What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-08-06 compared with 2025-05-07 · 314 added, 222 removed, 865 unchanged (38% of the section changed)

1 unchanged sentence

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

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

Operating results for the three and six months ended June 30, 2025 are not necessarily indicative of the results for the full-year ended December 31, 2025 or any future period.

Forward-Looking Statements

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

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

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

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

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

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

26 unchanged sentences

(Dollars in thousands, except per share amounts)

Three months ended March 31, 2025 2024

Three Months Six Months

Periods ended June 30, 2025 2024 2025 2024

Adjusted Noninterest Income:

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Adjusted noninterest expense (non-GAAP)

$36,530 $33,910 $72,290 $68,273

Adjusted Income Before Income Taxes:

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(Dollars in thousands, except per share amounts)

Three months ended March 31, 2025 2024

Three Months Six Months

Periods ended June 30, 2025 2024 2025 2024

Adjusted Diluted Earnings per Common Share:

Diluted earnings per common share, as reported (1)

$0.68 $0.63 $1.31 $1.27

impact of total adjustments — 0.04 0.02 0.13

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

$0.68 $0.59 $1.29 $1.14

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

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(Dollars in thousands)

Three months ended March 31, 2025 2024

Three Months Six Months

Periods ended June 30, 2025 2024 2025 2024

Adjusted Return on Average Assets (1) :

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Adjusted net income (non-GAAP)

13,245 10,076 25,007 19,442

Total average assets, as reported 6,643,370 7,227,478 6,703,877 7,229,656

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

13,245 10,069 25,007 19,425

Total average equity, as reported 523,709 460,959 518,408 466,028

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

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

Our principal noninterest

Management's Discussion and Analysis

expenses include salaries and employee benefit costs, outsourced services (including software-as-a-service) provided by third-party vendors, occupancy and facility-related costs, and other administrative expenses.

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

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

Management's Discussion and Analysis

ERM is an overarching program that includes all areas of the Corporation.

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

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

Management's Discussion and Analysis

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

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

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The following table presents a summarized consolidated statement of operations:

(Dollars in thousands)

Three months ended March 31, 2025 2024 $ %

(Dollars in thousands) Three Months Six Months

Change Change

Periods ended June 30, 2025 2024 $ % 2025 2024 $ %

Net interest income $37,185 $31,585 $5,600 18 % $73,607 $63,250 $10,357 16 %

8 unchanged sentences

$13,245 $10,076 $3,169 31 % $25,007 $19,442 $5,565 29 %

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

These results included the following:

Net income totaled $13.2 million and $25.4 million, respectively, for the three and six months ended June 30, 2025, compared to $10.8 million and $21.8 million, respectively, reported for the same periods in 2024.

These results included the following infrequent transactions:

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

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

• In the second quarter of 2024, noninterest income included a net gain of $988 thousand recognized on the sale of a bank-owned operations facility.

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

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

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

Excluding these items, adjusted net income (non-GAAP) for the three and six months ended June 30, 2025 was $13.2 million and $25.0 million, respectively, compared to $10.1 million and $19.4 million, respectively, for the same periods in 2024.

These increases were largely driven by increases in net interest income.

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

Three months ended March 31, 2025 2024

Three Months Six Months

Periods ended June 30, 2025 2024 2025 2024

Diluted earnings per common share $0.68 $0.63 $1.31 $1.27

Adjusted diluted earnings per common share (non-GAAP)

$0.68 $0.59 $1.29 $1.14

Return on average assets (net income divided by average assets) 0.80 % 0.60 % 0.76 % 0.61 %

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Average Balances / Net Interest Margin - Fully Taxable Equivalent Basis

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

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

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

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

Three months ended March 31, 2025 2024 Change

Three months ended June 30, 2025 2024 Change

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

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(Dollars in thousands)

Three months ended March 31, 2025 2024 Change

Three months ended June 30, 2025 2024 Change

Commercial loans $219 $227 ($8)

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Total $219 $227 ($8)

Six months ended June 30, 2025 2024 Change

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

Cash, federal funds sold, and short-term investments $138,950 $3,022 4.39 % $87,964 $2,493 5.70 % $50,986 $529 (1.31 %)

Mortgage loans held for sale 66,145 1,400 4.27 19,103 647 6.81 47,042 753 (2.54)

Taxable debt securities 1,055,109 18,057 3.45 1,138,013 14,040 2.48 (82,904) 4,017 0.97

Nontaxable debt securities 650 16 4.96 — — — 650 16 4.96

Total debt securities 1,055,759 18,073 3.45 1,138,013 14,040 2.48 (82,254) 4,033 0.97

42,482 1,814 8.61 57,106 2,197 7.74 (14,624) (383) 0.87

Commercial real estate 2,150,209 61,579 5.78 2,154,336 68,927 6.43 (4,127) (7,348) (0.65)

Commercial & industrial (1) 544,352 15,841 5.87 606,766 19,728 6.54 (62,414) (3,887) (0.67)

Total commercial 2,694,561 77,420 5.79 2,761,102 88,655 6.46 (66,541) (11,235) (0.67)

Residential real estate 2,108,429 46,350 4.43 2,581,357 53,004 4.13 (472,928) (6,654) 0.30

