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Item 7. Management’s Discussion and Analysis

2026-02-24 compared with 2025-02-25 · 365 added, 388 removed, 899 unchanged (46% of the section changed)

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The following analysis is intended to provide the reader with a further understanding of the consolidated financial condition and results of operations of the Corporation for the periods shown.

For a full understanding of this analysis, it should be read in conjunction with other sections of this Annual Report on Form 10-K, including Part I, “Item 1.

Business” and Part II, “Item 8.

Financial Statements and Supplementary Data.”

Information pertaining to 2022 was included in the Corporation’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023, starting on page 32 under Part II, Item 7.

“Management’s Discussion and Analysis of Results of Operations and Financial Condition,” which was filed with the SEC on February 26, 2024.

For a full understanding of this analysis, it should be read in conjunction with other sections of this Annual Report on Form 10-K, including Part I, Item 1 “Business” and Part II, Item 8 “Financial Statements and Supplementary Data.”

Information pertaining to 2023 was included in the Corporation’s Annual Report on Form 10-K for the fiscal year ended December 31, 2024, starting on page 31 under Part II, Item 7 “Management’s Discussion and Analysis of Results of Operations and Financial Condition,” which was filed with the SEC on February 25, 2025.

Non-GAAP Financial Measures and Reconciliation to GAAP

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Management's Discussion and Analysis

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

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)

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Adjusted Noninterest Income:

Noninterest (loss) income, as reported ($27,797) $56,140

Noninterest income (loss), as reported $75,860 ($27,797)

Less adjustments:

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

Net gain on sale of bank-owned operations facility 988 —

Gain on sale of bank-owned properties, net 6,994 988

Litigation settlement income — 2,100

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$68,866 $63,050

Adjusted Noninterest Expense:

Noninterest expense, as reported $152,435 $137,069

Less adjustments:

Pension plan settlement charge 6,436 —

Total adjustments, pre-tax 6,436 —

Adjusted noninterest expense (non-GAAP)

$145,999 $137,069

Adjusted Income Before Income Taxes:

(Loss) income before income taxes ($38,818) $56,481

Income (loss) before income taxes, as reported $67,413 ($38,818)

total adjustments, pre-tax 558 (90,847)

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$66,855 $52,029

Adjust Income Tax Expense:

Income tax (benefit) expense, as reported ($10,759) $8,305

Adjusted Income Tax Expense:

Income tax expense (benefit), as reported $15,169 ($10,759)

tax on total adjustments 141 (21,920)

state legislative tax change, net (tax only adjustment) — (3,253)

Total tax adjustments (21,920) (3,253)

Adjusted income tax expense (non-GAAP)

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Adjusted Effective Tax Rate:

Effective tax rate (1)

Effective tax rate, as reported (1)

22.5 % 27.7 %

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Adjusted Net Income:

Net (loss) income, as reported ($28,059) $48,176

Net income (loss), as reported $52,244 ($28,059)

total adjustments, after-tax 417 (68,927)

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Adjusted Net Income Available to Common Shareholders:

Net (loss) income available to common shareholders, as reported ($28,038) $48,091

Net income (loss) available to common shareholders, as reported $52,244 ($28,038)

total adjustments available to common shareholders, after-tax 417 (68,906)

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Adjusted Diluted Earnings per Common Share:

Diluted (loss) earnings per common share, as reported (1)

Diluted earnings (loss) per common share, as reported (1)

$2.71 ($1.63)

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Cash dividends declared per share, as reported $2.24 $2.24

Diluted (loss) earnings per common share, as reported (1.63) 2.82

Diluted earnings (loss) per common share, as reported 2.71 (1.63)

impact of adjustments 0.02 (4.00)

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9.84 % 8.52 %

(1) Net income (income) loss divided by total average assets.

(1) Net income (loss) divided by total average assets.

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

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

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

Our principal noninterest 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.

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

Common Stock Issued in Public Offering and Balance Sheet Repositioning Transactions

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

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

On December 20, 2024, the Corporation announced the execution of balance sheet repositioning transactions to support continued organic growth and capital generation.

The Bank sold available for sale debt securities with an amortized cost balance of $409.5 million (fair value of $378.4 million) and a weighted average yield of 2.65% and reinvested $378.4 million into purchases of available for sale debt securities with a weighted average yield of 5.30%.

The sale of debt securities resulted in a net pre-tax realized loss of $31.0 million (after-tax of $23.5 million) that was recognized in the fourth quarter of 2024.

In addition, pursuant to the terms of a sales agreement effective December 30, 2024, the Bank committed to sell residential mortgage loans with an amortized cost balance of $344.6 million and a weighted average rate of approximately 3.02%.

These loans were reclassified to held for sale and written down to a fair value of $281.7 million, resulting in a net pre-tax loss of $62.9 million (after-tax of $47.7 million) that was recognized in the fourth quarter of 2024.

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

The net proceeds received from the equity offering and the loan sale were used to pay down wholesale funding balances in December 2024 and the first quarter of 2025.

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 the 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.

Management's Discussion and Analysis

discussion regarding the credit risk and the credit quality of the Corporation’s loan portfolio, see Notes 4 and 5 to the Consolidated Financial Statements.

For further discussion regarding credit risk associated with unfunded commitments, see Note 21 to the Consolidated Financial Statements.

For further discussion regarding the Corporation’s securities portfolio, see Note 3 to the 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.

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” concept 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 the section labeled “Risk Factors” in Item 1A of this Annual Report on Form 10-K.

Management's Discussion and Analysis

We plan to open a new full-service branch in Pawtucket, Rhode Island in the latter half of 2026.

Results of Operations

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Net interest income $153,188 $128,448 $24,740 19 %

Noninterest (loss) income (27,797) 56,140 (83,937) (150)

Noninterest income (loss) 75,860 (27,797) 103,657 373

Total revenues 229,048 100,651 128,397 128

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Noninterest expense 152,435 137,069 15,366 11

(Loss) income before income taxes (38,818) 56,481 (95,299) (169)

Income tax (benefit) expense (10,759) 8,305 (19,064) (230)

Net (loss) income ($28,059) $48,176 ($76,235) (158 %)

Income (loss) before income taxes 67,413 (38,818) 106,231 274

Income tax expense (benefit) 15,169 (10,759) 25,928 241

Net income (loss) $52,244 ($28,059) $80,303 286 %

Adjusted net income (non-GAAP)

$51,827 $40,868 $10,959 27 %

In 2024, a net loss of $28.1 million was recognized, compared to net income of $48.2 million in 2023.

As further described under the caption “Overview” above, balance sheet repositioning transactions were executed that impacted the 2024 results.

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

In 2023, a state legislative tax change resulted in a net reduction in income tax expense of $3.3 million.

Excluding these items, adjusted net income (non-GAAP) in 2024 was $40.9 million, compared to $44.9 million in 2023, down by $4.1 million, or 9%.

This decrease was primarily attributable to a decline in net interest income and a relatively modest increase in noninterest expenses, partially offset by higher wealth management revenues and mortgage banking revenues.

Net income totaled $52.2 million for 2025, compared to a net loss of $28.1 million reported for 2024.

These results included:

• In 2025, sale-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 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 December 2024, the Bancorp completed an underwritten public offering of its common stock and used the $70.5 million in net proceeds to invest in the Bank and execute balance sheet repositioning transactions, including the sale of lower-yielding loans and securities, the purchase of debt securities, and the repayment of wholesale funding balances.

◦ Included in noninterest income (loss) in 2024 was a net pre-tax realized loss of $31.0 million on the sale of available for sale debt securities.

