WASHINGTON TRUST BANCORP INC 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion should be read in conjunction with the Corporation’s Audited Consolidated Financial Statements and notes thereto included in the Annual Report on Form 10-K for the year ended December 31, 2024, and in conjunction with the condensed Unaudited Consolidated Financial Statements and notes thereto included in Item 1 of this report. Operating results for the three and 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 This report contains statements that are “forward-looking statements.” We may also make forward-looking statements in other documents we file with the SEC, in our annual reports to shareholders, in press releases and other written materials, and in oral statements made by our officers, directors, or employees. You can identify forward-looking statements by the use of the words “believe,” “expect,” “anticipate,” “intend,” “estimate,” “assume,” “outlook,” “will,” “should,” and other expressions that predict or indicate future events and trends and which do not relate to historical matters. You should not rely on forward-looking statements, because they involve known and unknown risks, uncertainties, and other factors, some of which are beyond our control. These risks, uncertainties, and other factors may cause our actual results, performance, or achievements to be materially different than the anticipated future results, performance, or achievements expressed or implied by the forward-looking statements. Some of the factors that might cause these differences include the following: • 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; • changes in customer behavior due to political, business and economic conditions; • changes in loan demand and collectability; • the possibility that future credit losses are higher than currently expected due to changes in economic assumptions or adverse economic developments; • ongoing volatility in national and international financial markets; • reductions in the market value or outflows of wealth management AUA; • decreases in the value of securities and other assets; • increases in defaults and charge-off rates; • changes in the size and nature of our competition; • changes in, and evolving interpretations of, existing and future laws, rules and regulations; • changes in accounting principles, policies and guidelines; • operational risks including, but not limited to, changes in information technology, cybersecurity incidents, fraud, natural disasters, war, terrorism, civil unrest and future pandemics; • regulatory, litigation and reputational risks; and • changes in the assumptions used in making such forward-looking statements. In addition, the factors described under “Risk Factors” in Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2024, as updated by our Quarterly Reports on Form 10-Q and other filings submitted to the SEC, may result in these differences. You should carefully review all of these factors and you should be aware that there may be other factors that could cause these differences. These forward-looking statements were based on information, plans, and estimates at the date of this report, and we assume no obligation to update any forward-looking statements to reflect changes in underlying assumptions or factors, new information, future events or other changes. -47- Management's Discussion and Analysis Non-GAAP Financial Measures and Reconciliation to GAAP In addition to evaluating the Corporation’s results of operations in accordance with GAAP, management supplements this evaluation with an analysis of certain non-GAAP financial measures, such as adjusted noninterest income, adjusted noninterest expense, adjusted income before income taxes, adjusted income tax expense, adjusted effective tax rate, adjusted net income, adjusted net income available to common shareholders, adjusted diluted earnings per common share, adjusted return on average assets and adjusted return on average equity. We believe these non-GAAP financial measures are utilized by regulators and market analysts to evaluate the Corporation’s results of operations and financial condition, and therefore such information is useful to investors. In addition, these non-GAAP financial measures remove the impact of infrequent items that may obscure trends in the Corporation’s underlying performance. These disclosures should not be viewed as a substitute for financial results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures, which may be presented by other companies. Because non-GAAP financial measures are not standardized, it may not be possible to compare these financial measures with other companies' non-GAAP financial measures having the same or similar names. Each presentation below reconciles the “as reported” GAAP measure to the adjusted non-GAAP measure. -48- Management's Discussion and Analysis The following table presents adjusted noninterest income, adjusted noninterest expense, adjusted income before income taxes, adjusted income tax expense, adjusted effective tax rate, adjusted net income, and adjusted net income available to common shareholders: (Dollars in thousands, except per share amounts) Three Months Six Months Periods ended June 30, 2025 2024 2025 2024 Adjusted Noninterest Income: Noninterest income, as reported $17,078 $16,660 $39,721 $33,823 Less adjustments: Gain on sale of bank-owned properties, net — 988 6,994 988 Litigation settlement income — — — 2,100 Total adjustments, pre-tax — 988 6,994 3,088 Adjusted noninterest income (non-GAAP) $17,078 $15,672 $32,727 $30,735 Adjusted Noninterest Expense: Noninterest expense, as reported $36,530 $33,910 $78,726 $68,273 Less adjustments: Pension plan settlement charge — — 6,436 — Total adjustments, pre-tax — — 6,436 — Adjusted noninterest expense (non-GAAP) $36,530 $33,910 $72,290 $68,273 Adjusted Income Before Income Taxes: Income before income taxes $17,133 $13,835 $32,802 $27,600 Less: total adjustments, pre-tax — 988 558 3,088 Adjusted income before income taxes (non-GAAP) $17,133 $12,847 $32,244 $24,512 Adjusted Income Tax Expense: Income tax expense, as reported $3,888 $3,020 $7,378 $5,849 Less: tax on total adjustments — 249 141 779 Adjusted income tax expense (non-GAAP) $3,888 $2,771 $7,237 $5,070 Adjusted Effective Tax Rate: Effective tax rate (1) 22.7 % 21.8 % 22.5 % 21.2 % Less: impact of total adjustments — 0.2 0.1 0.5 Adjusted effective tax rate (non-GAAP) (2) 22.7 % 21.6 % 22.4 % 20.7 % Adjusted Net Income: Net income, as reported $13,245 $10,815 $25,424 $21,751 Less: total adjustments, after-tax — 739 417 2,309 Adjusted net income (non-GAAP) $13,245 $10,076 $25,007 $19,442 Adjusted Net Income Available to Common Shareholders: Net income available to common shareholders, as reported $13,245 $10,807 $25,424 $21,731 Less: total adjustments available to common shareholders, after-tax — 738 417 2,306 Adjusted net income available to common shareholders (non-GAAP) $13,245 $10,069 $25,007 $19,425 (1) Calculated as income tax expense divided by income before income taxes. (2) Calculated as income tax expense, adjusted for the tax impact of the adjustments as outlined in the table above, divided by income before income taxes, adjusted for the pre-tax impact of the adjustments as outlined in the table above. -49- Management's Discussion and Analysis The following table presents adjusted diluted earnings per common share: (Dollars in thousands, except per share amounts) 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 Less: 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. (2) Net income available to common shareholders, adjusted for the after-tax impact of adjustments as outlined in the table above, divided by weighted average diluted common and potential shares outstanding. The following table presents adjusted return on average assets and adjusted return on average equity: (Dollars in thousands) Three Months Six Months Periods ended June 30, 2025 2024 2025 2024 Adjusted Return on Average Assets (1) : Net income, as reported $13,245 $10,815 $25,424 $21,751 Less: total adjustments, after-tax — 739 417 2,309 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 Return on average assets (2) 0.80 % 0.60 % 0.76 % 0.61 % Adjusted return on average assets (non-GAAP) (3) 0.80 % 0.56 % 0.75 % 0.54 % Adjusted Return on Average Equity (1) : Net income available to common shareholders, as reported $13,245 $10,807 $25,424 $21,731 Less: total adjustments, after-tax — 738 417 2,306 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 Return on average equity (4) 10.14 % 9.43 % 9.89 % 9.38 % Adjusted return on average equity (non-GAAP) (5) 10.14 % 8.79 % 9.73 % 8.38 % (1) Annualized based on the actual number of days in the period. (2) Net income divided by total average assets. (3) Net income, adjusted for the after-tax impact of adjustments as outlined in the table above, divided by total average assets. (4) Net income available to common shareholders divided by total average equity. (5) Net income available to common shareholders, adjusted for the after-tax impact of adjustments as outlined in the table above, divided by total average equity. Overview Washington Trust offers a full range of financial services, including commercial, residential, and consumer lending, retail and commercial deposit products, and wealth management and trust services through its offices in Rhode Island, Massachusetts, and Connecticut. Our largest source of operating income is net interest income, which is the difference between interest earned on loans and securities and interest paid on deposits and borrowings. In addition, we generate noninterest income from a number of sources, including wealth management services, mortgage banking activities, and deposit services. Our principal noninterest -50- 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. We believe the key to future growth is providing customers with convenient in-person service and digital banking solutions. Risk Management The Corporation has a comprehensive ERM program through which the Corporation identifies, measures, monitors, and controls current and emerging material risks. The Board of Directors is responsible for oversight of the ERM program. The ERM program enables the aggregation of risk across the Corporation and ensures the Corporation has the tools, programs, and processes in place to support informed decision making, to anticipate risks before they materialize and to maintain the Corporation’s risk profile consistent with its risk strategy. The Board of Directors has approved an ERM Policy that addresses each category of risk. The risk categories include: credit risk, interest rate risk, liquidity risk, price and market risk, compliance risk, strategic and reputation risk, and operational risk. A description of each risk category is provided below. Credit risk represents the possibility that borrowers or other counterparties may not repay loans or other contractual obligations according to their terms due to changes in the financial capacity, ability, and willingness of such borrowers or counterparties to meet their obligations. In some cases, the collateral securing payment of the loans may be sufficient to assure repayment, but in other cases the Corporation may experience significant credit losses, which could have an adverse effect on its operating results. The Corporation makes various assumptions and judgments about the collectability of its loan portfolio, including the creditworthiness of its borrowers and counterparties and the value of the real estate and other assets serving as collateral for the repayment of loans. Credit risk also exists with respect to investment securities. For further discussion regarding the credit risk and the credit quality of the Corporation’s loan portfolio, see Notes 4 and 5 to the Unaudited Consolidated Financial Statements. For further discussion regarding credit risk associated with unfunded commitments, see Note 17 to the Unaudited Consolidated Financial Statements. For further discussion regarding the Corporation’s securities portfolio, see Note 3 to the Unaudited Consolidated Financial Statements. Interest rate risk is the risk of loss to earnings due to movements in interest rates. Interest rate risk arises from differences between the timing of rate changes and the timing of cash flows. It exists because the repricing frequency and magnitude of interest-earning assets and interest-bearing liabilities are not identical. See the “Asset/Liability Management and Interest Rate Risk” section below for additional disclosure. Liquidity risk is the risk that the Corporation will not have the ability to generate adequate amounts of cash in the most economical way for it to meet its maturing liability obligations and customer loan demand. Liquidity risk includes the inability to manage unplanned decreases or changes in funding sources. For detailed disclosure regarding liquidity management, see the “Liquidity and Capital Resources” section below. Price and market risk refers to the risk of loss arising from adverse changes in interest rates and other relevant market rates and prices, such as equity prices. Interest rate risk, discussed above, is the most significant market risk to which the Corporation is exposed. The Corporation is also exposed to financial market risk and housing market risk. Compliance risk represents the risk of regulatory sanctions or financial loss resulting from the failure to comply with laws, rules, and regulations and standards of good banking practice. Activities that may expose the Corporation to compliance risk include, but are not limited to, those dealing with the prevention of money laundering, privacy and data protection, adherence to all applicable laws and regulations, and employment and tax matters. Strategic and reputation risk represent the risk of loss due to impairment of reputation, failure to fully develop and execute business plans, and failure to assess existing and new opportunities and threats in business, markets, and products. 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. -51- 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 ERM. Business units are the first line of defense in managing risk. They are responsible for identifying, measuring, monitoring, and controlling current and emerging risks. They must report on and escalate their concerns. Corporate functions such as Credit Risk Management, Financial Administration, Information Assurance, and Compliance represent the second line of defense. They are responsible for policy setting and for reviewing and challenging the risk management activities of the business units. They collaborate closely with business units on planning and resource allocation with respect to risk management. Internal Audit is a third line of defense. They provide independent assurance to the Board of Directors of the effectiveness of the first and second lines in fulfilling their risk management responsibilities. For additional factors that could adversely impact Washington Trust’s future results of operations and financial condition, see Part II, Item 1A below and the section labeled “Risk Factors” in Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2024, as updated by our Quarterly Reports on Form 10-Q and other filings submitted to the SEC. -52- Management's Discussion and Analysis Results of Operations Summary The following table presents a summarized consolidated statement of operations: (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 % Noninterest income 17,078 16,660 418 3 39,721 33,823 5,898 17 Total revenues 54,263 48,245 6,018 12 113,328 97,073 16,255 17 Provision for credit losses 600 500 100 20 1,800 1,200 600 50 Noninterest expense 36,530 33,910 2,620 8 78,726 68,273 10,453 15 Income before income taxes 17,133 13,835 3,298 24 32,802 27,600 5,202 19 Income tax expense 3,888 3,020 868 29 7,378 5,849 1,529 26 Net income $13,245 $10,815 $2,430 22 % $25,424 $21,751 $3,673 17 % Adjusted net income (non-GAAP) $13,245 $10,076 $3,169 31 % $25,007 $19,442 $5,565 29 % 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 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 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 % Adjusted return on average assets (non-GAAP) 0.80 % 0.56 % 0.75 % 0.54 % Return on average equity (net income available for common shareholders divided by average equity) 10.14 % 9.43 % 9.89 % 9.38 % Adjusted return on average equity (non-GAAP) 10.14 % 8.79 % 9.73 % 8.38 % -53- Management's Discussion and Analysis Average Balances / Net Interest Margin - Fully Taxable Equivalent Basis The following tables present daily average balance, interest, and yield/rate information, as well as net interest margin on an FTE basis. 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. Unrealized gains (losses) on available for sale securities, changes in fair value on mortgage loans held for sale, and basis adjustments associated with fair value hedges are excluded from the average balance and yield calculations. Nonaccrual loans, as well as interest recognized on these loans, are included in amounts presented for loans. 