Home equity 297,695 10,229 6.93 308,467 10,215 6.66 (10,772) 14 0.27

Other 17,174 423 4.97 18,744 451 4.84 (1,570) (28) 0.13

Total consumer 314,869 10,652 6.82 327,211 10,666 6.56 (12,342) (14) 0.26

Total loans 5,117,859 134,422 5.30 5,669,670 152,325 5.40 (551,811) (17,903) (0.10)

Total interest-earning assets 6,421,195 158,731 4.98 6,971,856 171,702 4.95 (550,661) (12,971) 0.03

Noninterest-earning assets 282,682 257,800 24,882

Total assets $6,703,877 $7,229,656 ($525,779)

Liabilities and Shareholders’ Equity:

Interest-bearing demand deposits (in-market) $646,489 $12,126 3.78 % $521,495 $11,770 4.54 % $124,994 $356 (0.76 %)

NOW accounts 674,985 685 0.20 716,896 764 0.21 (41,911) (79) (0.01)

Money market accounts 1,207,072 19,806 3.31 1,113,962 21,351 3.85 93,110 (1,545) (0.54)

Savings accounts 614,573 4,932 1.62 486,472 1,554 0.64 128,101 3,378 0.98

Time deposits (in-market) 1,209,927 22,611 3.77 1,153,702 23,522 4.10 56,225 (911) (0.33)

Interest-bearing in-market deposits 4,353,046 60,160 2.79 3,992,527 58,961 2.97 360,519 1,199 (0.18)

Wholesale brokered time deposits 97,939 2,452 5.05 608,514 15,799 5.22 (510,575) (13,347) (0.17)

Total interest-bearing deposits 4,450,985 62,612 2.84 4,601,041 74,760 3.27 (150,056) (12,148) (0.43)

FHLB advances

946,906 21,397 4.56 1,318,544 32,434 4.95 (371,638) (11,037) (0.39)

Junior subordinated debentures 22,681 693 6.16 22,681 809 7.17 — (116) (1.01)

Total interest-bearing liabilities 5,420,572 84,702 3.15 5,942,266 108,003 3.66 (521,694) (23,301) (0.51)

Noninterest-bearing demand deposits 618,373 658,423 (40,050)

Other liabilities 146,524 162,939 (16,415)

Shareholders’ equity 518,408 466,028 52,380

Total liabilities and shareholders’ equity $6,703,877 $7,229,656 ($525,779)

Net interest income (FTE)

$74,029 $63,699 $10,330

Interest rate spread 1.83 % 1.29 % 0.54 %

Net interest margin 2.32 % 1.84 % 0.48 %

Management's Discussion and Analysis

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

(Dollars in thousands)

Six months ended June 30, 2025 2024 Change

Commercial loans $425 $449 ($24)

Nontaxable debt securities 1 — 1

Total $426 $449 ($23)

Net Interest Income

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

Net interest income, the primary source of our operating income, totaled $37.2 million and $73.6 million, respectively, for the three and six months ended June 30, 2025, compared to $31.6 million and $63.3 million, respectively, for the same periods in 2024.

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

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

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

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

Prepayment penalty fee income amounted to $52 thousand and $60 thousand, respectively, for the three and six months ended June 30, 2025, compared to $46 thousand and $66 thousand, respectively, for the three and six months ended June 30, 2024, and had essentially no benefit to NIM in any of the respective periods.

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

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

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

As noted in the Unaudited Consolidated Statements of Cash Flows, net amortization of premiums and discounts on securities and loans (a net reduction to net interest income) amounted to $364 thousand for the six months ended June 30, 2025, compared to $573 thousand for the same period in 2024.

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

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

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

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

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

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

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

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

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

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

FTE net interest income for the three and six months ended June 30, 2025 amounted to $37.4 million and $74.0 million, respectively, up by $5.6 million and $10.3 million, respectively, from the same periods in 2024.

For the three and six months ended June 30, 2025, decreases in average interest-bearing liability balances, net of decreases in average interest-earning assets, increased net income by $1.9 million and $3.6 million, respectively.

Decreases in funding costs outpaced decreases in asset yields, increasing net interest income by $3.7 million and $6.8 million, respectively, for the three and six months ended June 30, 2025.

NIM was 2.36% and 2.32%, respectively, for the three and six months ended June 30, 2025, compared to 1.83% and 1.84%, respectively, for the same periods in 2024.

Total average securities for the three and six months ended June 30, 2025 decreased by $61.5 million and $82.3 million, respectively, from the average balances for the same periods a year earlier primarily due to routine pay-downs.

The FTE rate of return on the securities portfolio for the three and six months ended June 30, 2025 was 3.47% and 3.45%, respectively, compared to 2.47% and 2.48%, respectively, for the same periods in 2024.

Total average loan balances for the three and six months ended June 30, 2025 decreased by $540.9 million and $551.8 million, respectively, from the average loan balances for the comparable 2024 periods, largely reflecting a decrease in average balances of residential real estate loans.

The yield on total loans for the three and six months ended June 30, 2025 was 5.29% and 5.30%, respectively, compared to 5.43% and 5.40%, respectively, in the corresponding periods in 2024.

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

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

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

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

The average balance of FHLB advances for the three and six months ended June 30, 2025 decreased by $463.1 million and $371.6 million, respectively,

Management's Discussion and Analysis

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

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

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

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

compared to the average balances for the same periods in 2024.

The average rate paid on such advances for the three and six months ended June 30, 2025 was 4.49% and 4.56%, respectively, down from 4.98% and 4.95%, respectively, for the same periods in 2024, reflecting lower short-term market interest rates.