◦ Included in noninterest income (loss) in 2024 was a net pre-tax loss of $62.9 million when residential mortgage loans, that the Bank committed to sell, were reclassified to held for sale and written down to a fair value.

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

◦ The net proceeds from the equity offering and the loan sale were used to pay down wholesale funding balances in December 2024 and the first quarter of 2025.

• Also in 2024, noninterest income (loss) included a net gain of $988 thousand recognized on the sale of a bank-owned operations facility and income of $2.1 million associated with a litigation settlement.

Management's Discussion and Analysis

Excluding these infrequent transactions, adjusted net income (non-GAAP) was $51.8 million in 2025, compared to $40.9 million in 2024.

These results were driven by an increase in net interest income, largely reflecting the benefits of the balance sheet repositioning transactions mentioned above, and growth in wealth management and mortgage banking revenues, and were partially offset by higher salaries and benefits costs and an elevated provision for credit losses.

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

Years Ended December 31, 2025 2024

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

Diluted earnings (loss) per common share $2.71 ($1.63)

Adjusted diluted earnings per common share (non-GAAP)

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Liabilities and Shareholders’ Equity:

Interest-bearing demand deposits (in-market) $550,652 $24,156 4.39 % $415,725 $17,521 4.21 % $134,927 $6,635 0.18 %

Interest-bearing demand deposits $678,515 $25,005 3.69 % $550,652 $24,156 4.39 % $127,863 $849 (0.70 %)

NOW accounts 672,808 1,423 0.21 701,989 1,572 0.22 (29,181) (149) (0.01)

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Interest-bearing in-market deposits 4,438,882 121,438 2.74 4,043,099 119,737 2.96 395,783 1,701 (0.22)

Wholesale brokered demand deposits — — — 4,015 178 4.43 (4,015) (178) (4.43)

Wholesale brokered time deposits 48,703 2,457 5.04 504,638 26,361 5.22 (455,935) (23,904) (0.18)

Wholesale brokered deposits 504,638 26,361 5.22 606,438 28,873 4.76 (101,800) (2,512) 0.46

Total interest-bearing deposits 4,487,585 123,895 2.76 4,547,737 146,098 3.21 (60,152) (22,203) (0.45)

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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.

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

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

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

Prepayment penalty fee income amounted to $70 thousand (or 0 basis point benefit to NIM) and $272 thousand (or 1 basis point benefit to NIM), respectively, in 2024 and 2023.

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

Prepayment penalty fee income amounted to $580 thousand (or a 1 basis point benefit to NIM) in 2025.

Prepayment penalty fee income and its impact on NIM was insignificant in 2024.

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 decrease as market interest rates rise and increase as market interest rates decline.

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 Consolidated Statements of Cash Flows, net amortization of premiums and discounts on securities and loans (a net reduction to net interest income) amounted to $1.1 million in 2025, compared to $1.3 million in 2024.

FTE net interest income in 2024 amounted to $129.4 million, down by $8.7 million, or 6%, from 2023.

Increases in average interest-bearing liability balances, net of increases in average interest-earning assets, reduced net interest income by $4.4 million in 2024.

Increases in funding costs outpaced increases in asset yields, reducing net interest income by $4.3 million.

See additional discussion regarding interest rate sensitivity under the caption “Asset/Liability Management and Interest Rate Risk.”

NIM was 1.87% in 2024, down by 18 basis points from 2.05% in 2023.

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

Total average securities for 2024 decreased by $66.8 million, or 6%, from the average balance for 2023, primarily due to routine pay downs.

The FTE rate of return on securities was 2.49% in 2024, up by 4 basis points from 2.45% in 2023.

Total average loan balances increased by $195.9 million, or 4%, from the average balance for 2023.

This reflected growth in average CRE and residential real estate loans.

The yield on total loans in 2024 was 5.37%, up by 34 basis points from 5.03% in 2023, reflecting higher market interest rates in 2024.

The Bank utilizes FHLB advances and brokered time deposits as wholesale funding sources.

The average balance of FHLB advances for 2024 increased by $255.7 million, or 24%, compared to the average balance for 2023.

Due to increases in market rates, the average rate paid on such advances in 2024 was 4.92%, up 23 basis points from 4.69% in 2023.

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 in 2025 amounted to $154.0 million, up by $24.7 million, or 19%, from 2024.

Decreases in average interest-bearing liability balances net of decreases in average interest-earning assets, increased net interest income by $9.5 million in 2025.

Decreases in funding costs outpaced decreases in asset yields, increasing net interest income by $15.2 million in 2025.

NIM was 2.40% in 2025, up by 53 basis points from 1.87% in 2024.

Total average securities for 2025 decreased by $58.4 million, or 5%, from 2024, primarily due to routine pay downs.

The FTE rate of return on securities was 3.45% in 2025, up by 96 basis points from 2024.

Total average loan balances decreased by $463.2 million, or 8%, from 2024, largely reflecting a decrease in residential real estate loans.

The yield on total loans in 2025 was 5.28%, down by 9 basis points from 2024.

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

Wholesale funding balances decreased in 2025, largely reflecting benefits from the balance sheet repositioning transactions mentioned above, as well as in-market deposit growth.

Rates paid on wholesale funding have declined from the prior year reflecting lower market interest rates.

The average balance of FHLB advances for 2025 decreased by $426.7 million, or 33%, from 2024.

The average rate paid on such advances in 2025 was 4.48%, down 44 basis points from 2024.

Included in total average interest-bearing deposits were wholesale brokered deposits, which decreased by $455.9 million, or 90%, from 2024.

The average rate paid on wholesale brokered deposits in 2024 was 5.22%, up by 46 basis points from 4.76% in 2023.

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

Average in-market interest-bearing deposits, which excludes wholesale brokered deposits, increased by $132.9 million, or 3%, from the average balance in 2023, with increases in time deposits and interest-bearing demand deposits.

The average rate paid on in-market

The average rate paid on wholesale brokered deposits in 2025 was 5.04%, down by 18 basis points from 2024.

Average in-market interest-bearing deposits, which excludes wholesale brokered deposits, increased by $395.8 million, or 10%, from 2024, reflecting increases across most deposit categories.

The average rate paid on in-market interest-bearing deposits in 2025 was 2.74%, down by 22 basis points from 2024, largely reflecting lower market interest rates.

The average balance of noninterest-bearing demand deposits for 2025 decreased by $31.4 million, or 5%, from 2024.

Management's Discussion and Analysis

interest-bearing deposits in 2024 was 2.96%, up by 62 basis points from 2.34% in 2023.

The average balance of noninterest-bearing demand deposits for 2024 decreased by $113.6 million, or 15%, from the average balance in 2023.

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

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Interest-bearing in-market deposits 10,972 (9,271) 1,701

Wholesale brokered demand deposits (89) (89) (178)

Wholesale brokered time deposits (23,025) (879) (23,904)

Wholesale brokered deposits (5,026) 2,514 (2,512)

Total interest-bearing deposits

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

Management's Discussion and Analysis

The following table presents the provision for credit losses:

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Provision for credit losses $9,200 $2,400 $6,800 283 %

The provision for credit losses in 2024 reflected specific reserve allocations on individually analyzed nonaccrual commercial loans, as well as the impact of continued, yet subsiding, slowdown in prepayment speeds.

This was partially offset by relatively stable to improving forecasted economic conditions in 2024 and a decline in loan balances that was concentrated in residential real estate and also included the reclassification of loans from portfolio to held for sale.

The provision recognized in 2023 reflected loan growth and slowdown of loan prepayment speeds, changes in asset and credit quality, and our estimate of forecasted economic conditions.