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 Assets: Cash, federal funds sold, and short-term investments $92,692 $1,029 4.45 % $96,934 $1,297 5.38 % ($4,242) ($268) (0.93 %) Mortgage loans held for sale 27,466 442 6.45 22,755 392 6.93 4,711 50 (0.48) Taxable debt securities 1,067,394 9,230 3.47 1,129,573 6,944 2.47 (62,179) 2,286 1.00 Nontaxable debt securities 650 8 4.94 — — — 650 8 4.94 Total securities 1,068,044 9,238 3.47 1,129,573 6,944 2.47 (61,529) 2,294 1.00 FHLB stock 41,484 792 7.66 60,354 1,124 7.49 (18,870) (332) 0.17 Commercial real estate 2,161,987 31,225 5.79 2,167,785 34,707 6.44 (5,798) (3,482) (0.65) Commercial & industrial 550,550 7,967 5.80 602,786 9,837 6.56 (52,236) (1,870) (0.76) Total commercial 2,712,537 39,192 5.80 2,770,571 44,544 6.47 (58,034) (5,352) (0.67) Residential real estate 2,096,538 22,996 4.40 2,569,945 26,473 4.14 (473,407) (3,477) 0.26 Home equity 298,645 5,167 6.94 306,703 5,211 6.83 (8,058) (44) 0.11 Other 17,001 207 4.88 18,375 239 5.23 (1,374) (32) (0.35) Total consumer 315,646 5,374 6.83 325,078 5,450 6.74 (9,432) (76) 0.09 Total loans 5,124,721 67,562 5.29 5,665,594 76,467 5.43 (540,873) (8,905) (0.14) Total interest-earning assets 6,354,407 79,063 4.99 6,975,210 86,224 4.97 (620,803) (7,161) 0.02 Noninterest-earning assets 288,963 252,268 36,695 Total assets $6,643,370 $7,227,478 ($584,108) Liabilities and Shareholders’ Equity: Interest-bearing demand deposits (in-market) $664,290 $6,251 3.77 % $536,752 $6,064 4.54 % $127,538 $187 (0.77 %) NOW accounts 670,878 341 0.20 712,874 388 0.22 (41,996) (47) (0.02) Money market accounts 1,182,377 9,779 3.32 1,120,333 10,934 3.93 62,044 (1,155) (0.61) Savings accounts 664,590 3,080 1.86 482,674 803 0.67 181,916 2,277 1.19 Time deposits (in-market) 1,215,018 11,308 3.73 1,157,962 11,802 4.10 57,056 (494) (0.37) Interest-bearing in-market deposits 4,397,153 30,759 2.81 4,010,595 29,991 3.01 386,558 768 (0.20) Wholesale brokered time deposits 8,485 105 4.96 517,424 6,722 5.23 (508,939) (6,617) (0.27) Total interest-bearing deposits 4,405,638 30,864 2.81 4,528,019 36,713 3.26 (122,381) (5,849) (0.45) FHLB advances 934,066 10,451 4.49 1,397,143 17,296 4.98 (463,077) (6,845) (0.49) Junior subordinated debentures 22,681 346 6.12 22,681 403 7.15 — (57) (1.03) Total interest-bearing liabilities 5,362,385 41,661 3.12 5,947,843 54,412 3.68 (585,458) (12,751) (0.56) Noninterest-bearing demand deposits 615,926 652,189 (36,263) Other liabilities 141,350 166,487 (25,137) Shareholders’ equity 523,709 460,959 62,750 Total liabilities and shareholders’ equity $6,643,370 $7,227,478 ($584,108) Net interest income (FTE) $37,402 $31,812 $5,590 Interest rate spread 1.87 % 1.29 % 0.58 % Net interest margin 2.36 % 1.83 % 0.53 % -54- Management's Discussion and Analysis Interest income amounts presented in the preceding table include the following adjustments for taxable equivalency: (Dollars in thousands) Three months ended June 30, 2025 2024 Change Commercial loans $219 $227 ($8) Nontaxable debt securities — — — 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 Assets: 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 FHLB stock 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 % -55- 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 $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 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. Changes in market interest rates affect the level of loan prepayments and the receipt of payments on mortgage-backed securities. Prepayment speeds generally increase as longer-term market interest rates decline and decrease as longer-term market interest rates rise. Changes in prepayment speeds could increase or decrease the level of net amortization of premiums and discounts, thereby affecting interest income. As noted in the Unaudited Consolidated Statements of Cash Flows, net amortization of premiums and discounts on securities and loans (a net reduction to net interest income) amounted to $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 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 and six months ended June 30, 2025 decreased by $463.1 million and $371.6 million, respectively, -56- Management's Discussion and Analysis 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. -57- Management's Discussion and Analysis Volume / Rate Analysis - Interest Income and Expense (FTE Basis) The following table presents certain information on an FTE basis regarding changes in our interest income and interest expense for the period indicated. The net change attributable to both volume and rate has been allocated proportionately. (Dollars in thousands) Three Months Ended June 30, 2025 vs. 2024 Six Months Ended June 30, 2025 vs. 2024 Change Due to Change Due to Volume Rate Net Change Volume Rate Net Change Interest on Interest-Earning Assets: Cash, federal funds sold, and other short-term investments ($55) ($213) ($268) $1,204 ($675) $529 Mortgage loans held for sale 77 (27) 50 1,074 (321) 753 Taxable debt securities (402) 2,688 2,286 (1,085) 5,102 4,017 Nontaxable debt securities 8 — 8 16 — 16 Total securities (394) 2,688 2,294 (1,069) 5,102 4,033 FHLB stock (360) 28 (332) (605) 222 (383) Commercial real estate (92) (3,390) (3,482) (133) (7,215) (7,348) Commercial & industrial (810) (1,060) (1,870) (1,924) (1,963) (3,887) Total commercial (902) (4,450) (5,352) (2,057) (9,178) (11,235) Residential real estate (5,125) 1,648 (3,477) (10,172) 3,518 (6,654) Home equity (140) 96 (44) (363) 377 14 Other (17) (15) (32) (39) 11 (28) Total consumer (157) 81 (76) (402) 388 (14) Total loans (6,184) (2,721) (8,905) (12,631) (5,272) (17,903) Total interest income (6,916) (245) (7,161) (12,027) (944) (12,971) Interest on Interest-Bearing Liabilities: Interest-bearing demand deposits (in-market) 1,300 (1,113) 187 2,548 (2,192) 356 NOW accounts (19) (28) (47) (42) (37) (79) Money market accounts 583 (1,738) (1,155) 1,677 (3,222) (1,545) Savings accounts 397 1,880 2,277 498 2,880 3,378 Time deposits (in-market) 567 (1,061) (494) 1,108 (2,019) (911) Interest-bearing in-market deposits 2,828 (2,060) 768 5,789 (4,590) 1,199 Wholesale brokered time deposits (6,303) (314) (6,617) (12,809) (538) (13,347) Total interest-bearing deposits (3,475) (2,374) (5,849) (7,020) (5,128) (12,148) FHLB advances (5,309) (1,536) (6,845) (8,565) (2,472) (11,037) Junior subordinated debentures — (57) (57) — (116) (116) Total interest expense (8,784) (3,967) (12,751) (15,585) (7,716) (23,301) Net interest income (FTE) $1,868 $3,722 $5,590 $3,558 $6,772 $10,330 Provision for Credit Losses The provision for credit losses results from management’s review of the adequacy of the ACL. The ACL is management’s estimate, at the reporting date, of expected lifetime credit losses and includes consideration of current forecasted economic conditions. Estimating an appropriate level of ACL necessarily involves a high degree of judgment. -58- Management's Discussion and Analysis The following table presents the provision for credit losses: (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 % Provision for credit losses on unfunded commitments (50) — ($50) (100) (250) (200) ($50) (25) Provision for credit losses $600 $500 $100 20 % $1,800 $1,200 $600 50 % 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 Noninterest income is an important source of revenue for Washington Trust. The principal categories of noninterest income are shown in the following table: (Dollars in thousands) Three Months Six Months Change Change Periods ended June 30, 2025 2024 $ % 2025 2024 $ % Noninterest income: Wealth management revenues $10,120 $9,678 $442 5 % $20,011 $19,016 $995 5 % Mortgage banking revenues 3,034 2,761 273 10 5,338 5,267 71 1 Card interchange fees 1,247 1,275 (28) (2) 2,756 2,420 336 14 Service charges on deposit accounts 808 769 39 5 1,552 1,454 98 7 Loan related derivative income 676 49 627 1,280 777 333 444 133 Income from bank-owned life insurance 826 753 73 10 1,595 1,492 103 7 Gain on sale of bank-owned properties, net — 988 (988) (100) 6,994 988 6,006 608 Other income 367 387 (20) (5) 698 2,853 (2,155) (76) Total noninterest income $17,078 $16,660 $418 3 % $39,721 $33,823 $5,898 17 % 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 $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. -59- Management's Discussion and Analysis 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. This portion of wealth management revenues is referred to as “asset-based” and includes trust and investment management fees. Wealth management revenues also include “transaction-based” revenues