Included in total average interest-bearing deposits were wholesale brokered deposits, which decreased by $508.9 million and $510.6 million, respectively, from the same periods in 2024.

The average rate paid on wholesale brokered deposits for the three and six months ended June 30, 2025 was 4.96% and 5.05%, respectively, down from 5.23% and 5.22%, respectively, for the same periods in 2024.

Average in-market interest-bearing deposits, which excludes wholesale brokered deposits, for the three and six months ended June 30, 2025 increased by $386.6 million and $360.5 million, respectively, from the average balances for the same periods in 2024, reflecting increases in average balances across most deposit categories.

The average rate paid on in-market interest-bearing deposits for the three and six months ended June 30, 2025 was 2.81% and 2.79%, respectively, down from 3.01% and 2.97%, respectively, for the same periods in 2024.

The average balance of noninterest-bearing demand deposits for the three and six months ended June 30, 2025 decreased by $36.3 million and $40.1 million, respectively, from the average balances for the same periods in 2024.

Management's Discussion and Analysis

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

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

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

Change Due to

Volume Rate Net Change

(Dollars in thousands) Three Months Ended June 30, 2025 vs.

2024 Six Months Ended June 30, 2025 vs.

Change Due to Change Due to

Volume Rate Net Change Volume Rate Net Change

Interest on Interest-Earning Assets:

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$1,868 $3,722 $5,590 $3,558 $6,772 $10,330

Management's Discussion and Analysis

Provision for Credit Losses

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

Management's Discussion and Analysis

The following table presents the provision for credit losses:

(Dollars in thousands)

Three months ended March 31, 2025 2024 $ %

(Dollars in thousands) Three Months Six Months

Change Change

Periods ended June 30, 2025 2024 $ % 2025 2024 $ %

Provision for credit losses on loans $650 $500 $150 30 % $2,050 $1,400 $650 46 %

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Provision for credit losses $600 $500 $100 20 % $1,800 $1,200 $600 50 %

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

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

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

See additional discussion under the caption “Asset Quality.”

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

The provision for credit losses for the three and six months ended June 30, 2025 included the impact of losses and specific reserve allocations on individually analyzed nonaccrual commercial loans and reflected our estimate of forecasted economic conditions.

The provision for credit losses recognized for the three and six months ended June 30, 2024 reflected continued, yet subsiding, slowdown of loan prepayment speeds and modest commercial loan growth, and was partially offset by improvements in our estimate of forecasted economic conditions.

Net charge-offs totaled $647 thousand for the three months ended June 30, 2025, compared to net charge-offs of $27 thousand for the same period in 2024.

For the six months ended June 30, 2025, net charge-offs totaled $3.0 million, compared to net charge-offs of $79 thousand for the same period in 2024.

The year-to-date increase in net charge-offs reflected partial charge-offs on two CRE office portfolio segment loans.

See additional discussion under the caption “Asset Quality” below.

The ACL on loans was $41.1 million, or 0.80% of total loans, at June 30, 2025, compared to $42.0 million, or 0.82% of total loans, at December 31, 2024.

Noninterest Income

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

(Dollars in thousands)

Three months ended March 31, 2025 2024 $ %

(Dollars in thousands) Three Months Six Months

Change Change

Periods ended June 30, 2025 2024 $ % 2025 2024 $ %

Noninterest income:

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Adjusted noninterest income (non-GAAP)

$17,078 $15,672 $1,406 9 % $32,727 $30,735 $1,992 6 %

Noninterest Income Analysis

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

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

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

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

Noninterest income amounted to $17.1 million and $39.7 million, respectively, for the three and six months ended June 30, 2025, compared $16.7 million and $33.8 million, respectively, for the same periods in 2024.

Noninterest income was impacted by infrequent transactions, as described under the caption “Summary” above.

Excluding the impact of these transactions, adjusted noninterest income (non-GAAP) was $17.1 million and $32.7 million, respectively, for the three and six months ended June 30, 2025, up by $1.4 million and $2.0 million, respectively, from the same periods in 2024.

Management's Discussion and Analysis

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

Wealth management services represent our largest source of noninterest income.

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

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

(Dollars in thousands)

Three months ended March 31, 2025 2024 $ %

(Dollars in thousands) Three Months Six Months

Change Change

Periods ended June 30, 2025 2024 $ % 2025 2024 $ %

Wealth management revenues:

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Total wealth management revenues $10,120 $9,678 $442 5 % $20,011 $19,016 $995 5 %

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

Wealth management revenues for the three and six months ended June 30, 2025 increased by $442 thousand and $995 thousand, respectively, from the same periods in 2024, reflecting an increase in asset-based revenues.

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

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

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

The average balance of AUA for the three and six months ended June 30, 2025 increased by 3% and 4%, respectively, from the average balance for the same periods in 2024.

The end of period AUA balance amounted to $7.2 billion at June 30, 2025, up by $103.9 million, or 1%, from December 31, 2024, reflecting net investment appreciation that was partially offset by net client asset outflows.