Econometric factors were stable to improving in 2023, with our forecast reflecting a lower probability of a recession.

Net charge-offs totaled $2.0 million, or 0.04% of average loans, in 2024, compared to net charge-offs of $520 thousand, or 0.01% of average loans, in 2023.

The ACL on loans was $42.0 million, or 0.82% of total loans, at December 31, 2024, compared to $41.1 million, or 0.73% of total loans, at December 31, 2023.

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

Management's Discussion and Analysis

The increase in the provision for credit losses in 2025 reflected the impact of charge-offs on two commercial loan relationships.

Net charge-offs totaled $14.2 million, or 0.28% of average loans in 2025, compared to $2.0 million, or 0.04% of average loans in 2024.

See additional discussion regarding these two commercial loan relationships, other credit quality details and discussion regarding the ACL under the caption “Asset Quality” below.

Noninterest Income

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Losses on the sale of portfolio loans, net — (62,888) 62,888 100

Gain on sale of bank-owned properties, net 6,994 988 6,006 608

Other income 1,691 3,579 (1,888) (53)

Total noninterest (loss) income ($27,797) $56,140 ($83,937) (150 %)

Total noninterest income (loss) $75,860 ($27,797) $103,657 373 %

Adjusted noninterest income (non-GAAP)

$68,866 $63,050 $5,816 9 %

Noninterest Income Analysis

Noninterest income amounted to a net loss of $27.8 million in 2024, compared to income of $56.1 million in 2023.

Noninterest income in 2024 was impacted by the recognition of $93.9 million in net realized losses on securities and net losses on the sale of portfolio loans associated with balance sheet repositioning transactions.

In addition, other income in 2024 included income of $2.1 million associated with a litigation settlement and a net gain of $988 thousand recognized on the sale of a bank-owned operations facility.

Noninterest income amounted to $75.9 million in 2025, compared to a loss of $27.8 million in 2024.

As described above, total noninterest income was impacted by infrequent transactions in both years.

Excluding the impact of these transactions, adjusted noninterest income (non-GAAP) was $68.9 million in 2025, compared to $63.1 million in 2024, up by $5.8 million, or 9%.

Wealth management revenues represent our largest source of noninterest income.

A substantial portion of wealth

Management's Discussion and Analysis

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

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.

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Total wealth management revenues $41,236 $39,054 $2,182 6 %

Wealth management revenues for 2024 increased by $3.5 million, or 10%, from 2023, reflecting an increase in asset-based revenues.

The change in asset-based revenues correlated with the increase in average AUA balances in 2024.

The average balance of AUA in 2024 increased by 10% from the average balance in 2023.

The end of period AUA balance amounted to $7.1 billion at December 31, 2024, up by $489.4 million, or 7%, from December 31, 2023.

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

Management's Discussion and Analysis

The following table presents wealth management AUA balances:

(Dollars in thousands) 2025 2024

Wealth management AUA:

Balance at the beginning of period $6,588,406 $5,961,990

Net investment appreciation & income 902,506 894,990

Net client asset outflows (413,110) (268,574)

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

Assets under administration at the end of period $7,777,250 $7,077,802

In the third quarter of 2025, the Bank's registered investment adviser subsidiary purchased client advisory contracts from Lighthouse in an asset acquisition.

The transaction closed on July 31, 2025, resulting in the acquisition of AUA totaling $195.4 million.

See Note 8 to the Consolidated Financial Statements for additional disclosure.

Wealth management revenues for 2025 increased by $2.2 million, or 6%, from 2024, largely reflecting an increase in asset-based revenues.

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

The average balance of AUA increased by 7% over 2024, primarily reflecting net investment appreciation of AUA.

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

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

In 2025, loan origination activities increased in response to decreases in market interest rates.

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

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Mortgage banking revenues increased by $1.1 million, or 10%, in 2025.

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

Loan related derivative income from interest rate swap contracts with commercial borrowers decreased by $923 thousand, or 66%, in 2024, reflecting a decline in volume.

The increase in mortgage banking revenues largely reflected an increase in sales volume.

Loan related derivative income from interest rate swap contracts with commercial borrowers increased by $1.7 million in 2025, reflecting higher transaction volume.

Other income was down by $1.9 million, or 53%, from 2024, primarily due to the receipt of income associated with a litigation settlement as mentioned above.

Management's Discussion and Analysis

Income from BOLI was down by $447 thousand, or 13%, from 2023, reflecting the recognition of $658 thousand in non-taxable income in 2023 associated with the receipt of life insurance proceeds.

Other income was up by $3.2 million, or 242%, from 2023, primarily due to the receipt of income associated with a litigation settlement and the net gain on the sale of a bank-owned operations facility as mentioned above.

Noninterest Expense

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Amortization of intangibles 762 826 (64) (8)

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

Other 11,845 8,835 3,010 34

Total noninterest expense $152,435 $137,069 $15,366 11 %

Adjusted noninterest expense (non-GAAP)

$145,999 $137,069 $8,930 7 %

Noninterest Expense Analysis

Total noninterest expense amounted to $152.4 million in 2025, compared to $137.1 million in 2024.

Total 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 $146.0 million in 2025, up by $8.9 million, or 7%, from 2024.

Salaries and employee benefits expense, the largest component of noninterest expense, increased by $5.5 million, or 6%, from 2024.

This included higher performance-based incentive compensation, merit increases, and lower staffing levels.

Outsourced services expense increased by $1.7 million, or 12%, from 2023.

Equipment expense decreased by $480 thousand, or 11%, from 2023.

Both the increase in outsourced services expense and decline in equipment expense reflected changes to and expansion of services, including software as a service, that are provided by third-party vendors, as well as volume-related increases in third-party costs.

Legal, audit and professional fees decreased by $763 thousand, or 20%, in 2024, reflecting lower legal fees.

FDIC deposit insurance costs for the 2024 increased by $846 thousand, or 18%, from 2023, reflecting the impact of increases in average assets from a year ago and a higher FDIC deposit assessment rate.

Other expenses for 2024 decreased by $1.8 million, or 17%, from 2023.

In 2023, a charitable contribution expense as a $1.0 million contribution was made to Washington Trust’s charitable foundation.

There was no such expense in 2024.

This included higher levels of performance- and volume-based compensation, merit increases, and increased staffing levels.

Outsourced services includes software as a service and cloud computing software costs, as well as other third-party provided processing costs.

Outsourced services expense increased by $679 thousand, or 4%, from 2024, reflecting changes in third-party provided services, including volume-related changes.

Net occupancy increased by $951 thousand, or 10%, primarily due to lease expense associated with the sale-leaseback transactions that were completed in the first quarter of 2025.

FDIC deposit insurance costs for the 2025 decreased by $933 thousand, or 17%, from 2024, reflecting the impact of a decline in average assets from a year ago and a lower FDIC deposit assessment rate.

Other noninterest expense for 2025 increased by $3.0 million, or 34%, from 2024.

Included in this increase was a fourth quarter 2025 $1.0 million contribution made by Washington Trust to its charitable foundation, as well as system conversion costs associated with changes in technology, and increases across a variety of noninterest expense categories.

Management's Discussion and Analysis

The following table presents the Corporation’s income tax expense and effective tax rate for the periods indicated:

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Years ended December 31, 2025 2024

Income tax (benefit) expense ($10,759) $8,305

Income tax expense (benefit) $15,169 ($10,759)

Adjusted income tax expense (non-GAAP)

$15,028 $11,161

Effective income tax rate 27.7 % 14.7 %

Adjusted effective income tax rate (non-GAAP)

Effective tax rate 22.5 % 27.7 %

Adjusted effective tax rate (non-GAAP)

22.5 % 21.5 %

Blended statutory rate 25.0 % 25.3 %

Management's Discussion and Analysis

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

The effective tax rates differed from the federal rate of 21%, primarily due to state income tax expense, which was 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.