that are not primarily derived from the value of assets. The categories of wealth management revenues are shown in the following table: (Dollars in thousands) Three Months Six Months Change Change Periods ended June 30, 2025 2024 $ % 2025 2024 $ % Wealth management revenues: Asset-based revenues $9,745 $9,239 $506 5 % $19,514 $18,328 $1,186 6 % Transaction-based revenues 375 439 (64) (15) 497 688 (191) (28) Total wealth management revenues $10,120 $9,678 $442 5 % $20,011 $19,016 $995 5 % 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 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 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 appreciation & income 466,541 108,529 317,793 472,773 Net client asset outflows (103,216) (163,360) (213,880) (257,688) Balance at the end of period $7,181,715 $6,803,491 $7,181,715 $6,803,491 Mortgage banking revenues are dependent on mortgage origination volume and are sensitive to interest rates and the condition of housing markets. The composition of mortgage banking revenues and the volume of loans sold to the secondary market are shown in the following table: (Dollars in thousands) Three Months Six Months Change Change Periods ended June 30, 2025 2024 $ % 2025 2024 $ % Mortgage banking revenues: Realized gains on loan sales, net (1) $2,460 $2,205 $255 12 % $4,035 $3,791 $244 6 % Changes in fair value, net (2) 19 20 (1) (5) 152 344 (192) (56) 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 % Loans sold to the secondary market (4) $116,775 $110,052 $6,723 6 % $192,274 $182,696 $9,578 5 % (1) Includes gains on loan sales, commission income on loans originated for others, servicing right gains, and gains (losses) on forward loan commitments. (2) Represents fair value changes on mortgage loans held for sale and forward loan commitments. (3) Represents loan servicing fee income, net of servicing right amortization and valuation adjustments. (4) Includes brokered loans (loans originated for others). -60- 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 Six Months Change Change Periods ended June 30, 2025 2024 $ % 2025 2024 $ % Noninterest expense: Salaries and employee benefits $23,025 $21,260 $1,765 8 % $45,447 $43,035 $2,412 6 % Outsourced services 4,404 4,096 308 8 8,750 7,876 874 11 Net occupancy 2,662 2,397 265 11 5,403 4,958 445 9 Equipment 930 958 (28) (3) 1,821 1,978 (157) (8) Legal, audit, and professional fees 726 741 (15) (2) 1,476 1,447 29 2 FDIC deposit insurance costs 1,235 1,404 (169) (12) 2,497 2,845 (348) (12) Advertising and promotion 717 661 56 8 1,127 1,209 (82) (7) Amortization of intangibles 203 208 (5) (2) 407 416 (9) (2) Pension plan settlement charge — — — — 6,436 — 6,436 100 Other 2,628 2,185 443 20 5,362 4,509 853 19 Total noninterest expense $36,530 $33,910 $2,620 8 % $78,726 $68,273 $10,453 15 % 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 $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. -61- Management's Discussion and Analysis 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. Income Taxes The following table presents the Corporation’s income tax provision and applicable tax rates for the periods indicated: (Dollars in thousands) 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 % The effective income tax rates differed from the federal rate of 21%, primarily due to state income tax, partially offset by benefits from tax-exempt income, income from BOLI, and federal tax credits. The blended statutory rates include the federal income tax rate of 21% and a blended state income tax rate net of a federal tax benefit. The increase in the 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 $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. Management believes deferred tax assets, net of the valuation allowance, are more-likely-than-not to be realized. Segment Reporting The Corporation manages its operations through two reportable business segments, consisting of Commercial Banking and Wealth Management Services. See Note 14 to the Unaudited Consolidated Financial Statements for additional disclosure related to business segments. Commercial Banking The following table presents a summarized statement of operations for the Commercial Banking business segment: (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 % Provision for credit losses 600 500 100 20 1,800 1,200 600 50 Net interest income after provision for credit losses 36,585 31,085 5,500 18 71,807 62,050 9,757 16 Noninterest income 6,720 6,651 69 1 19,355 12,223 7,132 58 Noninterest expense 28,512 26,919 1,593 6 61,058 53,952 7,106 13 Income before income taxes 14,793 10,817 3,976 37 30,104 20,321 9,783 48 Income tax expense 3,283 2,342 941 40 6,630 4,248 2,382 56 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 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 -62- 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 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 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. Wealth Management Services The following table presents a summarized statement of operations for the Wealth Management Services business segment: (Dollars in thousands) Change Change Periods ended June 30, 2025 2024 $ % 2025 2024 $ % Net interest income $— $— $— — % $— $— $— — % Noninterest income 10,358 10,009 349 3 20,366 21,600 (1,234) (6) Noninterest expense 8,018 6,991 1,027 15 17,668 14,321 3,347 23 Income before income taxes 2,340 3,018 (678) (22) 2,698 7,279 (4,581) (63) Income tax expense 605 678 (73) (11) 748 1,601 (853) (53) Net income $1,735 $2,340 ($605) (26 %) $1,950 $5,678 ($3,728) (66 %) 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. 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. -63- Management's Discussion and Analysis Financial Condition Summary The following table presents selected financial condition data: (Dollars in thousands) Change June 30, 2025 December 31, 2024 $ % 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 %) Available for sale debt securities 971,341 916,305 55,036 6 Total loans 5,140,260 5,137,838 2,422 — Allowance for credit losses on loans 41,059 41,960 (901) (2) Total assets 6,745,167 6,930,647 (185,480) (3) Total deposits 5,045,248 5,115,800 (70,552) (1) FHLB advances 1,001,000 1,125,000 (124,000) (11) Total shareholders’ equity 527,519 499,728 27,791 6 Mortgage loans held for sale at lower of cost or market decreased from the end of 2024. As part of the previously announced balance sheet repositioning transactions, residential mortgage loans that were held in portfolio were reclassified to held for sale at December 31, 2024. On January 24, 2025, the sale was completed and the cash proceeds received, along with in-market deposit growth, were used to pay down FHLB advances and wholesale brokered time deposits in the first quarter of 2025. Securities I nvestment security activity is monitored by the Investment Committee, the members of which also sit on the ALCO. Asset and liability management objectives are the primary influence on the Corporation’s investment activities. However, the Corporation also recognizes that there are certain specific risks inherent in investment activities. The securities portfolio is managed in accordance with regulatory guidelines and established internal corporate investment policies that provide limitations on specific risk factors such as market risk, credit risk and concentration, liquidity risk, and operational risk to help monitor risks associated with investing in securities. Reports on the activities conducted by the Investment Committee and the ALCO are presented to the Board of Directors on a regular basis. The Corporation’s securities portfolio is managed to generate interest income, to implement interest rate risk management strategies, and to provide a readily available source of liquidity for balance sheet management. Securities are designated as either available for sale, held to maturity or trading at the time of purchase. The Corporation does not maintain a portfolio of trading securities and does not have securities designated as held to maturity. Securities available for sale may be sold in response to changes in market conditions, prepayment risk, rate fluctuations, liquidity, or capital requirements. Debt securities available for sale are reported at fair value, with any unrealized gains and losses excluded from earnings and reported as a separate component of shareholders’ equity, net of tax, until realized. Determination of Fair Value The Corporation uses an independent pricing service to obtain quoted prices. The prices provided by the