that they are not significant to the overall valuation. As a result, the Corporation has classified its interest rate lock commitments as Level 2. Items Recorded at Fair Value on a Recurring Basis The following tables present the balances of assets and liabilities reported at fair value on a recurring basis: (Dollars in thousands) Total Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) March 31, 2025 Assets: Available for sale debt securities: Obligations of U.S. government agencies and U.S government sponsored enterprises $ 39,252 $ — $ 39,252 $ — Mortgage-backed securities issued by U.S. government agencies and U.S. government-sponsored enterprises 855,560 — 855,560 — Obligations of states and political subdivisions 642 — 642 — Individual name issuer trust preferred debt securities 9,249 — 9,249 — Corporate bonds 12,842 — 12,842 — Mortgage loans held for sale 21,953 — 21,953 — Derivative assets 40,659 — 40,659 — Total assets at fair value on a recurring basis $ 980,157 $ — $ 980,157 $ — Liabilities: Derivative liabilities $ 40,250 $ — $ 40,250 $ — Total liabilities at fair value on a recurring basis $ 40,250 $ — $ 40,250 $ — -28- Condensed Notes to Unaudited Consolidated Financial Statements – (continued) (Dollars in thousands) Total Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) December 31, 2024 Assets: Available for sale debt securities: Obligations of U.S. government agencies and U.S government sponsored enterprises $ 38,612 $ — $ 38,612 $ — Mortgage-backed securities issued by U.S. government agencies and U.S. government-sponsored enterprises 855,147 — 855,147 — Obligations of states and political subdivisions 655 — 655 — Individual name issuer trust preferred debt securities 9,221 — 9,221 — Corporate bonds 12,670 — 12,670 — Mortgage loans held for sale 21,708 — 21,708 — Derivative assets 54,302 — 54,302 — Total assets at fair value on a recurring basis $ 992,315 $ — $ 992,315 $ — Liabilities: Derivative liabilities $ 51,663 $ — $ 51,663 $ — Total liabilities at fair value on a recurring basis $ 51,663 $ — $ 51,663 $ — Valuation Techniques for Items Recorded at Fair Value on a Nonrecurring Basis Collateral Dependent Individually Analyzed Loans Collateral dependent individually analyzed loans are valued based upon the lower of amortized cost or fair value. Fair value is determined based on the appraised value of the underlying collateral. Such collateral primarily consists of real estate and, to a lesser extent, other business assets. For collateral dependent loans that are expected to be repaid substantially through the sale of the collateral, management adjusts the fair value for estimated costs to sell. Management may also adjust appraised values to reflect estimated market value declines or apply other discounts to appraised values resulting from its knowledge of the collateral. Internal valuations may be utilized to determine the fair value of other business assets. Collateral dependent individually analyzed loans are categorized as Level 3. Mortgage Loans Held for Sale, at Lower of Cost or Market Pursuant to the terms of a sales agreement effective December 30, 2024, the Bank had committed to sell residential mortgage loans with an amortized cost balance of $344.6 million that were held in portfolio. These loans were reclassified to held for sale and written down to a fair value of $281.7 million in December 2024. The fair value of these loans was based on the terms of the sales agreement with an unrelated third party and therefore are categorized as Level 2. The sale of these loans was completed on January 24, 2025. Items Recorded at Fair Value on a Nonrecurring Basis The following table presents the carrying value of assets held at March 31, 2025, which were written down to fair value during the three months ended March 31, 2025: (Dollars in thousands) Total Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Assets: Collateral dependent individually analyzed loans $ 4,405 $ — $ — $ 4,405 Total assets at fair value on a nonrecurring basis $ 4,405 $ — $ — $ 4,405 -29- Condensed Notes to Unaudited