In 2024, the Corporation recognized an income tax benefit of $10.8 million, compared to income tax expense of $8.3 million in 2023.

In 2025, the Corporation recognized income tax expense of $15.2 million, compared to an income tax benefit of $10.8 million in 2024.

The effective tax rate for 2025 was 22.5%, compared to a rate 27.7% for 2024.

The year over year comparisons include the impact of the balance sheet repositioning transactions, litigation settlement income and net gain on sale of a bank-owned operations facility in 2024, as well as a net tax expense reduction associated with a state tax legislative change and valuation allowance adjustment in 2023.

Excluding these items, the adjusted effective income tax rate (non-GAAP) increased to 21.5% in 2024 from 20.5% in 2023, reflecting changes in state tax expense, lower levels of income from BOLI and tax-exempt income, and higher excess tax expense associated with the settlement of share-based awards.

Income tax expense (benefit) was impacted by infrequent transactions, as described under the caption “Summary” above.

Excluding the impact of these transactions, the adjusted effective tax rate (non-GAAP) increased to 22.5% in 2025 from 21.5% in 2024, reflecting changes in state tax exposure and a lower proportion of nontaxable income to adjusted pre-tax book income.

The Corporation’s net deferred tax assets amounted to $36.9 million at December 31, 2025, compared to $63.0 million at December 31, 2024.

This increase included the establishment 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, as part of the balance sheet repositioning transactions.

This decrease included the realization of a deferred tax asset established in December 2024 associated with the loans that were reclassified to held for sale and written down to fair value as part of the balance sheet repositioning transactions.

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

Excluding that item, the decrease largely reflected reductions in deferred tax assets associated with increases in fair value of securities available for sale.

Management’s assessment considered the Corporation’s forecasted future taxable income, existing taxable temporary differences along with tax planning strategies.

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Segment Reporting

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

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

See Note 18 to the Consolidated Financial Statements.

Commercial Banking

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

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

(Dollars in thousands) Change

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Net income $45,189 ($38,820) $84,009 (216 %)

Net interest income for the Commercial Banking segment decreased by $8.6 million, or 6%, from 2023.

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

The provision for credit losses decreased by $800 thousand, or 25%, from 2023.

Management's Discussion and Analysis

Net interest income for the Banking segment increased by $24.7 million, or 19%, from 2024.

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

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

The provision for credit losses increased by $6.8 million from 2024, primarily due to elevated charge-offs in 2025.

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

Noninterest income derived from the Commercial Banking segment was a loss of $69.6 million, compared to income of $20.0 million in 2023.

Noninterest income in 2024 included net losses recognized on balance sheet repositioning transactions, as well as a net gain recognized on the sale of a bank-owned operations facility.

Excluding these items, the year over year change in Commercial Banking noninterest reflected higher mortgage banking revenues that was partially offset by lower loan related derivative income.

Noninterest income derived from the Banking segment was $33.9 million, compared to a loss of $69.6 million in 2024.

Noninterest income in 2025 included a net gain recognized on sale-leaseback transactions.

Noninterest income in 2024 included net losses recognized on balance sheet repositioning transactions, as well as a net gain on sale of a bank-owned operations facility.

Excluding these items, Banking noninterest income increased by $3.4 million, or 14%, largely reflecting higher loan related derivative income and mortgage banking revenues.

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

Management's Discussion and Analysis

Commercial Banking noninterest expenses were up by $5.8 million, or 6%, from 2023, largely reflecting increases in salaries and employee benefits expense, outsourced services, and FDIC deposit insurance costs.

Banking noninterest expenses were up by $11.1 million, or 10%, from 2024.

Included in 2025 was $4.9 million of the total pension plan settlement charge that was allocated to the Banking segment.

Excluding this item, noninterest expenses for the Banking segment increased by $6.2 million, or 6%, reflecting increases in salaries and employee benefits expense, net occupancy, outsourced services, system conversion costs and charitable contribution expense.

These increases were partially offset by a decrease in FDIC insurance costs.

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

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Years Ended December 31, 2025 2024 $ %

Net interest income (expense) $— $37 ($37) (100 %)

Net interest income $— $— $— — %

Noninterest income 41,973 41,812 161 —

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Net income $7,055 $10,761 ($3,706) (34 %)

Noninterest income for the Wealth Management Services segment was $41.8 million, up by $5.7 million, or 16%, from 2023, reflecting an increase in asset-based revenues, as well as the receipt of income associated with a litigation settlement.

Noninterest income for the Wealth Management Services segment was $42.0 million, up by $161 thousand, or 0.4%, from 2024.

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

Excluding the impact of this item, Wealth Management Services noninterest income increased by $2.3 million, or 6%, largely reflecting an increase in asset-based revenues.

See further discussion of wealth management revenues under the caption “Noninterest Income” above.

Noninterest expenses for the Wealth Management Services segment decreased by $2.3 million, or 8%, compared to 2023, largely reflecting decreases in salaries and employee benefits expense, legal fees, and other expenses.

Noninterest expenses for the Wealth Management Services segment increased by $4.2 million, or 15%, compared to 2024.

Included in 2025 was $1.5 million of the total pension plan settlement charge that was allocated to the Wealth Management Services segment.

Excluding this item, noninterest expenses for the Wealth Management Services segment increased by $2.7 million, or 10%, largely reflecting increases in salaries and employee benefits expense.

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

Management's Discussion and Analysis

Financial Condition

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Total shareholders’ equity 543,584 499,728 43,856 9

As further disclosed under the caption “Overview,” in December 2024, the Corporation completed an equity offering and announced a subsequent balance sheet repositioning involving the sale of lower-yielding residential mortgage loans and debt securities, the purchase of debt securities with current market yields, and the repayment of wholesale funding balances.

Mortgage loans held for sale at lower of cost or market totaled $281.7 million at December 31, 2024, as loans with an amortized cost balance of $344.6 million that were held in portfolio were reclassified to held for sale as part of the balance sheet repositioning transactions.

These loans were written down to their fair value.

The securities portfolio decreased by $84.1 million, or 8%, from the end of 2023, reflecting routine pay-downs on mortgage-backed securities and a decrease in fair value of available for sale securities due to changes in market interest rates.

Management's Discussion and Analysis

Total loans decreased by $509.9 million, or 9%, from the balance at December 31, 2023, largely reflecting a decrease in the residential real estate loan portfolio, which included the reclassification of loans to held for sale associated with the balance sheet repositioning transactions.

Total deposit balances decreased by $232.4 million, or 4%, from the end of 2023, reflecting a decrease in wholesale brokered time deposits that was partially offset by in-market deposit growth.

FHLB advances decreased by $65.0 million, or 5%, from December 31, 2023.

Both FHLB and wholesale brokered time deposits decreased in 2024, reflecting less need for wholesale funding and the use of net proceeds received from December 2024 equity offering to pay down balances.

Shareholders’ equity increased by $27.0 million, or 6%, from the end of 2023, as the net capital raised from the equity offering of $70.5 million and a net increase in the AOCL component of shareholders’ equity were partially offset by a net loss and dividend declarations.

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

As part of the previously disclosed 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 2025.

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

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government-sponsored enterprises.

As part of the December 2024 balance sheet repositioning transactions, the Bank sold available for sale debt securities with an amortized cost balance of $409.5 million (fair value of $378.4 million) and a weighted average yield of 2.65% and reinvested $378.4 million into purchases of available for sale debt securities with a weighted average yield of 5.30%.