independent pricing service are generally based on observable market data in active markets. The determination of whether markets are active or inactive is based upon the level of trading activity for a particular security class. Management reviews the independent pricing service’s documentation to gain an understanding of the appropriateness of the pricing methodologies. Management also reviews the prices provided by the independent pricing service for reasonableness based upon current trading levels for similar securities. If the prices appear unusual, they are re-examined and the value is either confirmed or revised. In addition, management periodically performs independent price tests of securities to ensure proper valuation and to verify our understanding of how securities are priced. As of 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. -64- 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. Securities Portfolio The carrying amounts of securities held are as follows: (Dollars in thousands) June 30, 2025 December 31, 2024 Amount % of Total Amount % of Total Available for Sale Debt Securities: Obligations of U.S. government agencies and government-sponsored enterprises $39,581 4 % $38,612 4 % Mortgage-backed securities issued by U.S. government agencies and U.S. government-sponsored enterprises 912,510 94 855,147 94 Obligations of states and political subdivisions 635 — 655 — Individual name issuer trust preferred debt securities 6,049 1 9,221 1 Corporate bonds 12,566 1 12,670 1 Total available for sale debt securities $971,341 100 % $916,305 100 % 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. government agencies or U.S. government-sponsored enterprises. The securities portfolio increased by $55.0 million, or 6%, from the end of 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. government agencies and U.S. government-sponsored enterprises, including mortgage-backed securities, and primarily attributable to relative changes in market interest rates since the time of purchase. See Note 3 to the Unaudited Consolidated Financial Statements for additional information. Loans 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. -65- Management's Discussion and Analysis The following table sets forth the composition of the Corporation’s loan portfolio: (Dollars in thousands) June 30, 2025 December 31, 2024 Amount % of Total Amount % of Total Commercial: Commercial real estate $2,178,925 42 % $2,154,504 42 % Commercial & industrial 547,318 11 542,474 10 Total commercial 2,726,243 53 2,696,978 52 Residential Real Estate: Residential real estate (1) 2,096,250 41 2,126,171 41 Consumer: Home equity 300,917 6 297,119 6 Other 16,850 — 17,570 1 Total consumer 317,767 6 314,689 7 Total loans $5,140,260 100 % $5,137,838 100 % (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 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. The Bank also participates in commercial loans originated by other banks. 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 $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. Shared national credits are defined as participation in loans or loan commitments of at least $100.0 million that are shared by three or more banks. Commercial loans fall into two main categories, CRE and C&I loans. CRE loans consist of commercial mortgages secured by non-owner occupied real property where the primary source of repayment is derived from rental income associated with the property or the proceeds of the sale, refinancing or permanent financing of the property. CRE loans also include construction loans made to businesses for land development or the on-site construction of industrial, commercial, or residential buildings. C&I loans primarily provide working capital, equipment financing, and financing for other business-related purposes. C&I loans are frequently collateralized by equipment, inventory, accounts receivable, and/or general business assets. A portion of the Bank’s C&I loans is also collateralized by owner occupied real estate. C&I loans also include tax-exempt loans made to states and political subdivisions, as well as industrial development or revenue bonds issued through quasi-public corporations for the benefit of a private or non-profit entity where that entity rather than the governmental entity is obligated to pay the debt service. From time to time, commercial loans may be reclassified between CRE and C&I categories, reflecting underlying changes in loans to/from owner occupied from/to non-owner occupied. Additionally, certain construction loans may be reclassified to C&I when the construction phase is complete and the loan transitions to permanent financing. Commercial Real Estate Loans 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 -66- 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 June 30, 2025. The following table presents a geographic summary of CRE loans by property location: (Dollars in thousands) June 30, 2025 December 31, 2024 Outstanding Balance % of Total Outstanding Balance % of Total Connecticut $850,350 39 % $839,079 39 % Massachusetts 650,834 30 663,026 31 Rhode Island 429,385 20 434,244 20 Subtotal 1,930,569 89 1,936,349 90 All other states 248,356 11 218,155 10 Total $2,178,925 100 % $2,154,504 100 % Management considers the CRE portfolio to be well-diversified with loans across several property types. Other than the multi-family segment that is discussed further below, there were no other property types within the CRE portfolio that exceeded 10% of total loans. The following table presents a summary of CRE loans by property type segmentation: (Dollars in thousands) June 30, 2025 December 31, 2024 Outstanding Balance (1) % of CRE Total Outstanding Balance (1) % of CRE Total CRE Portfolio Segmentation: Multi-family $629,184 29 % $567,243 26 % Retail 407,039 19 433,146 20 Industrial and warehouse 370,839 17 358,425 17 Office 274,657 13 289,853 13 Hospitality 222,715 10 213,585 10 Healthcare facility 193,791 9 205,858 10 Mixed-use 26,379 1 29,023 1 Other 54,321 2 57,371 3 Total CRE loans $2,178,925 100 % $2,154,504 100 % Average CRE loan size (2) $5,234 $5,255 Largest individual CRE loan outstanding $65,496 $65,482 (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 $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 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 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 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% -67- Management's Discussion and Analysis classified as of June 30, 2025. Commercial and Industrial Loans 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) June 30, 2025 December 31, 2024 Outstanding Balance (1) % of C&I Total Outstanding Balance (1) % of C&I Total C&I Portfolio Segmentation: Healthcare and social assistance $118,747 22 % $126,547 23 % Real estate rental and leasing 56,715 10 63,992 12 Educational services 55,174 10 47,092 9 Transportation and warehousing 52,698 10 55,784 10 Retail trade 50,207 9 41,132 8 Finance and insurance 24,779 5 26,557 5 Accommodation and food services 24,752 5 12,368 2 Information 21,858 4 22,265 4 Manufacturing 21,536 4 32,140 6 Arts, entertainment, and recreation 19,129 3 19,861 4 Professional, scientific, and technical services 11,990 2 10,845 2 Public administration 2,036 — 2,186 — Other 87,697 16 81,705 15 Total C&I loans $547,318 100 % $542,474 100 % Average C&I loan size (2) $790 $798 Largest individual C&I loan outstanding $24,892 $25,333 (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 $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 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 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. -68- Management's Discussion and Analysis The following is a geographic summary of residential real estate loans by property location: (Dollars in thousands) June 30, 2025 December 31, 2024 Amount % of Total Amount % of Total Massachusetts $1,489,658 71 % $1,530,847 72 % Rhode Island 459,486 22 443,237 21 Connecticut 124,623 6 128,933 6 Subtotal 2,073,767 99 2,103,017 99 All other states 22,483 1 23,154 1 Total (1) $2,096,250 100 % $2,126,171 100 % (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. We also originate residential real estate loans for various investors in a broker capacity, including conventional mortgages and reverse mortgages. Residential real estate loan origination and refinancing activities are sensitive to interest rates and the condition of housing markets. The table below presents residential real estate loan origination activity: (Dollars in thousands) Three Months 