Consolidated Financial Statements – (continued) The following table presents the carrying value of assets held at December 31, 2024, which were written down to fair value during the year ended December 31, 2024. (Dollars in thousands) Total Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Assets: Collateral dependent individually analyzed loans $ 9,057 $ — $ — $ 9,057 Mortgage loans held for sale, at lower of cost or market 281,706 — 281,706 — Total assets at fair value on a nonrecurring basis $ 290,763 $ — $ 281,706 $ 9,057 The following tables present valuation techniques and unobservable inputs for assets measured at fair value on a nonrecurring basis for which the Corporation has utilized Level 3 inputs to determine fair value: (Dollars in thousands) Fair Value Valuation Technique Unobservable Input Range of Inputs Utilized (Weighted Average) March 31, 2025 Collateral dependent individually analyzed loans $ 4,405 Appraisals of collateral Discount for costs to sell 14 % - 15 % ( 15 %) Appraisal adjustments 0 % - 60 % ( 3 %) (Dollars in thousands) Fair Value Valuation Technique Unobservable Input Inputs Utilized (Weighted Average) December 31, 2024 Collateral dependent individually analyzed loans $ 9,057 Appraisals of collateral Discount for costs to sell 14 % - 49 % ( 16 %) Appraisal adjustments 0 % - 10 % ( 7 %) Items for which Fair Value is Only Disclosed The estimated fair values and related carrying amounts for financial instruments for which fair value is only disclosed are presented in the tables below: (Dollars in thousands) March 31, 2025 Carrying Amount Total Fair Value Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Financial Assets: Cash and cash equivalents $ 120,239 $ 120,239 $ 120,239 $ — $ — Loans, net of allowance for credit losses on loans (1) 5,055,154 4,850,461 — — 4,850,461 FHLB stock 38,899 38,899 — 38,899 — Investment in BOLI 107,546 107,546 — 107,546 — Financial Liabilities: Non-maturity deposits $ 3,799,971 $ 3,799,971 $ — $ 3,799,971 $ — Time deposits 1,240,610 1,234,345 — 1,234,345 — FHLB advances 850,000 853,446 — 853,446 — Junior subordinated debentures 22,681 19,416 — 19,416 — (1) The estimated fair value excludes a $ 699 thousand negative basis adjustment associated with fair value hedges. See Note 7 for additional disclosure. -30- Condensed Notes to Unaudited Consolidated Financial Statements – (continued) (Dollars in thousands) December 31, 2024 Carrying Amount Total Fair Value Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Financial Assets: Cash and cash equivalents $ 113,889 $ 113,889 $ 113,889 $ — $ — Loans, net of allowance for credit losses on loans (1) 5,095,878 4,952,110 — — 4,952,110 FHLB stock 49,817 49,817 — 49,817 — Investment in BOLI 106,777 106,777 — 106,777 — Financial Liabilities: Non-maturity deposits $ 3,626,152 $ 3,626,152 $ — $ 3,626,152 $ — Time deposits 1,489,648 1,479,267 — 1,479,267 — FHLB advances 1,125,000 1,125,819 — 1,125,819 — Junior subordinated debentures 22,681 19,602 — 19,602 — (1) The estimated fair value excludes a $ 1.5 million negative basis adjustment associated with fair value hedges. See Note 7 for additional disclosure. Note 9 - Deposits The following table presents a summary of deposits: (Dollars in thousands) March 31, 2025 December 31, 2024 Noninterest-bearing: Noninterest-bearing demand deposits $ 625,590 $ 661,776 Interest-bearing: Interest-bearing demand deposits 654,599 592,904 NOW accounts 686,666 692,812 Money market accounts 1,202,703 1,154,745 Savings accounts 630,413 523,915 Time deposits (1) 1,240,610 1,489,648 Total interest-bearing deposits 4,414,991 4,454,024 Total deposits $ 5,040,581 $ 5,115,800 (1) Includes wholesale brokered time deposit balances of $ 27.2 million and $ 297.5 million, respectively, as of March 31, 2025 and December 31, 2024. The following table presents scheduled maturities of time certificates of deposit: (Dollars in thousands) Scheduled Maturity Weighted Average Rate April 1, 2025 to December 31, 2025 $ 932,475 3.94 % 2026 223,777 3.48 2027 51,151 3.02 2028 25,683 3.70 2029 5,941 2.80 2030 