These sales resulted in a net realized pre-tax loss of $31.0 million that was recognized in December 2024.

The carrying value of the securities portfolio decreased by $84.1 million, or 8%, from the end of 2023.

The decrease included $72.1 million of routine pay-downs and maturities of mortgage-backed securities, as well as a temporary decline in the fair value of available for sale debt securities.

As of December 31, 2024, the carrying amount of available for sale debt securities included net unrealized losses of $133.3 million, compared to net unrealized losses of $152.2 million as of December 31, 2023.

The decline in unrealized losses in 2024 reflected the impact of the sales of securities mentioned above, as well as net of changes in the fair value of securities.

The net unrealized losses at December 31, 2024 and 2023 were concentrated mortgage-backed securities issued by U.S.

The securities portfolio increased by $24.0 million, or 3%, from the end of 2024.

This included purchases of U.S.

government agency mortgage-backed securities totaling $75.9 million, with a weighted average yield of 5.46% and an increase of $38.4 million (pre-tax) in the fair value of available for sale securities.

These increases were partially offset by $89.2 million of routine pay-downs and maturities of mortgage-backed securities and calls of trust preferred debt securities.

The carrying amounts of available for sale debt securities as of December 31, 2025 and 2024, included net unrealized losses of $94.9 million and $133.3 million, respectively.

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

government agencies and U.S.

government-sponsored enterprises and were primarily attributable to relative changes in market interest rates since the time of purchase.

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 Consolidated Financial Statements for additional information.

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See Note 1 to the Consolidated Financial Statements for additional information.

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 December 31, 2025, down by $3.5 million, or 0.1%, from the end of 2024.

This decline largely reflected a decrease in the residential real estate loan portfolio, which included the reclassification of $344.6 million of loans to held for sale associated with the balance sheet repositioning transactions.

Management's Discussion and Analysis

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Commercial real estate $2,183,985 43 % $2,154,504 42 %

$2,154,504 42 % $2,106,359 37 %

Commercial & industrial 564,082 11 542,474 10

542,474 10 605,072 11

Total commercial 2,748,067 54 2,696,978 52

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Home equity 318,862 6 297,119 6

17,570 1 19,203 —

Other 17,060 — 17,570 1

Total consumer 335,922 6 314,689 7

Total loans $5,134,388 100 % $5,137,838 100 %

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

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

(2) C&I consists of loans to businesses and individuals, a portion of which are fully or partially collateralized by real estate.

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

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

(1) Includes negative basis adjustments associated with fair value hedges of $335 thousand and $1.5 million, respectively, at December 31, 2025 and 2024.

See Note 9 to the Consolidated Financial Statements for additional disclosure.

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

An analysis of the maturity and interest rate sensitivity of the Corporation’s loan portfolio as of December 31, 2025 follows:

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Under the latter scenario, the average yield on portfolio loans tends to decrease as higher yielding loans are repaid or refinanced at lower rates.

Due to the fact that the Bank may, consistent with industry practice, renew a significant portion of commercial loans at or immediately prior to their maturity by renewing the loans on substantially similar or revised terms, the principal repayments actually received by the Bank are anticipated to be significantly less than the amounts contractually due in any

Management's Discussion and Analysis

particular period.

In other circumstances, a loan, or a portion of a loan, may not be repaid due to the borrower’s inability to satisfy the contractual terms of the loan.

Management's Discussion and Analysis

Commercial Loans

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

Shared national credits are defined as participations 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.

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CRE loans totaled $2.2 billion at December 31, 2025, up by $29.5 million, or 1%, from the balance at December 31, 2024.

In 2024, CRE loan originations and advances amounted to $272.5 million and were partially offset by principal payments.

Construction and development loans included in the CRE loan portfolio amounted to $102.2 million and $214.6 million, respectively, as of December 31, 2024 and 2023.

Shared national credit balances outstanding included in the CRE loan portfolio totaled $84.7 million and $47.4 million, respectively, at December 31, 2024 and 2023.

At December 31, 2024 and December 31, 2023 balances of $63.7 million and $29.0 million, respectively, were included in the pass-rated category of commercial loan credit quality and balances of $21.0 million and $18.4 million, respectively, were included in the classified category.

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

In 2025, CRE loan originations and advances amounted to $359.1 million and were largely offset by payments.

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

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

As discussed further below, the multi-family property type was the largest segment and represented 11% of total loans at December 31, 2024.

There were no other property types within the CRE portfolio that exceeded 10% of total loans.

Other than the multi-family segment that is described 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:

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Outstanding Balance (1)

% of Total Outstanding Balance (1)

% of CRE Total

Outstanding Balance (1)

% of CRE Total

CRE Portfolio Segmentation:

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$2,183,985 100 % $2,154,504 100 %

Construction & development loans outstanding, included above $86,682 $102,245

Participation in CRE loans originated by other banks, included above (2)

$518,493 $574,816

Average CRE loan size (3)

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(1) Does not include unfunded commitments of $127.1 million and $168.3 million, respectively, as of December 31, 2025 and 2024.

(2) Includes shared national credit balances of $45.6 million and $84.7 million, respectively, as of December 31, 2025 and 2024.

There were no classified shared national credit balances as of December 31, 2025, compared to $21.0 million of classified balances as of December 31, 2024.

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

Multi-family totaled $567.2 million as of December 31, 2024, and is our largest single CRE segment, representing 26% of the total CRE portfolio.

Multi-family totaled $667.4 million as of December 31, 2025, and is our largest single CRE segment, representing 13% of total loans and 31% 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 December 31, 2025, the credit quality of the multi-family segment was 100% pass-rated.

Also, there were no nonaccrual loans and all loans in this segment were current with respect to payment terms at December 31, 2024.

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

Also, there were no nonaccrual loans and there was one loan that was past due with respect to payment terms in this segment at December 31, 2025.

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

As of December 31, 2025, Washington Trust’s CRE office loan segment totaled $237.7 million, or 5% of total loans and 11% of the total CRE loans.

These office loans are secured by properties located in our primary lending market area of southern New England - Connecticut, Massachusetts and Rhode Island.

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 - Massachusetts, Connecticut, and Rhode Island.

Furthermore, approximately 66% of the CRE office segment balance of $237.7 million is secured by properties located in suburban areas.

As of December 31, 2024, 100% of the CRE office loans were current with respect to payment terms, and 97% of the CRE office segment balance was on accruing status.

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

Additionally, the credit quality of the CRE office loan segment was 73% pass-rated, 24% special mention and 3% classified as of December 31, 2025.

Commercial and Industrial Loans

C&I loans amounted to $542.5 million at December 31, 2024, down by $62.6 million, or 10%, from the balance at December 31, 2023.

In 2024, C&I originations, advances and line utilization amounted to $55.2 million and were more than offset by payments.

Shared national credit balances outstanding included in the C&I loan portfolio totaled $71.0 million and $66.3 million, respectively, at December 31, 2024 and 2023.

All of these loans were included in the pass-rated category of commercial loan credit quality and were current with respect to payment terms at both December 31, 2024 and 2023.

C&I loans amounted to $564.1 million at December 31, 2025, up by $21.6 million, or 4%, from the balance at December 31, 2024.

In 2025, C&I originations and advances amounted to $106.2 million and were largely offset by payments.