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) $51,331 28 % $26,520 19 % $78,993 28 % $50,994 21 % Originations for sale to the secondary market (2) 130,212 72 110,728 81 205,731 72 188,826 79 Total $181,543 100 % $137,248 100 % $284,724 100 % $239,820 100 % (1) Includes the full commitment amount of homeowner construction loans. (2) Includes brokered loans (loans originated for others). The table below presents residential real estate loan sales activity: (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 Loans sold with servicing rights retained $7,762 7 % $24,570 22 % $24,581 13 % $48,627 27 % Loans sold with servicing rights released (1) 109,013 93 85,482 78 167,693 87 134,069 73 Total $116,775 100 % $110,052 100 % $192,274 100 % $182,696 100 % (1) Includes brokered loans (loans originated for others). We have active relationships with various secondary market investors that purchase residential real estate loans we originate. In addition to managing our interest rate risk position and earnings through the sale of these loans, we are also able to manage our liquidity position through timely sales of residential real estate loans to the secondary market. Loans are sold with servicing retained or released. Loans sold with servicing rights retained result in the capitalization of servicing rights. 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 $7.2 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. -69- Management's Discussion and Analysis Consumer Loans 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 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 $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 The Corporation continually monitors the asset quality of the loan portfolio using all available information. In the course of resolving problem loans, the Corporation may choose to modify the contractual terms of certain loans. A loan that has been modified is considered a TLM when the modification is made to a borrower experiencing financial difficulty and the modification has a direct impact to the contractual cash flows. The decision to modify a loan, versus aggressively enforcing the collection of the loan, may benefit the Corporation by increasing the ultimate probability of collection. See Note 4 to the Unaudited Consolidated Financial Statements for additional information regarding TLMs. Nonperforming Assets Nonperforming assets include nonaccrual loans and OREO. The following table presents nonperforming assets and additional asset quality data: (Dollars in thousands) June 30, 2025 December 31, 2024 Commercial: Commercial real estate $4,276 $10,053 Commercial & industrial 9,711 515 Total commercial 13,987 10,568 Residential Real Estate: Residential real estate 10,614 10,767 Consumer: Home equity 1,507 1,972 Other — — Total consumer 1,507 1,972 Total nonaccrual loans 26,108 23,307 OREO, net — — Total nonperforming assets $26,108 $23,307 Nonperforming assets to total assets 0.39 % 0.34 % Nonperforming loans to total loans 0.51 % 0.45 % Total past due loans to total loans 0.27 % 0.23 % Allowance for credit losses on loans to total loans 0.80 % 0.82 % Allowance for credit losses on loans to nonaccrual loans 157.27 % 180.03 % Accruing loans 90 days or more past due $— $— Nonaccrual Loans 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. -70- Management's Discussion and Analysis The following table presents the activity in nonaccrual loans: (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 Additions to nonaccrual status 10,454 556 12,596 988 Loans returned to accruing status (1,493) (369) (1,497) (14,133) Loans charged-off (667) (53) (3,189) (123) Loans transferred to other real estate owned — — — — Payments, payoffs, and other changes (3,812) (365) (5,109) (871) Balance at end of period $26,108 $30,479 $26,108 $30,479 The following table presents additional detail on nonaccrual loans: (Dollars in thousands) June 30, 2025 December 31, 2024 Days Past Due Days Past Due Current 30-89 90 or More Total Nonaccrual % (1) Current 30-89 90 or More Total Nonaccrual % (1) Commercial: Commercial real estate $4,276 $— $— $4,276 0.20 % $10,053 $— $— $10,053 0.47 % Commercial & industrial 7,917 1,371 423 9,711 1.77 — 515 — 515 0.09 Total commercial 12,193 1,371 423 13,987 0.51 10,053 515 — 10,568 0.39 Residential Real Estate: Residential real estate 4,554 4,551 1,509 10,614 0.51 5,975 2,419 2,373 10,767 0.51 Consumer: Home equity 1,174 192 141 1,507 0.50 832 233 907 1,972 0.66 Other — — — — — — — — — — Total consumer 1,174 192 141 1,507 0.47 832 233 907 1,972 0.63 Total nonaccrual loans $17,921 $6,114 $2,073 $26,108 0.51 % $16,860 $3,167 $3,280 $23,307 0.45 % (1) Percentage of nonaccrual loans to the total loans outstanding within the respective loan class. 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. -71- Management's Discussion and Analysis 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. Past Due Loans The following table presents past due loans by class: (Dollars in thousands) June 30, 2025 December 31, 2024 Amount % (1) Amount % (1) Commercial: Commercial real estate $— — % $— — % Commercial & industrial 1,799 0.33 900 0.17 Total commercial 1,799 0.07 900 0.03 Residential Real Estate: Residential real estate 9,772 0.47 7,741 0.36 Consumer: Home equity 2,430 0.81 2,947 0.99 Other 34 0.20 394 2.24 Total consumer 2,464 0.78 3,341 1.06 Total past due loans $14,035 0.27 % $11,982 0.23 % (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 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 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. Potential problem loans are assessed for loss exposure using the methods described in Note 4 to the Unaudited Consolidated Financial Statements under the caption “Credit Quality Indicators.” Management cannot predict the extent to which economic conditions or other factors may impact borrowers and the potential problem loans. 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 $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. -72- Management's Discussion and Analysis Allowance for Credit Losses on Loans The ACL on loans is management’s estimate of expected lifetime credit losses on loans carried at amortized cost. The ACL on loans is established through a provision for credit losses recognized in earnings. The ACL on loans is reduced by charge-offs on loans and is increased by recoveries of amounts previously charged off. 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. To determine if a loan should be charged-off, all possible sources of repayment are analyzed. Possible sources of repayment include the potential for future cash flows, the value of underlying collateral, and the strength of guarantors. Full or partial charge-offs are recognized as promptly as practicable when available information confirms that the collection of loan principal is unlikely. For collateral dependent loans, this confirming information may include an appraisal that reflects a shortfall between the value of the collateral and the carrying value of the loan or a deficiency balance following the sale of the collateral. Appraisals are generally obtained with values determined on an “as is” basis from independent appraisal firms for real estate collateral dependent loans in the process of collection or when warranted by other deterioration in the borrower’s credit status. New appraisals are generally obtained for nonaccrual loans or when management believes it is warranted. The Corporation has continued to maintain appropriate professional standards regarding the professional qualifications of appraisers and has an internal review process to monitor the quality of appraisals. The Corporation does not recognize a recovery when new appraisals indicate a subsequent increase in value. The following table presents additional detail on the Corporation’s loan portfolio and associated allowance: (Dollars in thousands) June 30, 2025 December 31, 2024 Loans Related Allowance Allowance / Loans Loans Related Allowance Allowance / Loans Individually analyzed loans $21,429 $2,310 10.78 % $16,591 $1,543 9.30 % Pooled (collectively evaluated) loans (1) 5,119,010 38,749 0.76 5,122,728 40,417 0.79 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 $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 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. Deteriorating conditions or assumptions could lead to further increases in the ACL on loans; conversely, improving conditions or assumptions could lead to further reductions in the ACL on loans. -73- Management's Discussion and Analysis The