and thereafter 1,583 1.92 Balance at March 31, 2025 $ 1,240,610 3.80 % Time certificates of deposit in denominations of $250 thousand or more totaled $ 362.3 million and $ 353.9 million, -31- Condensed Notes to Unaudited Consolidated Financial Statements – (continued) respectively, at March 31, 2025 and December 31, 2024. Note 10 - Borrowings Advances payable to the FHLB amounted to $ 850.0 million and $ 1.1 billion, respectively, at March 31, 2025 and December 31, 2024. See Note 7 for additional disclosure on derivatives designated as cash flow hedges to hedge the interest rate risk associated with short-term FHLB advances. The Bank pledges certain qualified investment securities and loans as collateral to the FHLB. As of March 31, 2025 and December 31, 2024, the Bank had available borrowing capacity of $ 1.0 billion and $ 753.0 million, respectively, with the FHLB. In addition, the Bank had access to a $ 40.0 million unused line of credit with the FHLB at both March 31, 2025 and December 31, 2024. Furthermore, the Bank had standby letters of credit with the FHLB of $ 66.0 million at both March 31, 2025 and December 31, 2024 to collateralize institutional deposits. The following table presents maturities and weighted average interest rates on FHLB advances outstanding as of March 31, 2025: (Dollars in thousands) Scheduled Maturity Weighted Average Rate April 1, 2025 to December 31, 2025 $ 475,000 4.77 % 2026 165,000 4.54 2027 45,000 4.24 2028 85,000 4.35 2029 80,000 3.82 2030 and thereafter — — Balance at March 31, 2025 $ 850,000 4.57 % -32- Condensed Notes to Unaudited Consolidated Financial Statements – (continued) Note 11 - Shareholders' Equity Regulatory Capital Requirements Capital levels at March 31, 2025 exceeded the regulatory minimum levels to be considered “well capitalized.” The following table presents the Corporation’s and the Bank’s actual capital amounts and ratios, as well as the corresponding minimum and well capitalized regulatory amounts and ratios that were in effect during the respective periods: (Dollars in thousands) Actual For Capital Adequacy Purposes To Be “Well Capitalized” Under Prompt Corrective Action Provisions Amount Ratio Amount Ratio Amount Ratio March 31, 2025 Total Capital (to Risk-Weighted Assets): Corporation $ 619,238 13.13 % $ 377,420 8.00 % N/A N/A Bank 613,684 13.01 377,218 8.00 $ 471,523 10.00 % Tier 1 Capital (to Risk-Weighted Assets): Corporation 576,942 12.23 283,065 6.00 N/A N/A Bank 571,388 12.12 282,914 6.00 377,218 8.00 Common Equity Tier 1 Capital (to Risk-Weighted Assets): Corporation 554,945 11.76 212,299 4.50 N/A N/A Bank 571,388 12.12 212,185 4.50 306,490 6.50 Tier 1 Capital (to Average Assets): (1) Corporation 576,942 8.45 273,007 4.00 N/A N/A Bank 571,388 8.38 272,892 4.00 341,115 5.00 December 31, 2024 Total Capital (to Risk-Weighted Assets): Corporation 617,762 12.47 396,309 8.00 N/A N/A Bank 612,603 12.37 396,150 8.00 495,187 10.00 Tier 1 Capital (to Risk-Weighted Assets): Corporation 576,731 11.64 297,232 6.00 N/A N/A Bank 571,572 11.54 297,112 6.00 396,150 8.00 Common Equity Tier 1 Capital (to Risk-Weighted Assets): Corporation 554,734 11.20 222,924 4.50 N/A N/A Bank 571,572 11.54 222,834 4.50 321,872 6.50 Tier 1 Capital (to Average Assets): (1) Corporation 576,731 8.13 283,730 4.00 N/A N/A Bank 571,572 8.06 283,628 4.00 354,536 5.00 (1) Leverage ratio. In addition to the minimum regulatory capital required for capital adequacy outlined in the table above, the Corporation and the Bank are required to maintain a minimum capital conservation buffer, in the form of common equity, of 2.50%, resulting in a requirement for the Corporation and the Bank to effectively maintain total capital, Tier 1 capital, and common equity Tier 1 capital ratios of 10.50%, 8.50%, and 7.00%, respectively. The Corporation and the Bank must maintain the capital conservation buffer to avoid restrictions on the ability to pay dividends and discretionary bonuses. The Corporation’s and the Bank’s capital levels exceeded the minimum regulatory capital requirements plus the capital