Management's Discussion and Analysis

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Retail trade 48,289 9 41,132 8

Accommodation and food services 26,431 5 12,368 2

Manufacturing 23,714 4 32,140 6

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22,727 4 26,557 5

22,265 4 22,674 4

Arts, entertainment and recreation

22,043 4 19,861 4

Accommodation and food services 12,368 2 13,502 2

21,843 4 22,265 4

Professional, scientific and technical services

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$564,082 100 % $542,474 100 %

Participation in C&I loans originated by other banks, included above (2)

$95,047 $110,889

Average C&I loan size (3)

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(1) Does not include unfunded commitments of $306.9 million and $307.9 million, respectively, as of December 31, 2025 and 2024.

(2) Includes shared national credit balances of $72.0 million and $71.0 million, respectively, as of December 31, 2025 and 2024;

all of which were pass-rated.

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

Healthcare and social assistance totaled $126.5 million as of December 31, 2024, and is our largest single C&I segment, representing 23% of the total C&I portfolio.

Healthcare and social assistance, our largest single C&I segment, totaled $150.1 million as of December 31, 2025, representing 3% of total loans and 27% of the total C&I portfolio.

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

At December 31, 2025, the credit quality of the healthcare and social assistance segment was 89% pass-rated and 11% was special mention.

Also, there were no nonaccrual loans and all loans in this segment were current with respect to payment terms at December 31, 2024.

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

Residential Real Estate Loans

The residential real estate loan portfolio represented 40% of total loans at December 31, 2025, compared to 41% of total loans at December 31, 2024.

Residential real estate loans held in portfolio amounted to $2.1 billion at December 31, 2024, down by $478.3 million, or 18%, from the balance at December 31, 2023.

This decrease included the reclassification of $344.6 million of loans, with a weighted average rate of 3.02%, to held for sale associated with balance sheet repositioning transactions.

In addition, total origination activity declined and a lower proportion of loans was originated for portfolio in 2024.

Residential real estate loans held in portfolio amounted to $2.1 billion at December 31, 2025, down by $75.8 million, or 4%, from the balance at December 31, 2024, as loan originations were more than offset by payments.

Management's Discussion and Analysis

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(1) Includes residential mortgage loans purchased from and serviced by other financial institutions totaling $38.5 million and $46.8 million, respectively, as of December 31, 2025 and 2024.

Included in the residential real estate loan portfolio are mortgage loans purchased from and serviced by other financial institutions.

These loans are individually evaluated at time of purchase to Washington Trust’s underwriting standards and are secured by one- to four-family residential properties in southern New England and other states.

Purchased residential mortgages serviced by others represented 2% of the total residential real estate loan portfolio at both December 31, 2025 and 2024, and were largely secured by properties located in Massachusetts.

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 conditions of housing markets.

The table below presents residential real estate loan origination activity:

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

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

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

The table below presents residential real estate loan sales activity:

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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 $7.7 million and $8.5 million, respectively, as of December 31, 2024 and 2023.

The balance of residential mortgage loans

Loan servicing rights are included in other assets and are subsequently amortized as an offset to mortgage

Management's Discussion and Analysis

serviced for others, which are not included in the Consolidated Balance Sheets, amounted to $1.4 billion at December 31, 2024, compared to $1.5 billion at December 31, 2023.

banking revenues over the estimated period of servicing.

The net balance of capitalized servicing rights amounted to $6.6 million and $7.7 million, respectively, as of December 31, 2025 and 2024.

The balance of residential mortgage loans serviced for others, which are not included in the Consolidated Balance Sheets, amounted to $1.3 billion at December 31, 2025, compared to $1.4 billion at December 31, 2024.

Consumer Loans

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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 $314.7 million at December 31, 2024, down by $17.1 million, or 5%, from December 31, 2023, largely reflecting decreases in home equity lines and loans.

Purchased consumer loans, consisting of loans to individuals secured by general aviation aircraft, amounted to $11.6 million and $13.2 million, respectively, at December 31, 2024 and 2023.

Also included in the consumer loan portfolio are purchased loans to individuals secured by general aviation aircraft.

These loans were individually underwritten by us at the time of purchase using standards similar to those employed for self-originated consumer loans.

At December 31, 2025, these purchased loans represented 3% of the total consumer loan portfolio, compared to 4% at December 31, 2024.

The consumer loan portfolio totaled $335.9 million at December 31, 2025, up by $21.2 million, or 7%, from December 31, 2024, largely reflecting increases in home equity lines and loans.

Investment in Bank-Owned Life Insurance

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Nonperforming Assets

Nonperforming assets include nonaccrual loans and OREO.

Nonperforming assets are typically comprised of nonaccrual loans and OREO.

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

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Commercial real estate

$10,053 $32,827

Commercial & industrial

Total commercial

10,568 33,509

Residential Real Estate:

Residential real estate

11,099 10,767

Total consumer

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

Interest income that would have been recognized if loans on nonaccrual status had been current in accordance with their original terms was approximately $1.6 million in 2024, compared to $3.4 million in 2023.

Interest income attributable to these loans included in the Consolidated Statements of Income (Loss) amounted to approximately $908 thousand and $2.9 million, respectively, in 2024 and 2023.

Interest income that would have been recognized if loans on nonaccrual status had been current in accordance with their original terms was approximately $933 thousand in 2025, compared to $1.6 million in 2024.

Interest income attributable to these loans included in the Consolidated Statements of Income (Loss) amounted to approximately $646 thousand and $908 thousand, respectively, in 2025 and 2024.

Management's Discussion and Analysis

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Loans charged-off (14,735) (2,413)

Loans transferred to other real estate owned — (683)

Payments, payoffs and other changes (8,438) (12,772)

Balance at end of period $12,923 $23,307

The Corporation’s 2025 results were adversely impacted by charge-offs on two nonaccrual commercial loan relationships.

The first loan relationship was a C&I participation in a shared national credit to a telecom infrastructure construction contractor.

The contractor filed for Chapter 11 bankruptcy in the second quarter of 2025 due to cash flow problems, and at that time, the Corporation placed the loan relationship on nonaccrual status.

As of June 30, 2025, this individually analyzed collateral dependent relationship had a carrying value of $9.3 million, of which $1.4 million was past due.

Utilizing the information available at that time, which included collateral valuations (estimated bids from the sale of the company and estimated recovery of receivables), management established a specific reserve of $2.3 million at June 30, 2025, which covered approximately 25% of the carrying value.

Based on ensuing developments in the bankruptcy proceedings during the third quarter, which included bidders dropping out of the sale process, the company sold via auction on August 28, 2025 significantly below expectations.

Additionally, the bank group, which included the Bank, approved the sale of the receivables on September 15, 2025.

As a result of these updated recovery estimates, the Corporation revised its estimate of expected credit losses on this relationship and recognized a charge-off of $8.3 million in the third quarter.

The remaining carrying value of $1.0 million as of September 30, 2025 was collected in October 2025.

The second loan was a CRE loan secured by an office property in our primary lending area of southern New England.

This loan was previously placed on nonaccrual status in 2023 and was also modified and reported as a TLM.

As of June 30, 2025, this individually analyzed collateral dependent loan had a carrying value of $4.3 million, net of previous charge-offs taken.

Based on an appraisal received in the first quarter of 2025, management concluded that no additional specific reserve was warranted for this loan at June 30, 2025.

In September 2025, the Corporation changed its exit strategy and decided to sell this loan.

Late in September, the sale closed, proceeds of $1.2 million were received, and a charge-off of $3.0 million was recognized.

The following table presents additional detail on nonaccrual loans:

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

There were no significant commitments to lend additional funds to borrowers whose loans were on nonaccrual status at December 31, 2024.

As of December 31, 2024, the composition of nonaccrual loans was 45% commercial and 55% residential and consumer.

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

Total nonaccrual loans decreased by $21.3 million from the end of 2023, reflecting a decline in nonaccrual commercial real estate loans.