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

(Dollars in thousands)

Three months ended March 31, 2025 2024

Three Months Six Months

Periods ended June 30, 2025 2024 2025 2024

Wealth management assets under administration:

Balance at the beginning of period $6,818,390 $6,858,322 $7,077,802 $6,588,406

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

Net investment appreciation & income 466,541 108,529 317,793 472,773

Net client asset outflows (103,216) (163,360) (213,880) (257,688)

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

Management's Discussion and Analysis

(Dollars in thousands)

Three months ended March 31, 2025 2024 $ %

(Dollars in thousands) Three Months Six Months

Change Change

Periods ended June 30, 2025 2024 $ % 2025 2024 $ %

Mortgage banking revenues:

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Loan servicing fee income, net (3)

555 536 19 4 1,151 1,132 19 2

Total mortgage banking revenues $3,034 $2,761 $273 10 % $5,338 $5,267 $71 1 %

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

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

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

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

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

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

Management's Discussion and Analysis

For the three and six months ended June 30, 2025, mortgage banking revenues were up by $273 thousand and $71 thousand, respectively, compared to the same periods in 2024, reflecting an increase in the volume of loans sold and the sales yield.

Mortgage banking revenues are also impacted by changes in the fair value on mortgage loans held for sale and forward loan commitments.

Card interchange fee income or the three and six months ended June 30, 2025 was down modestly by $28 thousand and up by $336 thousand, respectively, from the same periods in 2024.

The year-to-date increase included the receipt of a third-party contract incentive, as well as revenue generated from debit card transaction volume.

Loan related derivative income from interest rate swap transactions with commercial borrowers for the three and six months ended June 30, 2025, increased by $627 thousand and $444 thousand, respectively, from the same periods in 2024.

Noninterest Expense

The following table presents noninterest expense comparisons:

(Dollars in thousands)

Three months ended March 31, 2025 2024 $ %

(Dollars in thousands) Three Months Six Months

Change Change

Periods ended June 30, 2025 2024 $ % 2025 2024 $ %

Noninterest expense:

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Adjusted noninterest expense (non-GAAP)

$36,530 $33,910 $2,620 8 % $72,290 $68,273 $4,017 6 %

Noninterest Expense Analysis

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

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

Noninterest expense amounted to $36.5 million and $78.7 million, respectively, for the three and six months ended June 30, 2025, compared to $33.9 million and $68.3 million, respectively, for the same periods in 2024.

Noninterest expense was impacted by the termination of the Corporation’s qualified pension plan, as described under the caption “Summary” above.

Excluding the impact of this infrequent transaction, adjusted noninterest expense (non-GAAP) was $36.5 million and $72.3 million, respectively, for the three and six months ended June 30, 2025, up by $2.6 million and $4.0 million, respectively, from the same periods in 2024.

Salaries and employee benefits expense, the largest component of noninterest expense, for the three and six months ended June 30, 2025 increased by $1.8 million and $2.4 million, respectively, compared to the same periods in 2024.

These increases reflected lower levels of performance-based compensation recognized in 2024, as well as lower staffing levels in 2025.

Outsourced services expense for the three and six months ended June 30, 2025 increased by $308 thousand and $874 thousand, respectively, compared to the same periods in the prior year.

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

Net occupancy expense for the three and six months ended June 30, 2025 increased by $265 thousand and $445 thousand, respectively, compared to the same periods in 2024, largely reflecting additional lease expense associated with the sales-leaseback transactions that were completed in the first quarter of 2025.

Management's Discussion and Analysis

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

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

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

Increases in compensation were partially offset by lower staffing levels.

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

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

Other noninterest expense for three and six months ended June 30, 2025 increased by $443 thousand and $853 thousand, respectively, compared to the same periods in the prior year.

The increases included system conversion costs associated with recent investments in technology, as well as increases across a variety of noninterest expense categories.

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

(Dollars in thousands)

Three months ended March 31, 2025 2024

Three Months Six Months

Periods ended June 30, 2025 2024 2025 2024

Income tax expense $3,888 $3,020 $7,378 $5,849

Adjusted income tax expense (non-GAAP)

3,888 2,771 7,237 5,070

Effective income tax rate 22.7 % 21.8 % 22.5 % 21.2 %

Adjusted effective income tax rate (non-GAAP)

22.7 % 21.6 % 22.4 % 20.7 %

Blended statutory rate 25.3 % 25.5 % 25.3 % 25.5 %

2 unchanged sentences

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

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

The Corporation’s net deferred tax assets are reported in other assets and amounted to $40.5 million at June 30, 2025, down from $63.0 million at December 31, 2024.

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

3 unchanged sentences

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

Management's Discussion and Analysis

Commercial Banking

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

(Dollars in thousands)

Three months ended March 31, 2025 2024 $ %

(Dollars in thousands) Three Months Six Months

Change Change

Periods ended June 30, 2025 2024 $ % 2025 2024 $ %

Net interest income $37,185 $31,585 $5,600 18 % $73,607 $63,250 $10,357 16 %

7 unchanged sentences

Net income $11,510 $8,475 $3,035 36 % $23,474 $16,073 $7,401 46 %

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

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

Net interest income for the Commercial Banking segment for the three and six months ended June 30, 2025 increased by $5.6 million and $10.4 million, respectively, from the same periods in 2024.

This improvement reflected benefits from the

Management's Discussion and Analysis

balance sheet repositioning transactions previously announced in December 2024.

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

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

The provision for credit losses for the three and six months ended June 30, 2025 increased by $100 thousand and $600 thousand, respectively, from the same periods in 2024.

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

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

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

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

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

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

Noninterest income derived from the Commercial Banking segment for the three and six months ended June 30, 2025 was up by $69 thousand and $7.1 million, respectively, from the comparable periods in 2024.