conservation buffer at March 31, 2025 and December 31, 2024. The Bancorp owns the common stock of two capital trusts, which have issued trust preferred securities. In accordance with GAAP, the capital trusts are treated as unconsolidated subsidiaries. At both March 31, 2025 and December 31, 2024, $ 22.0 million in trust preferred securities were included in the Tier 1 capital of the Corporation for regulatory capital reporting purposes pursuant to the capital adequacy guidelines of the Federal Reserve. -33- Condensed Notes to Unaudited Consolidated Financial Statements – (continued) In accordance with regulatory capital rules, the Corporation elected the option to delay the estimated impact of ASC 326 on its regulatory capital over a two-year deferral and subsequent three-year transition period ending December 31, 2024. As a result, the December 31, 2024 capital ratios in the table above excluded the full impact of the increased ACL on loans and unfunded loan commitments attributed to the adoption of ASC 326, adjusted for an approximation of the after-tax provision for credit losses attributable to ASC 326 relative to the incurred loss methodology during the two-year deferral period. The cumulative difference quantified at the end of the deferral period was fully phased-in to regulatory capital on January 1, 2025. Note 12 - Revenue from Contracts with Customers The following tables summarize total revenues as presented in the Unaudited Consolidated Statements of Income and the related amounts that are from contracts with customers within the scope of ASC 606. As shown below, a substantial portion of our revenues are specifically excluded from the scope of ASC 606. For the three months ended March 31, 2025 2024 (Dollars in thousands) Revenue (1) ASC 606 Revenue (2) Revenue (1) ASC 606 Revenue (2) Net interest income $ 36,422 $ — $ 31,665 $ — Noninterest income: Wealth management revenues 9,891 9,891 9,338 9,338 Mortgage banking revenues 2,304 — 2,506 — Card interchange fees 1,509 1,509 1,145 1,145 Service charges on deposit accounts 744 744 685 685 Loan related derivative income 101 — 284 — Income from bank-owned life insurance 769 — 739 — Gain on sale of bank-owned properties, net (3) 6,994 6,994 — — Other income 331 264 2,466 270 Total noninterest income 22,643 19,402 17,163 11,438 Total revenues $ 59,065 $ 19,402 $ 48,828 $ 11,438 (1) As reported in the Unaudited Consolidated Statements of Income. (2) Revenue from contracts with customers in scope of ASC 606. (3) Included herein in accordance with sales-leaseback transaction provisions of ASC 842 and ASC 606. The following table presents revenue from contracts with customers based on the timing of revenue recognition: (Dollars in thousands) Three months ended March 31, 2025 2024 Revenue recognized at a point in time: Card interchange fees $ 1,509 $ 1,145 Service charges on deposit accounts 463 425 Gain on sale of bank-owned properties, net 6,994 — Other income 204 211 Revenue recognized over time: Wealth management revenues 9,891 9,338 Service charges on deposit accounts 281 260 Other income 60 59 Total revenues from contracts with customers in scope of ASC 606 $ 19,402 $ 11,438 Receivables for revenue from contracts with customers primarily consist of amounts due for wealth management services performed for which the Corporation’s performance obligations have been fully satisfied. Receivables amounted to $ 5.9 million and $ 6.0 million, respectively, at March 31, 2025 and December 31, 2024 and were included in other assets in the Unaudited Consolidated Balance Sheets. -34- Condensed Notes to Unaudited Consolidated Financial Statements – (continued) Deferred revenues, which are considered contract liabilities under ASC 606, represent advance consideration received from customers for which the Corporation has a remaining performance obligation to fulfill. Contract liabilities are recognized as revenue over the life of the contract as the performance obligations are satisfied. The balances of contract liabilities were insignificant at both March 31, 2025 and December 31, 