Nonaccrual CRE loans declined by $22.8 million from the balance at December 31, 2023.

This decline was primarily attributable to two loans secured by properties in our primary lending area of southern New England.

One loan, with a carrying value of $13.7 million, was in the healthcare facility segment, returned to accruing status in the first quarter of 2024 and paid off in the third quarter of 2024.

The second loan, with a carrying value of $10.5 million, was in the office segment and was resolved due to the sale of the underlying property to a third party in fourth quarter of 2024.

The payoff received on this CRE office loan was $9.5 million, resulting in a charge-off of $976 thousand being recognized in the fourth quarter of 2024.

As of December 31, 2024, the balance of nonaccrual CRE loans consisted of two collateral dependent loans.

One loan for $6.7 million (net of charge-offs to date of $1.4 million) was modified as a TLM in 2023, and another loan for $3.3 million was placed on nonaccrual status and modified as a TLM in 2024.

Both of these loans are secured by office properties in our

Management's Discussion and Analysis

primary lending area of southern New England and are current with respect to payment terms at December 31, 2024.

These loans were individually assessed for credit impairment and based on the estimated fair value of the collateral less estimated costs to sell (when appropriate), specific reserves of $1.3 million were deemed necessary at December 31, 2024.

Nonaccrual residential real estate mortgage loans amounted to $10.8 million at December 31, 2024, up by $1.1 million from the end of 2023.

As of December 31, 2024, the balance of nonaccrual residential mortgage loans was predominately secured by properties in Massachusetts, Connecticut and Rhode Island.

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

As of December 31, 2025, there were no nonaccrual commercial loans and the composition of nonaccrual loans was 100% residential and consumer.

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

Nonaccrual loans at December 31, 2025 totaled $12.9 million, down by $10.4 million from the end of 2024.

This decline was concentrated in CRE office segment and reflected charge-offs, as well as a loan payoff and proceeds received on a note sale.

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

Included in total nonaccrual residential real estate loans at December 31, 2025 were two loans purchased for portfolio and serviced by others totaling $506 thousand.

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Commercial & industrial

900 0.17 10 —

Total commercial

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

The composition of past due loans (loans past due 30 days or more) was 92% residential and consumer and 8% commercial at December 31, 2024 and essentially all residential and consumer at December 31, 2023.

Total past due loans increased by $637 thousand from the end of 2023.

The composition of past due loans (loans past due 30 days or more) was 94% residential and consumer and 6% commercial at December 31, 2025.

This compared to 92% residential and consumer and 8% commercial of December 31, 2024.

Total past due loans decreased by $599 thousand from the end of 2024.

Total past due loans included $8.3 million of nonaccrual loans as of December 31, 2025, compared to $6.4 million of as of December 31, 2024.

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

They are assessed for loss exposure using the methods described in Note 4 to the 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 increased allowance coverage and provision for credit losses on loans.

They are assessed for loss exposure using the methods described in Note 4 to the Consolidated Financial Statements under the caption “Credit Quality

Management's Discussion and Analysis

Indicators.” Management cannot predict the extent to which economic conditions or other factors may impact borrowers and the potential problem loans.

Management has identified $28.4 million in potential problem loans at December 31, 2025, compared to $28.2 million at December 31, 2024.

As of December 31, 2024, the balance of potential problem loans largely consisted of two CRE loans secured by office properties in Massachusetts.

As of December 31, 2025, the balance of potential problem loans largely consisted of two CRE office segment loans secured by properties in our primary lending market area.

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

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Total $5,134,723 $37,236 0.73 % $5,139,319 $41,960 0.82 %

(1) The amount reported for pooled loans excludes a $1.5 million negative basis adjustment associated with fair value hedges at December 31, 2024.

(1) The amount reported for pooled loans excludes negative basis adjustment associated with fair value hedges of $335 thousand and $1.5 million, respectively, at December 31, 2025 and December 31, 2024.

See Note 9 to the Consolidated Financial Statements for additional disclosure.

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

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

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

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

For additional information regarding the ACL methodology, see Note 1 to the Consolidated Financial Statements, as well as disclosure under the caption “Critical Accounting Policies and Estimates.”

The ACL on loans amounted to $42.0 million at December 31, 2024, up by $903 thousand, or 2%, from the balance at December 31, 2023.

The ACL on loans amounted to $37.2 million at December 31, 2025, down by $4.7 million, or 11%, 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 0.73% at December 31, 2025, compared to 0.82% at December 31, 2024.

The Corporation recorded a provision for credit losses on loans of $2.9 million in 2024.

This reflected specific reserve allocations on individually analyzed nonaccrual commercial loans, as well as the impact of continued, yet subsiding, slowdown in prepayment speeds.

This was also partially offset by relatively stable to improving forecasted economic conditions in 2024 and a decline in loan balances that was concentrated in residential real estate and also included the reclassification of loans from portfolio to held for sale.

ACL on loans as a percentage of nonaccrual loans was 288.14% at December 31, 2025, compared to 180.03% at December 31, 2024

Net charge-offs totaled $14.2 million, or 0.28% of average loans, in 2025, compared to $2.0 million, or 0.04% of average loans, in 2024.

See additional discussion regarding charge-offs on two nonaccrual commercial loan relationships above under the caption “Nonaccrual Loans.”

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 decrease in the ACL on loans from December 31, 2024 reflects the impact of elevated charge-offs in 2025, as well as net improvements in loss given default estimates and regression analysis results, which were reflective of the performance of the overall loan portfolio and changes in econometric forecasts.

Management's Discussion and Analysis

Net charge-offs totaled $2.0 million, or 0.04% of average loans, in 2024, compared to net charge-offs of $520 thousand, or 0.01% of average loans, in 2023.

The charge-offs recognized in 2024 were concentrated in the CRE office portfolio segment.

additional information regarding the ACL methodology, see Note 1 to the Consolidated Financial Statements, as well as disclosure under the caption “Critical Accounting Policies and Estimates.”

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

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Commercial real estate

5,715 1,961 373

Commercial & industrial

Total commercial

14,408 2,169 410

Residential real estate:

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Total recoveries 511 416 57

Net charge-offs (recoveries) 1,997 520 (368)

Net charge-offs 14,224 1,997 520

Provision charged to earnings 9,500 2,900 3,550

Balance at end of period $37,236 $41,960 $41,057

Net charge-offs (recoveries) to average loans 0.04 % 0.01 % (0.01 %)

Net charge-offs to average loans 0.28 % 0.04 % 0.01 %

Sources of Funds

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Total deposits $5,269,990 100 % $5,115,800 100 % $154,190 3 %

Total deposits amounted to $5.1 billion at December 31, 2024, down by $232.4 million, or 4%, from December 31, 2023, driven by a decline in wholesale brokered time deposits of $356.5 million, or 55%.

Total deposits amounted to $5.3 billion at December 31, 2025, up by $154.2 million, or 3%, from December 31, 2024, reflecting increases in in-market deposits, partially offset by a decline in wholesale brokered time deposits.

In-market deposits, which exclude wholesale brokered deposits, were up by $451.7 million, or 9%, from the balance at December 31, 2024, largely reflecting increases in savings and interest-bearing demand deposits.

Competition for deposits in our market area is strong, and continued demand for higher‑cost deposit products remains.

Washington Trust remains focused on maintaining existing depositor relationships and supporting organic deposit growth.

There were no wholesale brokered time deposits at December 31, 2025, compared to $297.5 million at December 31, 2024.

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

In-market deposits, which exclude wholesale brokered deposits, were up by $124.2 million, or 3%, from the balance at December 31, 2023.

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

In 2024, Washington Trust made investments in technology to enhance our customers’ experience, and we remain focused on maintaining and growing depositor relationships.

As of December 31, 2024, in-market deposits were approximately 59% retail and 41% commercial.

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

The average size of our in-market deposit accounts was approximately $37 thousand at December 31, 2024.

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

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

FHLB advances totaled $1.1 billion at December 31, 2024, down by $65.0 million from the balance at the end of 2023.

FHLB advances totaled $626.0 million at December 31, 2025, down by $499.0 million from the balance at the end of 2024.

For additional information regarding FHLB advances see Note 13 to the Consolidated Financial Statements.

Both FHLB and wholesale brokered time deposits decreased in 2024, reflecting less need for wholesale funding and the use of net proceeds received from the December 2024 equity offering to pay down balances.

See additional discussion under the caption “Overview.”

Both FHLB advances and wholesale brokered time deposits decreased from the end of 2024, 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 66% of total average assets in the twelve months ended December 31, 2024.

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 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.

Management's Discussion and Analysis

The table below presents a summary of contingent liquidity balances by source:

(Dollars in thousands)

December 31, 2024 2023 2022

Contingent Liquidity:

Federal Home Loan Bank of Boston (1)

$752,951 $1,086,607 $668,295

Federal Reserve Bank of Boston (2)

70,286 65,759 27,059

Available cash liquidity (3)

36,647 54,970 49,727

Unencumbered securities 597,771 680,857 691,893

Total contingent liquidity $1,457,655 $1,888,193 $1,436,974

Percentage of total contingent liquidity to uninsured deposits 106.9 % 149.8 % 94.9 %

Percentage of total contingent liquidity to uninsured deposits, after exclusions 136.1 % 195.9 % 147.4 %

(1) As of December 31, 2024, 2023 and 2022, loans with a carrying value of $2.8 billion, $3.4 billion and $2.4 billion, respectively, and securities available for sale with a carrying value of $74.2 million, $94.3 million and $102.1 million, respectively, were pledged to the FHLB resulting in this additional borrowing capacity.

(2) As of December 31, 2024, 2023 and 2022, loans with a carrying value of $68.5 million, $71.0 million and $20.9 million, respectively, and securities available for sale with a carrying value of $13.9 million, $13.1 million and $12.7 million, respectively, were pledged to the FRBB 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 balance sheet repositioning transactions.

On January 24, 2025, the sale of these loans was completed and the cash proceeds received were used to pay down FHLB advances or other wholesale funding balances in the first quarter of 2025.

In addition to the amounts presented above, the Bank also access to a $40.0 million unused line of credit with the FHLB at December 31, 2024, 2023 and 2022.

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

Liquidity remained within target ranges established by the ALCO during 2024.

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, borrowings and defined benefit pension plans.

For additional information on these arrangements and the expected timing of applicable payments as of December 31, 2024 , see the following notes to the Consolidated Financial Statements:

Note 7 for leases, Note 12 for time deposits, Note 13 for borrowings and Note 16 for defined benefit pension plans.

Land and premises associated with five branch locations with a total net book value of $4.8 million were reported as held for sale as of December 31, 2024, as the Bank committed to sell these assets and lease them back from the buyers.

The sales-leaseback transactions for four of the locations were completed on January 30, 2025 and the remaining transaction associated with the fifth location is expected to be completed later in 2025.

As a result, the Corporation expects to recognize a net gain on the sale of these assets of approximately $7 million in the Consolidated Statements of Income (Loss) in the first quarter of 2025.

Additionally, the annual lease expense associated with leaseback of these five locations is estimated to be approximately $1 million.

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

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

This results in a pre-tax non-cash pension settlement charge of approximately $6.4 million, which includes the recognition of pre-tax actuarial losses accumulated in AOCL and the effects of the remeasurement of plan assets and liability upon settlement, being recognized in the Consolidated Statements of Income (Loss) in the first quarter of 2025.

See Note 16 to the Consolidated Financial Statements for additional disclosure regarding the qualified pension plan.

Management's Discussion and Analysis

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.

These transactions involve, to varying degrees, elements of credit, interest rate and liquidity risk.

The Corporation’s credit policies with respect to interest rate contracts with commercial borrowers, commitments to extend credit, and standby letters of credit are similar to those used for loans.

Some commitments to extend credit and standby letters of credit are expected to expire without being drawn upon, and thus, total amounts do not necessarily represent future cash requirements.

Interest rate risk management contracts with other counterparties are generally subject to bilateral collateralization terms.

These contracts with various counterparties may subject the Corporation to various cash flow requirements, which may include posting of cash as collateral for arrangements that are in a liability position.

For additional information on derivative financial instruments and financial instruments with off-balance sheet risk see Notes 9 and 21 to the Consolidated Financial Statements.

The Corporation proactively manages its liquidity and cash flow requirements with the intent to maintain stable, cost-effective funding and to promote the strength of its overall balance sheet.

The liquidity position of the Corporation is continuously monitored by management and adjustments are made to appropriately balance sources and uses of funds, as needed.

For further details surrounding the Corporation’s liquidity risks and related strategy, see the “Risk Management – Liquidity Risk Management” section below.

Capital Resources

In December 2024, the Corporation completed an equity offering and disclosed a subsequent balance sheet repositioning involving the sale of lower-yielding loans and debt securities, the purchase of debt securities with current market yields, and the repayment of wholesale funding balances.

Though the sales of lower-yielding loans and securities resulted in a net loss being recognized in 2024, we believe the repositioning will favorably impact future revenues and provide additional capacity for growth and investment.

At December 31, 2024, total shareholders’ equity amounted to $499.7 million, up by $27.0 million from December 31, 2023.

The net capital raised from the equity offering of $70.5 million and an increase of $22.0 million in the AOCL component of shareholders' equity were partially offset by a net loss of $28.1 million and dividend declarations of $39.8 million.

The change in AOCL reflected net changes in the fair value of available for sale debt securities and cash flow hedges.

Total shareholders’ equity amounted to $543.6 million at December 31, 2025, up by $43.9 million from December 31, 2024.

The net increase primarily reflected net income of $52.2 million and an improvement of $39.9 million in the AOCL component of shareholders' equity, partially offset by a dividend declarations of $43.5 million and a net increase in treasury stock of $6.1 million.

See Note 19 to the Consolidated Financial Statements for additional disclosure regarding changes in AOCL.

The Corporation declared dividends of $2.24 per share in 2024, unchanged from dividends per share declared in 2023.

The net increase in treasury stock included the Corporation’s repurchase of 267,658 shares, at an average price of $27.26 and a total cost of $7.4 million, under its 2025 Repurchase Program.

Washington Trust declared dividends of $2.24 per share in 2025, unchanged from dividends per share declared in 2024.

The dividend payout ratio was 82.7 % in 2025, compared to (137.4%) in 2024.

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See Note 14 to the Consolidated Financial Statements for additional discussion regarding shareholders’ equity.

Risk Management

The Corporation has a comprehensive ERM program through which the Corporation identifies, measures, monitors and controls current and emerging material risks.

Management's Discussion and Analysis

The Board of Directors is responsible for oversight of the ERM program.

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 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 Consolidated Financial Statements.

For further discussion regarding credit risk associated with unfunded commitments, see Note 21 to the Consolidated Financial Statements.

For further discussion regarding the Corporation’s securities portfolio, see Note 3 to the 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 additional disclosure under the caption “Asset/Liability Management and Interest Rate Risk” below.

Liquidity risk includes the inability to manage unplanned decreases or changes in funding sources.

See additional disclosure under the caption “Liquidity Risk Management” below.