following table presents the allocation of the ACL on loans by portfolio segment. The total ACL on loans is available to absorb losses from any segment of the loan portfolio. (Dollars in thousands) June 30, 2025 December 31, 2024 Allocated ACL ACL to Loans Loans to Total Portfolio (1) Allocated ACL ACL to Loans Loans to Total Portfolio (1) Commercial: Commercial real estate $19,604 0.90 % 42 % $26,485 1.23 % 42 % Commercial & industrial 13,158 2.40 11 7,277 1.34 10 Total commercial 32,762 1.20 53 33,762 1.25 52 Residential Real Estate: Residential real estate 6,919 0.33 41 6,832 0.32 41 Consumer: Home equity 1,107 0.37 6 1,031 0.35 6 Other 271 1.61 — 335 1.91 1 Total consumer 1,378 0.43 6 1,366 0.43 7 Total ACL on loans at end of period $41,059 0.80 % 100 % $41,960 0.82 % 100 % (1) Percentage of loans outstanding in respective class to total loans outstanding. Sources of Funds Our sources of funds include in-market deposits, wholesale brokered deposits, FHLB advances, other borrowings, and proceeds from the sales, maturities, and payments of loans and investment securities. The Corporation uses funds to originate and purchase loans, purchase investment securities, conduct operations, expand the branch network, and pay dividends to shareholders. Deposits The Corporation offers a wide variety of deposit products to consumer and business customers. Deposits provide an important source of funding for the Bank, as well as an ongoing stream of fee revenue. The Bank is a participant in the DDM, ICS and CDARS programs. The Bank uses these deposit sweep services to place customer and client funds into interest-bearing demand accounts, money market accounts, and/or time deposits issued by other participating banks. Customer and client funds are placed at one or more participating banks to ensure that each deposit customer is eligible for the full amount of FDIC insurance. As a program participant, we receive reciprocal amounts of deposits from other participating banks. We consider these reciprocal deposit balances to be in-market deposits as distinguished from traditional wholesale brokered deposits. The following table presents a summary of deposits: (Dollars in thousands) June 30, 2025 December 31, 2024 Change in Balance Amount % of Total Amount % of Total $ % Noninterest-bearing demand deposits $646,584 13 % $661,776 13 % ($15,192) (2 %) Interest-bearing demand deposits 668,483 13 592,904 12 75,579 13 NOW accounts 680,246 13 692,812 14 (12,566) (2) Money market accounts 1,147,792 23 1,154,745 23 (6,953) (1) Savings accounts 693,055 14 523,915 10 169,140 32 Time deposits (in-market) 1,207,255 24 1,192,110 22 15,145 1 Total in-market deposits (1) 5,043,415 100 4,818,262 94 225,153 5 Wholesale brokered time deposits 1,833 — 297,538 6 (295,705) (99) Total deposits $5,045,248 100 % $5,115,800 100 % ($70,552) (1 %) (1) As of June 30, 2025, in-market deposits were approximately 60% retail and 40% commercial and the average size was approximately $37 thousand. -74- Management's Discussion and Analysis 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 $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. Washington Trust has made recent investments in technology to enhance our customers’ experience and we remain focused on maintaining and growing depositor relationships. The following table presents a summary of the Bank’s uninsured deposits: (Dollars in thousands) June 30, 2025 December 31, 2024 Balance % of Total Deposits Balance % of Total Deposits Uninsured Deposits: Uninsured deposits (1) $1,365,590 27 % $1,363,689 27 % Less: affiliate deposits (2) 76,352 1 94,740 2 Uninsured deposits, excluding affiliate deposits 1,289,238 26 1,268,949 25 Less: fully-collateralized preferred deposits (3) 207,695 5 197,638 4 Uninsured deposits, after exclusions $1,081,543 21 % $1,071,311 21 % (1) Determined in accordance with regulatory reporting requirements, which includes affiliate deposits and fully-collateralized preferred deposits. (2) Uninsured deposit balances of Washington Trust Bancorp, Inc. and its subsidiaries that are eliminated in consolidation. (3) Uninsured deposits of states and political subdivisions, which are secured or collateralized as required by state law. Borrowings Borrowings primarily consist of FHLB advances, which are used as a source of funding for liquidity and interest rate risk management purposes. FHLB advances totaled $1.0 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 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 Liquidity Management 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 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. Other sources of funding include discretionary use of purchased liabilities (e.g., FHLB term advances and brokered deposits), cash flows from the investment securities portfolio, and loan repayments. Securities designated as available for sale may also be sold in response to short-term or long-term liquidity needs, although management has no intention to do so at this time. The Corporation has a detailed liquidity funding policy and a contingency funding plan that provide for the prompt and comprehensive response to unexpected demands for liquidity. Management employs stress testing methodology to estimate needs for contingent funding that could result from unexpected outflows of funds in excess of “business as usual” cash flows. In management’s estimation, risks are concentrated in two major categories: (1) runoff of in-market deposit balances; and (2) unexpected drawdown of loan commitments. Of the two categories, potential runoff of deposit balances would have the most significant impact on contingent liquidity. Our stress test scenarios, therefore, emphasize attempts to quantify deposits at risk over selected time horizons. In addition to these unexpected outflow risks, several other “business as usual” factors enter into the calculation of the adequacy of contingent liquidity including: (1) payment proceeds from loans and investment securities; (2) maturing debt obligations; and (3) maturing time deposits. The Corporation has established -75- Management's Discussion and Analysis collateralized borrowing capacity with the FRBB and also maintains additional collateralized borrowing capacity with the FHLB in excess of levels used in the ordinary course of business. Borrowing capacity is impacted by the amount and type of assets available to be pledged. The table below presents a summary of contingent liquidity balances by source: (Dollars in thousands) June 30, 2025 December 31, 2024 Contingent Liquidity: Federal Home Loan Bank of Boston (1) $987,119 $752,951 Federal Reserve Bank of Boston (2) 111,454 70,286 Available cash liquidity (3) 87,662 36,647 Unencumbered securities 596,906 597,771 Total contingent liquidity $1,783,141 $1,457,655 Percentage of total contingent liquidity to uninsured deposits 130.6 % 106.9 % Percentage of total contingent liquidity to uninsured deposits, after exclusions 164.9 % 136.1 % (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. Borrowing capacity at December 31, 2024 was reduced by the reclassification of residential mortgage loan collateral to held for sale as part of the previously disclosed balance sheet repositioning transactions. On January 24, 2025, the sale was completed and the cash proceeds received were used to pay down FHLB advances and wholesale brokered time deposits in the first quarter of 2025. In addition to the amounts presented above, the Bank also had access to a $40.0 million unused line of credit with the FHLB at 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 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. Contractual Obligations, Commitments, and Off-Balance Sheet Arrangements In the ordinary course of business, the Corporation enters into contractual obligations that require future cash payments. These include payments related to lease obligations, time deposits with stated maturity dates, and borrowings. Also, in the ordinary course of business, the Corporation engages in a variety of financial transactions that, in accordance with GAAP, are not recorded in the financial statements, or are recorded in amounts that differ from the notional amounts. These financial transactions include commitments to extend credit, standby letters of credit, forward loan commitments, loan related derivative contracts and interest rate risk management contracts. For additional information on derivative financial instruments and financial instruments with off-balance sheet risk see Notes 7 and 17 to the Unaudited Consolidated Financial