2024 and were included in other liabilities in the Unaudited Consolidated Balance Sheets. For commissions and incentives that are in scope of ASC 606, such as those paid to employees in our wealth management services and commercial banking segments in order to obtain customer contracts, contract cost assets are established. The contract cost assets are capitalized and amortized over the estimated useful life that the asset is expected to generate benefits. The carrying value of contract cost assets amounted to $ 2.0 million and $ 2.1 million, respectively at March 31, 2025 and December 31, 2024 and were included in other assets in the Unaudited Consolidated Balance Sheets. The amortization of contract cost assets is recorded within salaries and employee benefits expense in the Unaudited Consolidated Statements of Income. Note 13 - Defined Benefit Pension Plans Washington Trust maintained a qualified pension plan for the benefit of certain eligible employees who were hired prior to October 1, 2007. Washington Trust also has non-qualified retirement plans to provide supplemental retirement benefits to certain employees, as defined in the plans. These defined benefit pension plans were previously amended to freeze benefit accruals after a 10-year transition period, which ended in December 2023. In the fourth quarter of 2023, the Corporation’s Board of Directors approved a resolution to terminate the qualified pension plan, and participants were notified of the termination. In the first quarter of 2025, the qualified pension plan liability was settled after plan assets were distributed through a combination of lump sum payments to participants and the purchase of a group annuity contract from a highly-rated insurance company. This resulted in a pre-tax non-cash pension settlement charge of $ 6.4 million being recognized in noninterest expenses in the first quarter of 2025. The settlement charge included the recognition of pre-tax actuarial losses accumulated in AOCL and the effects of the remeasurement of plan assets and liabilities upon settlement. As a result of the plan’s over-funded status, remaining surplus plan assets of approximately $ 10.3 million are expected to be transferred directly to the Corporation’s 401(k) Plan (a qualified replacement plan) to fund future non-elective employer contributions. The following table presents components of net periodic benefit cost and other amounts recognized in other comprehensive income (loss), on a pre-tax basis: (Dollars in thousands) Qualified Pension Plan Non-Qualified Retirement Plans Three months ended March 31, 2025 2024 2025 2024 Net Periodic Benefit Cost: Service cost (1) $ — $ 125 $ — $ — Interest cost (2) 15 833 163 162 Expected return on plan assets (2) ( 34 ) ( 1,028 ) — — Recognized net actuarial loss (2) — — 29 31 Net periodic benefit cost before settlement ( 19 ) ( 70 ) 192 193 Pension plan settlement charge 6,436 — — — Net periodic benefit cost $ 6,417 ($ 70 ) $ 192 $ 193 (1) Included in salaries and employee benefits expense in the Unaudited Consolidated Statements of Income. Service cost for 2024 represents administrative expenses related to the termination of the qualified pension plan. (2) Included in other expenses in the Unaudited Consolidated Statements of Income. -35- Condensed Notes to Unaudited Consolidated Financial Statements – (continued) Note 14 - Business Segments The Corporation manages its operations through two reportable business segments, consisting of Commercial Banking and Wealth Management Services. The Corporation’s reportable business segments are determined by the Senior Executive Vice President, Chief Financial Officer and Treasurer, the designated CODM. An allocation methodology is utilized to allocate income and expenses to the business segments. Direct activities are assigned to the appropriate business segment to which the activity relates. Indirect activities, such as corporate, technology and other support functions, are allocated to business segments primarily based upon full-time equivalent employee computations. The Commercial