Year-over-year comparisons were impacted by the first quarter 2025 net gain recognized on sales-leaseback transactions and the second quarter 2024 net gain on sale of a bank-owned operations facility.

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

Commercial Banking noninterest expenses for the three and six months ended June 30, 2025 totaled $28.5 million and $61.1 million, respectively.

Included in the six months ended June 30, 2025 was $4.9 million of the total pension plan settlement charge that was recognized and allocated to the Commercial Banking segment in the first quarter.

Excluding this item, noninterest expenses for the Commercial Banking segment for the three and six months ended June 30, 2025 increased by $1.6 million and $2.2 million, respectively, from the same periods in 2024, reflecting increases in salaries and employee benefits expense, net occupancy, outsourced services, and system conversion costs.

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

2 unchanged sentences

(Dollars in thousands)

Three months ended March 31, 2025 2024 $ %

Change Change

Periods ended June 30, 2025 2024 $ % 2025 2024 $ %

Net interest income $— $— $— — % $— $— $— — %

4 unchanged sentences

Net income $1,735 $2,340 ($605) (26 %) $1,950 $5,678 ($3,728) (66 %)

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

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

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

For the three and six months ended June 30, 2025, noninterest income derived from the Wealth Management Services segment increased by $349 thousand and decreased by $1.2 million, respectively, from the same periods in 2024.

The year-over-year comparison was impacted by the first quarter 2024 litigation settlement.

Excluding this item, Wealth Management noninterest income for the three and six months ended June 30, 2025 increased by $349 thousand and $866 thousand, respectively, from the same periods in 2024, largely reflecting an increase in asset-based revenues.

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

Management's Discussion and Analysis

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

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

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

Wealth Management Services segment noninterest expenses for the three and six months ended June 30, 2025 totaled $8.0 million and $17.7 million, respectively.

Included in the six months ended June 30, 2025 was $1.5 million of the total pension plan settlement charge, which was recognized and allocated to the Wealth Management Services segment in the first quarter.

Excluding this item, noninterest expenses for the Wealth Management Services segment for the three and six months ended June 30, 2025 increased by $1.0 million and $1.8 million, respectively, from the same periods in 2024, reflecting increases in salaries and employee benefits expense and system conversion costs.

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

Management's Discussion and Analysis

Financial Condition

2 unchanged sentences

2025 December 31,

Cash and due from banks $163,579 $109,902 $53,677 49 %

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

9 unchanged sentences

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

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

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

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

15 unchanged sentences

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

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

Management's Discussion and Analysis

understanding of how securities are priced.

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

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

As of June 30, 2025 and December 31, 2024, management did not make any adjustments to the prices provided by the pricing service.

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

Management's Discussion and Analysis

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

1 unchanged sentence

The carrying amounts of securities held are as follows:

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

(Dollars in thousands) June 30, 2025 December 31, 2024

Amount % of Total Amount % of Total

10 unchanged sentences

Total available for sale debt securities $971,341 100 % $916,305 100 %

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

The securities portfolio represented 14% of total assets at June 30, 2025, compared to 13% of total assets at December 31, 2024.

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

2 unchanged sentences

The securities portfolio increased by $55.0 million, or 6%, from the end of 2024.

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

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

This included purchases of U.S.

government agency mortgage-backed securities, totaling $73.3 million, with a weighted average yield of 5.49%, and an increase of $19.7 million (pre-tax) in the fair value of available for sale securities.

These increases were partially offset by $37.5 million of routine pay-downs on mortgage-backed securities and calls of trust preferred debt securities.

As of June 30, 2025, the carrying amount of available for sale debt securities included net unrealized losses of $113.5 million, compared to net unrealized losses of $133.3 million as of December 31, 2024.

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

2 unchanged sentences

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

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

We primarily serve individuals and businesses located in southern New England, and a substantial portion of our loans are secured by properties in southern New England.

Total loans amounted to $5.1 billion at June 30, 2025, up by $2.4 million, or 0.05%, from the end of 2024.

Management's Discussion and Analysis

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

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

(Dollars in thousands) June 30, 2025 December 31, 2024

Amount % of Total Amount % of Total

9 unchanged sentences

Total loans $5,140,260 100 % $5,137,838 100 %

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

(1) Includes negative basis adjustments associated with fair value hedges of $179 thousand and $1.5 million, respectively, at June 30, 2025 and December 31, 2024.

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

Commercial Loans

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

The commercial loan portfolio represented 53% of total loans at June 30, 2025, compared to 52% at December 31, 2024.

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

1 unchanged sentence

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

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

Our participation in commercial loans originated by other banks amounted to $680.6 million and $685.7 million, respectively, at June 30, 2025 and December 31, 2024.

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

10 unchanged sentences

Commercial Real Estate Loans

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

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

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

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

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

CRE loans totaled $2.2 billion at June 30, 2025, up by $24.4 million, or 1%, from the balance at December 31, 2024.

In the first six months of 2025, CRE advances and originations amounted to $133.0 million and were partially offset by payments.

The outstanding balance of construction and development loans included in the CRE loan portfolio amounted to $116.8 million and $102.2 million, respectively, as of June 30, 2025 and December 31, 2024.

Shared national credit balances outstanding included in the CRE loan portfolio at June 30, 2025 and December 31, 2024, totaled $86.6 million and $84.7 million, respectively.