Statements. Capital Resources Total shareholders’ equity amounted to $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. -76- Management's Discussion and Analysis 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. Asset/Liability Management and Interest Rate Risk Interest rate risk is the risk to earnings due to changes in interest rates. The ALCO is responsible for establishing policy guidelines on liquidity and acceptable exposure to interest rate risk. Quarterly, the ALCO reports on the status of liquidity and interest rate risk matters to the Corporation’s Audit Committee. The objective of the ALCO is to manage assets and funding sources to produce results that are consistent with the Corporation’s liquidity, capital adequacy, growth, risk, and profitability goals. The Corporation utilizes the size and duration of the investment securities portfolio, the size and duration of the wholesale funding portfolio, interest rate contracts, and the pricing and structure of loans and deposits, to manage interest rate risk. The interest rate contracts may include interest rate swaps, caps, floors, and collars. These interest rate contracts involve, to varying degrees, credit risk and interest rate risk. Credit risk is the possibility that a loss may occur if a counterparty to a transaction fails to perform according to terms of the contract. The notional amount of the interest rate contracts is the amount upon which interest and other payments are based. The notional amount is not exchanged, and therefore, should not be taken as a measure of credit risk. See Note 7 to the Unaudited Consolidated Financial Statements for additional information. The ALCO uses income simulation to measure interest rate risk inherent in the Corporation’s financial instruments at a given point in time by showing the effect of interest rate shifts on net interest income over a 12-month horizon and a 13- to 24-month horizon. The simulations assume that the size and general composition of the Corporation’s balance sheet remain static over the simulation horizons, with the exception of certain deposit mix shifts from lower-cost to higher-cost deposits in selected interest rate scenarios. The simulations at December 31, 2024 incorporated the reclassification of residential mortgage loans from portfolio to held for sale and the sale of these loans completing in January 2025. The simulations at December 31, 2024 assume the proceeds from the sale of loans are used to pay down maturing wholesale funding balances. Additionally, the simulations take into account the specific repricing, maturity, call options, and prepayment characteristics of differing financial instruments that may vary under different interest rate scenarios. Mortgage-backed securities and residential real estate loans involve a level of risk that unforeseen changes in prepayment speeds may cause related cash flows to vary significantly in differing rate environments. Such changes could affect the level of reinvestment risk associated with cash flow from these instruments, as well as their market value. Changes in prepayment speeds could also increase or decrease the amortization of premium or accretion of discounts related to such instruments, thereby affecting interest income. The characteristics of financial instrument classes are reviewed periodically by the ALCO to ensure their accuracy and consistency. Deposit balances may also be subject to possible outflow to non-bank alternatives in a rising rate environment. This may cause interest rate sensitivity to differ from the results as presented. Another significant simulation assumption is the sensitivity of savings deposits to fluctuations in interest rates. Income simulation results assume that changes in both savings deposit rates and balances are related to changes in short-term interest rates. The relationship between short-term interest rate changes and deposit rate and balance changes may differ from the ALCO’s estimates used in income simulation. The ALCO reviews simulation results to determine whether the Corporation’s exposure to a decline in net interest income remains within established tolerance levels over the simulation horizons and to develop appropriate strategies to manage this exposure. As of 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 -77- Management's Discussion and Analysis curve. Because income simulations assume that the Corporation’s balance sheet will generally remain static over the simulation horizon, the results do not reflect adjustments in strategy that the ALCO could implement in response to rate shifts. It should also be noted that the static balance sheet assumption does not necessarily reflect the Corporation’s expectation for future balance sheet growth, which is a function of the business environment and customer behavior. While the ALCO reviews and updates simulation assumptions and also periodically back-tests the simulation results to ensure that the assumptions are reasonable and current, income simulation may not always prove to be an accurate indicator of interest rate risk or future NIM. 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 June 30, 2025 and December 31, 2024. Interest rates are assumed to shift by parallel rate changes as shown in the table below. Further, deposits are assumed to have certain minimum rate levels below which they will not fall. 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. June 30, 2025 December 31, 2024 Months 1 - 12 Months 13 - 24 Months 1 - 12 Months 13 - 24 100 basis point rate decrease (2.01) % (2.10 %) (1.83) % (0.53 %) 200 basis point rate decrease (3.74) (4.29) (3.78) (1.67) 300 basis point rate decrease (5.63) (7.26) (5.89) (3.73) 100 basis point rate increase 0.69 (0.74) (0.16) (3.52) 200 basis point rate increase 2.03 (0.65) 1.54 (3.98) 300 basis point rate increase 3.35 (0.98) 3.25 (4.81) The relative change in interest rate sensitivity from December 31, 2024, as shown in the above table, was attributable to changes in balance sheet composition and market interest rates. The changes included in-market deposit growth and also reflected the balance sheet repositioning transactions previously announced in December 2024 that included a reduction in loans and a lower level of wholesale funding. The ALCO estimates that as interest rates change, interest-earning assets would reprice more quickly than interest-bearing liabilities. In-market deposit rate changes are modeled to lag behind other market interest rates in both pace and magnitude. In addition, prepayments of loans and securities generally increase as market interest rates decline and decrease as market interest rates rise. Additionally, the Corporation monitors the potential change in market value of its available for sale debt securities in changing interest rate environments. The purpose is to determine market value exposure that may not be captured by income simulation, but which might result in changes to the Corporation’s capital position. Results are calculated using industry-standard analytical techniques and securities data. -78- 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 June 30, 2025 and December 31, 2024 resulting from immediate parallel rate shifts: (Dollars in thousands) Security Type Down 100 Basis Points Up 200 Basis Points Obligations of U.S. government-sponsored enterprise securities (callable) $1,040 ($1,974) Mortgage-backed securities issued by U.S. government agencies and U.S. government-sponsored enterprises 53,738 (122,697) Obligations of states and political subdivisions 36 (96) Trust preferred debt and other corporate debt securities 62 (117) 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) Critical Accounting Policies and Estimates Estimates and assumptions are necessary in the application of certain accounting policies and procedures and can be susceptible to significant change. Critical accounting policies are defined as those that involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on the Corporation’s financial condition or results of operations. Management considers its accounting policy relating to the ACL on loans to be a critical accounting policy. There have been no material changes in the Corporation’s critical accounting policies and estimates from those disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024. Recently Issued Accounting Pronouncements See Note 2 to the Unaudited Consolidated Financial Statements for details of recently issued accounting pronouncements and their expected impact on the Corporation’s financial statements. -79-