Banking segment includes commercial, residential, and consumer lending activities; mortgage banking activities; deposit generation; cash management services; other banking activities, including customer support and the operation of ATMs, telephone banking, internet banking, and mobile banking services; as well as investment portfolio and wholesale funding activities. Wealth management services and operations are provided through the Bank and its registered investment adviser subsidiary. The Wealth Management Services segment provides investment management; holistic financial planning services; personal trust and estate services, including services as trustee, personal representative, and custodian; settlement of decedents’ estates; and institutional trust services, including custody and fiduciary services. The CODM evaluates the financial performance of each business segment, which is measured based upon the business segment’s net income. Components of net income for the business segments that are reviewed by the CODM include net interest income, provision for credit losses, noninterest income, noninterest expense, and income tax expense. The CODM, in conjunction with management committees (such as the ALCO) and certain members of executive management, evaluates financial performance to make decisions related to the products and services that are offered, pricing, and the allocation of resources, for each business segment. -36- Condensed Notes to Unaudited Consolidated Financial Statements – (continued) The following tables presents the components of net income, as well as other supplemental information for Washington Trust’s reportable business segments: (Dollars in thousands) Commercial Banking Wealth Management Services Consolidated Total Three months ended March 31, 2025 2024 2025 2024 2025 2024 Total interest income and dividend income $ 79,463 $ 85,256 $ — $ — $ 79,463 $ 85,256 Total interest expense 43,041 53,591 — — 43,041 53,591 Net interest income 36,422 31,665 — — 36,422 31,665 Provision for credit losses 1,200 700 — — 1,200 700 Net interest income after provision for credit losses 35,222 30,965 — — 35,222 30,965 Noninterest income 12,635 5,572 10,008 11,591 22,643 17,163 Noninterest expenses: Salaries and employee benefits 16,979 16,570 5,443 5,205 22,422 21,775 Outsourced services 3,265 2,848 1,081 932 4,346 3,780 Net occupancy 2,471 2,306 270 255 2,741 2,561 Equipment 815 901 76 119 891 1,020 Legal, audit and professional fees 527 590 223 116 750 706 FDIC deposit insurance costs 1,262 1,441 — — 1,262 1,441 Advertising and promotion 348 466 62 82 410 548 Amortization of intangibles — — 204 208 204 208 Other expenses 6,879 1,911 2,291 413 9,170 2,324 Total noninterest expenses 32,546 27,033 9,650 7,330 42,196 34,363 Income before income taxes 15,311 9,504 358 4,261 15,669 13,765 Income tax expense 3,347 1,906 143 923 3,490 2,829 Net income $ 11,964 $ 7,598 $ 215 $ 3,338 $ 12,179 $ 10,936 Supplemental Information: Total assets at period end $ 6,525,532 $ 7,190,644 $ 60,483 $ 58,480 $ 6,586,015 $ 7,249,124 Expenditures for long-lived assets 87 556 1 70 88 626 Depreciation expense (1) 808 892 86 109 894 1,001 (1) Included in net occupancy and equipment expenses in the table above. For the three months ended March 31, 2025, noninterest income for the Commercial Banking segment included a $ 7.0 million net gain associated with sales-leaseback transactions that were completed for five branch locations. See additional disclosure regarding the sale-leaseback transactions in Note 6. Also, for the three months ended March 31, 2025, total other expenses included a $ 6.4 million pension plan settlement charge, of which $ 4.9 million was included in the Commercial Banking segment and $ 1.5 million was included in the Wealth Management Services segment. See additional disclosure regarding the pension plan settlement charge in Note 13. For the three months ended March 31, 2024, noninterest income for the Wealth Management Services segment included income of $ 2.1 million associated with a litigation settlement. -37- Condensed