At June 30, 2025 and December 31, 2024, balances of $63.8 million

Management's Discussion and Analysis

and $63.7 million, respectively, were included in the pass-rated category of commercial loan credit quality and balances of $22.8 million and $21.0 million, respectively, were included in the classified category.

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

All of these loans were current with respect to contractual payment terms at June 30, 2025.

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

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

(Dollars in thousands) June 30, 2025 December 31, 2024

Outstanding Balance % of Total Outstanding Balance % of Total

8 unchanged sentences

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

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

(Dollars in thousands) June 30, 2025 December 31, 2024

Outstanding Balance (1)

% of Total Outstanding Balance (1)

% of CRE Total

Outstanding Balance (1)

% of CRE Total

CRE Portfolio Segmentation:

13 unchanged sentences

$65,496 $65,482

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

(1) Does not include unfunded commitments of $118.7 million and $168.3 million, respectively, as of June 30, 2025 and December 31, 2024.

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

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

Multi-family, our largest single CRE segment, totaled $629.2 million as of June 30, 2025, representing 12% of total loans and 29% of the total CRE portfolio.

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

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

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

At June 30, 2025, the credit quality of the multi-family segment was 100% pass-rated.

Also, there were no nonaccrual loans and all loans were current with respect to payment terms at June 30, 2025 in this segment.

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

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

As of June 30, 2025, Washington Trust’s CRE office loan segment totaled $274.7 million, or 5% of total loans and 13% of the total CRE loans.

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

Furthermore, approximately 66% of the CRE office segment balance of $274.7 million is secured by properties located in suburban areas.

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

As of June 30, 2025, 100% of the CRE office segment was current with respect to payment terms, and 98% of the CRE office segment was on accruing status.

Additionally, the credit quality of the CRE office loan segment was 85% pass-rated, 3% special mention-rated, and 12%

Management's Discussion and Analysis

classified as of March 31, 2025.

classified as of June 30, 2025.

Commercial and Industrial Loans

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

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

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

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

C&I loans amounted to $547.3 million at June 30, 2025, up by $4.8 million, or 1%, from the balance at December 31, 2024.

In the first six months of 2025, C&I originations and advances amounted to $35.6 million and were partially offset by payments.

Shared national credit balances outstanding included in the C&I loan portfolio totaled $89.7 million and $71.0 million, respectively, at June 30, 2025 and December 31, 2024.

At June 30, 2025, balances of $80.8 million were pass-rated and balances of $8.9 million were in the classified category.

Additionally, the classified balances at June 30, 2025 were on nonaccrual status and $1.4 million was past due.

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

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

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

(Dollars in thousands) June 30, 2025 December 31, 2024

Outstanding Balance (1)

% of Total Outstanding Balance (1)

% of C&I Total

Outstanding Balance (1)

% of C&I Total

C&I Portfolio Segmentation:

1 unchanged sentence

Real estate rental and leasing 56,715 10 63,992 12

Educational services 55,174 10 47,092 9

Transportation and warehousing

1 unchanged sentence

Retail trade 50,207 9 41,132 8

Educational services 49,432 9 47,092 9

Manufacturing 22,741 4 32,140 6

22,088 4 22,265 4

Finance and insurance

24,779 5 26,557 5

Accommodation and food services 24,752 5 12,368 2

21,858 4 22,265 4

Manufacturing 21,536 4 32,140 6

Arts, entertainment, and recreation

19,129 3 19,861 4

Accommodation and food services 14,958 3 12,368 2

Professional, scientific, and technical services

8 unchanged sentences

$24,892 $25,333

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

(1) Does not include unfunded commitments of $286.0 million and $307.9 million, respectively, as of June 30, 2025 and December 31, 2024.

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

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

Healthcare and social assistance, our largest single C&I segment, totaled $118.7 million as of June 30, 2025, representing 2% of total loans and 22% of the total C&I portfolio.

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

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

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

At June 30, 2025, the credit quality of the healthcare and social assistance segment was 86% pass-rated and 14% was special mention.

Also, there were no nonaccrual loans and all loans were current with respect to payment terms at June 30, 2025 in this segment.

Residential Real Estate Loans

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

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

The residential real estate loan portfolio represented 41% of total loans at both June 30, 2025 and December 31, 2024.

Residential real estate loans amounted to $2.1 billion at June 30, 2025, down by $29.9 million, or 1%, from the balance at December 31, 2024.

Management's Discussion and Analysis

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

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

(Dollars in thousands) June 30, 2025 December 31, 2024

Amount % of Total Amount % of Total

6 unchanged sentences

$2,096,250 100 % $2,126,171 100 %

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

(1) Includes residential mortgage loans purchased from and serviced by other financial institutions totaling $42.1 million and $46.8 million, respectively, as of June 30, 2025 and December 31, 2024.

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

2 unchanged sentences

The table below presents residential real estate loan origination activity:

(Dollars in thousands)

Three months ended March 31, 2025 2024

Amount % of Total Amount % of Total

(Dollars in thousands) Three Months Six Months

Periods ended June 30, 2025 2024 2025 2024

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

Originations for retention in portfolio (1)

7 unchanged sentences

(Dollars in thousands)

Three months ended March 31, 2025 2024

Amount % of Total Amount % of Total

Three Months Six Months

Periods ended June 30, 2025 2024 2025 2024

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

Loans sold with servicing rights retained $7,762 7 % $24,570 22 % $24,581 13 % $48,627 27 %

8 unchanged sentences

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

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

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

The net balance of capitalized servicing rights amounted to $7.2 million and $7.7 million, respectively, as of June 30, 2025 and December 31, 2024.