Notes to Unaudited Consolidated Financial Statements – (continued) Note 15 - Other Comprehensive Income (Loss) The following table presents the activity in other comprehensive income (loss): Three months ended March 31, 2025 2024 (Dollars in thousands) Pre-tax Amounts Income Tax Benefit (Expense) Net of Tax Pre-tax Amounts Income Tax Benefit (Expense) Net of Tax Available for Sale Debt Securities: Change in fair value of available for sale debt securities $ 16,896 ($ 4,266 ) $ 12,630 ($ 14,748 ) $ 3,760 ($ 10,988 ) Cash Flow Hedges: Change in fair value of cash flow hedges ( 1,130 ) 286 ( 844 ) 2,656 ( 677 ) 1,979 Net cash flow hedge losses reclassified into earnings 1,923 ( 486 ) 1,437 1,645 ( 419 ) 1,226 Net change in fair value of cash flow hedges 793 ( 200 ) 593 4,301 ( 1,096 ) 3,205 Defined Benefit Plan Obligations: Defined benefit plan obligation remeasurement 2,665 ( 728 ) 1,937 — — — Pension plan settlement charge reclassified into earnings 6,436 ( 1,625 ) 4,811 — — — Amortization of net actuarial losses into earnings 29 ( 8 ) 21 31 ( 8 ) 23 Net change in defined benefit plan obligations 9,130 ( 2,361 ) 6,769 31 ( 8 ) 23 Total other comprehensive income (loss) $ 26,819 ($ 6,827 ) $ 19,992 ($ 10,416 ) $ 2,656 ($ 7,760 ) The following table presents the changes in AOCL by component, net of tax: (Dollars in thousands) Net Unrealized Losses on Available For Sale Debt Securities Net Unrealized Losses on Cash Flow Hedges Net Unrealized Losses on Defined Benefit Plan Obligations Total For the three months ended March 31, 2025 Balance at December 31, 2024 ($ 102,439 ) ($ 7,938 ) ($ 8,794 ) ($ 119,171 ) Other comprehensive income (loss) before reclassifications 12,630 ( 844 ) 1,937 13,723 Amounts reclassified from AOCL — 1,437 4,832 6,269 Net other comprehensive income 12,630 593 6,769 19,992 Balance at March 31, 2025 ($ 89,809 ) ($ 7,345 ) ($ 2,025 ) ($ 99,179 ) (Dollars in thousands) Net Unrealized Losses on Available For Sale Debt Securities Net Unrealized Losses on Cash Flow Hedges Net Unrealized Losses on Defined Benefit Plan Obligations Total For the three months ended March 31, 2024 Balance at December 31, 2023 ($ 116,591 ) ($ 15,619 ) ($ 8,943 ) ($ 141,153 ) Other comprehensive (loss) income before reclassifications ( 10,988 ) 1,979 — ( 9,009 ) Amounts reclassified from AOCL — 1,226 23 1,249 Net other comprehensive (loss) income ( 10,988 ) 3,205 23 ( 7,760 ) Balance at March 31, 2024 ($ 127,579 ) ($ 12,414 ) ($ 8,920 ) ($ 148,913 ) -38- Condensed Notes to Unaudited Consolidated Financial Statements – (continued) Note 16 - Earnings per Common Share The following table presents the calculation of EPS: (Dollars and shares in thousands, except per share amounts) Three months ended March 31, 2025 2024 Earnings for basic and diluted EPS calculations: Net income $ 12,179 $ 10,936 Less: dividends and undistributed earnings allocated to participating securities — ( 12 ) Net income available to common shareholders $ 12,179 $ 10,924 Shares for basic and diluted EPS calculations: Weighted average common shares outstanding for basic EPS 19,276 17,033 Dilutive effect of common stock equivalents 94 41 Weighted average common and potential common shares outstanding for diluted EPS 19,370 17,074 EPS: Basic earnings per common share $ 0.63 $ 0.64 Diluted earnings per common share $ 0.63 $ 0.64 Awards excluded from the calculation of diluted EPS: Weighted average anti-dilutive common stock equivalents (1) 388 464 (1) For the three months ended 2025 and 2024, weighted average anti-dilutive common stock equivalents represent share-based compensation awards not included in the calculation of common shares outstanding for purposes of calculating diluted EPS as the grant prices were greater than the average market price of Bancorp’s common stock, and therefore were anti-dilutive. Note 17 - Commitments and Contingencies Financial Instruments with Off-Balance Sheet Risk The Corporation is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers and to manage the Corporation’s exposure to fluctuations in interest rates. These financial instruments include commitments to extend credit and standby letters of credit, as well as derivative financial instruments, such as mortgage loan commitments, loan related derivative contracts and interest rate risk management contracts. These instruments involve, to varying degrees, elements of credit risk in excess of the amount recognized in the Unaudited Consolidated Balance Sheets. The contract or notional amounts of these instruments reflect the extent of involvement the Corporation has in particular classes of financial instruments. See Note 7 for additional disclosure pertaining to derivative financial instruments. Financial Instruments Whose Contract Amounts Represent Credit Risk (Unfunded Commitments) Commitments to Extend Credit Commitments to extend credit are agreements to lend to a customer as long as there are no violations of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since some of the commitments are expected to expire without being drawn upon, total commitment amounts do not necessarily represent future cash requirements. Each borrower’s creditworthiness is evaluated on a case-by-case basis. The amount of collateral obtained is based on management’s credit evaluation of the borrower. Standby Letters of Credit Standby letters of credit are conditional commitments issued to guarantee the performance of a customer to a third party. These standby letters of credit are primarily issued to support the financing needs of the Bank’s commercial customers. The credit risk involved in issuing standby letters of credit is essentially the same as that involved in extending loan facilities to customers. The collateral supporting those commitments is essentially the same as for other commitments. Most standby letters of credit extend for one year. At March 31, 2025 and December 31, 2024, there were no liabilities to beneficiaries resulting from standby letters of credit. Should the Corporation be required to make payments to the beneficiary, repayment from the customer to the Corporation is required. -39- Condensed Notes to Unaudited Consolidated Financial Statements – (continued) The following table presents the contractual and notional amounts of financial instruments with off-balance sheet risk: (Dollars in thousands) March 31, 2025 December 31, 2024 Financial instruments whose contract amounts represent credit risk: Commitments to extend credit $ 957,935 $ 968,858 Standby letters of credit 12,750 12,455 ACL on Unfunded Commitments The ACL on unfunded commitments is management’s estimate of expected lifetime credit losses over the expected contractual term in which the Corporation is exposed to credit risk via a contractual obligation to extend credit, unless that obligation is unconditionally cancellable by the Corporation. The activity in the ACL on unfunded commitments for the three months ended March 31, 2025 is presented below: (Dollars in thousands) Commercial Consumer CRE C&I Total Commercial Residential Real Estate Home Equity Other Total Consumer Total Beginning Balance $ 822 $ 589 $ 1,411 $ 18 $ — $ 11 $ 11 $ 1,440 Provision ( 128 ) ( 71 ) ( 199 ) ( 1 ) — — — ( 200 ) Ending Balance $ 694 $ 518 $ 1,212 $ 17 $ — $ 11 $ 11 $ 1,240 The activity in the ACL on unfunded commitments for the three months ended March 31, 2024 is presented below: (Dollars in thousands) Commercial Consumer CRE C&I Total Commercial Residential Real Estate Home Equity Other Total Consumer Total Beginning Balance $ 1,091 $ 822 $ 1,913 $ 15 $ — $ 12 $ 12 $ 1,940 Provision ( 148 ) ( 51 ) ( 199 ) — — ( 1 ) ( 1 ) ( 200 ) Ending Balance $ 943 $ 771 $ 1,714 $ 15 $ — $ 11 $ 11 $ 1,740 Other Contingencies Litigation The Corporation is involved in various claims and legal proceedings arising out of the ordinary course of business. Management is of the opinion, based on its review with counsel of the development of such matters to date, that the ultimate disposition of such matters will not materially affect the consolidated balance sheets or statements of income of the Corporation. -40- Management's Discussion and Analysis