The balance of residential mortgage loans serviced for others, which are not included in the Unaudited Consolidated Balance Sheets, amounted to $1.4 billion at both June 30, 2025 and December 31, 2024.

Management's Discussion and Analysis

Consumer Loans

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

The consumer loan portfolio represented 6% of total loans at June 30, 2025, compared to 7% at December 31, 2024.

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

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

Home equity lines of credit and home equity loans represented 95% of the total consumer portfolio at June 30, 2025.

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

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

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

The consumer loan portfolio totaled $317.8 million at June 30, 2025, up by $3.1 million, or 1.0%, from December 31, 2024, largely reflecting an increase in home equity loans.

Asset Quality

7 unchanged sentences

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

(Dollars in thousands) March 31,

(Dollars in thousands) June 30,

2025 December 31,

2 unchanged sentences

Total commercial

13,987 10,568

Residential Real Estate:

11 unchanged sentences

Nonaccrual Loans

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

During the six months ended June 30, 2025, the Corporation made no changes in its practices or policies concerning the placement of loans into nonaccrual status.

Management's Discussion and Analysis

The following table presents the activity in nonaccrual loans:

(Dollars in thousands)

For the three months ended March 31, 2025 2024

(Dollars in thousands) Three Months Six Months

For the periods ended June 30, 2025 2024 2025 2024

Balance at beginning of period $21,626 $30,710 $23,307 $44,618

6 unchanged sentences

The following table presents additional detail on nonaccrual loans:

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

(Dollars in thousands) June 30, 2025 December 31, 2024

Days Past Due Days Past Due

13 unchanged sentences

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

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

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

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

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

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

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

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

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

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

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

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

As of June 30, 2025, the composition of nonaccrual loans was 54% commercial and 46% residential and consumer.

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

Nonaccrual loans at June 30, 2025 totaled $26.1 million, up by $2.8 million from the end of 2024.

This reflected an increase in nonaccrual C&I loans of $9.2 million, primarily attributable to one relationship that was placed on nonaccrual status, as discussed further below.

This increase was partially offset by a decline in nonaccrual CRE loans of $5.8 million that reflected year-to-date partial charge-offs of $2.7 million on two office segment loans and the resolution of one of these loans that paid off in the second quarter of 2025.

Both of these office segment loans were previously modified as TLMs.

As of June 30, 2025, the balance of nonaccrual C&I loans primarily consisted of one individually analyzed collateral dependent relationship with a carrying value of $9.3 million, of which $1.4 million was past due.

This C&I borrower is a broadband infrastructure contractor who recently filed Chapter 11 bankruptcy due to cash flow problems.

Washington Trust is a 5% participant in a multi-bank deal and has a total exposure of approximately $11 million.

As of June 30, 2025, the balance of nonaccrual commercial real estate loans consisted of one individually analyzed collateral dependent loan secured by an office property in our primary lending area of southern New England.

Based on recent collateral and other valuations of sources of repayment, management believes it has established appropriate specific reserves to cover the estimated potential loss exposure associated with these nonaccrual commercial loans at June 30, 2025.

Management's Discussion and Analysis

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

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

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

As of June 30, 2025, the balance of nonaccrual residential mortgage loans was predominately secured by properties in Massachusetts, Connecticut, and Rhode Island.

Included in total nonaccrual residential real estate loans at June 30, 2025 were two loans purchased for portfolio and serviced by others amounting to $517 thousand.

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

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The following table presents past due loans by class:

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

(Dollars in thousands) June 30, 2025 December 31, 2024

Commercial real estate $— — % $— — %

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

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

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

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

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

The composition of past due loans (loans past due 30 days or more) was 87% residential and consumer and 13% commercial as of June 30, 2025, compared to 92% residential and consumer and 8% commercial as of December 31, 2024.

Total past due loans increased by $2.1 million from the end of 2024, largely reflecting an increase in past due residential mortgage loans.

Total past due loans included $8.2 million of nonaccrual loans as of June 30, 2025, compared to $6.4 million as of December 31, 2024.

All loans 90 days or more past due at June 30, 2025 and December 31, 2024 were classified as nonaccrual.

Potential Problem Loans

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

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

Potential problem loans include classified accruing commercial loans that were less than 90 days past due at June 30, 2025 and other loans for which known information about possible credit problems of the related borrowers causes management to have doubts as to the ability of such borrowers to comply with the present loan repayment terms and which may result in disclosure of such loans as nonperforming at some time in the future.

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

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

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

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

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

Management has identified $29.2 million in potential problem loans at June 30, 2025, compared to $28.2 million at December 31, 2024.

As of June 30, 2025, the balance of potential problem loans largely consisted of two CRE loans secured by office properties in Massachusetts.

At June 30, 2025, these loans were current with respect to payment terms.

Management's Discussion and Analysis

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

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

There were no significant changes in our modeling methodology to determine the ACL on loans during the three and six months ended June 30, 2025.

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

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

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

(Dollars in thousands) June 30, 2025 December 31, 2024

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

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Total $5,140,439 $41,059 0.80 % $5,139,319 $41,960 0.82 %

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

(1) The amount reported for pooled loans excludes negative basis adjustments associated with fair value hedges of $179 thousand and $1.5 million, respectively, at June 30, 2025 and December 31, 2024.

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

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

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

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

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

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

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

The ACL on loans amounted to $41.1 million at June 30, 2025, down by $901 thousand, or 2%, from the balance at December 31, 2024.

The ACL on loans as a percentage of total loans, also known as the reserve coverage ratio, was 0.80% at June 30, 2025, compared to 0.82% at December 31, 2024.

The Corporation recorded a provision for credit losses on loans of $650 thousand and $2.1 million, respectively, for the three and six months ended June 30, 2025.

The provision included the impact of losses and specific reserve allocations on individually analyzed nonaccrual commercial loans and reflected our estimate of forecasted economic conditions.

Net charge-offs totaled $647 thousand for the three months ended June 30, 2025, compared to $27 thousand for the same period in 2024.

For the six months ended June 30, 2025, net charge-offs totaled $3.0 million, compared to $79 thousand for the same period in 2024.

The year-to-date increase in net charge-offs reflected partial charge-offs on two CRE office portfolio segment loans.

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

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

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

(Dollars in thousands) June 30, 2025 December 31, 2024

Allocated ACL

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The following table presents a summary of deposits:

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

(Dollars in thousands) June 30, 2025 December 31, 2024 Change in Balance

Amount % of Total Amount % of Total $ %

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Total deposits $5,045,248 100 % $5,115,800 100 % ($70,552) (1 %)

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

(1) As of June 30, 2025, in-market deposits were approximately 60% retail and 40% commercial and the average size was approximately $37 thousand.

Management's Discussion and Analysis

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

Total deposits amounted to $5.0 billion at June 30, 2025, down by $70.6 million, or 1%, from December 31, 2024, due to a decline in wholesale brokered time deposits of $295.7 million, or 99%, that was partially offset by an increase in in-market deposits.

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

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

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

In-market deposits were up by $225.2 million, or 5%, from the balance at December 31, 2024, largely reflecting increases in savings and interest-bearing demand deposit balances.

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

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

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

(Dollars in thousands) June 30, 2025 December 31, 2024

Balance % of Total Deposits Balance % of Total Deposits

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

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

FHLB advances totaled $1.0 billion at June 30, 2025, down by $124.0 million, or 11%, from the balance at the end of 2024.

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

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

Both FHLB advances and wholesale brokered time deposits decreased in the six months ended June 30, 2025, reflecting increases in in-market deposits, the redeployment of cash resulting from the previously disclosed balance sheet repositioning transactions, and timing of liquidity management activities.

Liquidity and Capital Resources

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

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

The Corporation’s primary source of liquidity is in-market deposits, which funded approximately 74% of total average assets in the six months ended June 30, 2025.

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

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Percentage of total contingent liquidity to uninsured deposits, after exclusions 164.9 % 136.1 %

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

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

(1) As of June 30, 2025 and December 31, 2024, loans with a carrying value of $2.9 billion and $2.8 billion, respectively, and securities available for sale with carrying values of $73.0 million and $74.2 million, respectively, were pledged to the FHLB resulting in this additional borrowing capacity.

(2) As of June 30, 2025 and December 31, 2024, loans with a carrying value of $65.7 million and $68.5 million, respectively, and securities available for sale with a carrying value of $58.8 million and $13.9 million, respectively, were pledged to the FRBB for the discount window resulting in this additional unused borrowing capacity.

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

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

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

In addition to the amounts presented above, the Bank also had access to a $40.0 million unused line of credit with the FHLB at June 30, 2025 and December 31, 2024.

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

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

Liquidity remained within target ranges established by the ALCO during the six months ended June 30, 2025.

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

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Capital Resources

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

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

Total shareholders’ equity amounted to $527.5 million at June 30, 2025, up by $27.8 million from December 31, 2024.

This net increase primarily reflected net income of $25.4 million, improvement of $23.2 million in the AOCL component of shareholders' equity, and a reduction of $21.9 million due to dividend declarations.

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

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

Washington Trust declared a quarterly dividend of 56 cents per share for the three months ended June 30, 2025, unchanged from the 56 cents per share declared for the same period in 2024.

Management's Discussion and Analysis

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

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

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

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

The ratio of total equity to total assets amounted to 7.82% at June 30, 2025, compared to a ratio of 7.21% at December 31, 2024.

Book value per share was $27.36 at June 30, 2025, compared to $25.93 at December 31, 2024.

The Bancorp and the Bank are subject to various regulatory capital requirements and are considered “well capitalized,” with a total risk-based capital ratio of 13.06% at June 30, 2025, compared to 12.47% at December 31, 2024.

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

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

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

As of June 30, 2025 and December 31, 2024, net interest income simulations indicated that exposure to changing interest rates over the simulation horizons remained within tolerance levels established by the Corporation.

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

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

Management's Discussion and Analysis

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

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

The following table sets forth the estimated change in net interest income from an unchanged rate scenario over the periods indicated for parallel changes in market interest rates using the Corporation’s on- and off-balance sheet financial instruments as of March 31, 2025 and December 31, 2024.

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

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

March 31, 2025 December 31, 2024

June 30, 2025 December 31, 2024

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

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Management's Discussion and Analysis

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

The following table summarizes the potential change in market value of the Corporation’s available for sale debt securities as of June 30, 2025 and December 31, 2024 resulting from immediate parallel rate shifts:

(Dollars in thousands)

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Trust preferred debt and other corporate debt securities 62 (117)

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

Total change in market value as of June 30, 2025 $54,876 ($124,884)

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

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis