# Washington Trust Bancorp Inc: Form 10-Q for the period ended Sep 30, 2024

- Company: [Washington Trust Bancorp Inc](/companies/wash.md) (CIK 737468)
- Form: 10-Q
- Filed: 2024-11-07
- Accepted by EDGAR: Nov 7, 2024, 10:13 ET
- Period: 2024-09-30
- Accession: 0000737468-24-000041
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/737468/000073746824000041/wash-20240930.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/737468/000073746824000041/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2024-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2024-07-01 to 2024-09-30 | $12.4m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Revenue | 9 months, 2024-01-01 to 2024-09-30 | $35.9m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Interest expense | 3 months, 2024-07-01 to 2024-09-30 | $55.3m | us-gaap:InterestExpense |
| Interest expense | 9 months, 2024-01-01 to 2024-09-30 | $163.3m | us-gaap:InterestExpense |
| Income tax | 3 months, 2024-07-01 to 2024-09-30 | $2.8m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2024-01-01 to 2024-09-30 | $8.7m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2024-07-01 to 2024-09-30 | $11.0m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2024-01-01 to 2024-09-30 | $32.7m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2024-07-01 to 2024-09-30 | $0.64 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months, 2024-01-01 to 2024-09-30 | $1.91 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2024-07-01 to 2024-09-30 | $0.64 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2024-01-01 to 2024-09-30 | $1.92 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2024-07-01 to 2024-09-30 | 17,140,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2024-01-01 to 2024-09-30 | 17,115,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months, 2024-01-01 to 2024-09-30 | $38.8m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 9 months, 2024-01-01 to 2024-09-30 | $3.5m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Dividends paid | 9 months, 2024-01-01 to 2024-09-30 | $28.8m | us-gaap:PaymentsOfDividends |
| Share repurchases | 9 months, 2024-01-01 to 2024-09-30 | $0 | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Total assets | at 2024-09-30 | $7.14bn | us-gaap:Assets |
| Total liabilities | at 2024-09-30 | $6.64bn | us-gaap:Liabilities |
| Shareholders' equity | at 2024-09-30 | $502.2m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 108,370 characters.

The following discussion should be read in conjunction with the Corporation’s Audited Consolidated Financial Statements and notes thereto included in the Annual Report on Form 10-K for the year ended December 31, 2023, and in conjunction with the condensed Unaudited Consolidated Financial Statements and notes thereto included in Item 1 of this report. Operating results for the three and nine months ended September 30, 2024 are not necessarily indicative of the results for the full-year ended December 31, 2024 or any future period.

### Forward-Looking Statements

This report contains statements that are “forward-looking statements.” We may also make forward-looking statements in other documents we file with the SEC, in our annual reports to shareholders, in press releases and other written materials, and in oral statements made by our officers, directors, or employees. You can identify forward-looking statements by the use of the words “believe,” “expect,” “anticipate,” “intend,” “estimate,” “assume,” “outlook,” “will,” “should,” and other expressions that predict or indicate future events and trends and which do not relate to historical matters. You should not rely on forward-looking statements, because they involve known and unknown risks, uncertainties, and other factors, some of which are beyond our control. These risks, uncertainties, and other factors may cause our actual results, performance, or achievements to be materially different than the anticipated future results, performance, or achievements expressed or implied by the forward-looking statements.

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

- changes in general business and economic conditions on a national basis and in the local markets in which we operate;
- changes in customer behavior due to political, business, and economic conditions, including inflation and concerns about liquidity;
- interest rate changes or volatility, as well as changes in the balance and mix of loans and deposits;
- changes in loan demand and collectability;
- the possibility that future credits losses are higher than currently expected due to changes in economic assumptions or adverse economic developments;
- ongoing volatility in national and international financial markets;
- reductions in the market value or outflows of wealth management AUA;
- decreases in the value of securities and other assets;
- increases in defaults and charge-off rates;
- changes in the size and nature of our competition;
- changes in legislation or regulation and accounting principles, policies, and guidelines;
- operational risks including, but not limited to, changes in information technology, cybersecurity incidents, fraud, natural disasters, war, terrorism, civil unrest, and future pandemics;
- regulatory, litigation, and reputational risks; and
- changes in the assumptions used in making such forward-looking statements.

In addition, the factors described under “Risk Factors” in Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, as updated by our Quarterly Reports on Form 10-Q and other filings submitted to the SEC, may result in these differences. You should carefully review all of these factors and you should be aware that there may be other factors that could cause these differences. These forward-looking statements were based on information, plans, and estimates at the date of this report, and we assume no obligation to update any forward-looking statements to reflect changes in underlying assumptions or factors, new information, future events or other changes.

### Overview

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

Our largest source of operating income is net interest income, which is the difference between interest earned on loans and securities and interest paid on deposits and borrowings. In addition, we generate noninterest income from a number of sources, including wealth management services, mortgage banking activities, and deposit services. Our principal noninterest expenses include salaries and employee benefit costs, outsourced services 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.

### Risk Management

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

The Board of Directors is responsible for oversight of the ERM program. The ERM program enables the aggregation of risk across the Corporation and ensures the Corporation has the tools, programs, and processes in place to support informed decision making, to anticipate risks before they materialize and to maintain the Corporation’s risk profile consistent with its risk strategy. The Board of Directors has approved an ERM Policy that addresses each category of risk. The risk categories include: credit risk, interest rate risk, liquidity risk, price and market risk, compliance risk, strategic and reputation risk, and operational risk. A description of each risk category is provided below.

Credit risk represents the possibility that borrowers or other counterparties may not repay loans or other contractual obligations according to their terms due to changes in the financial capacity, ability, and willingness of such borrowers or counterparties to meet their obligations. In some cases, the collateral securing payment of the loans may be sufficient to assure repayment, but in other cases the Corporation may experience significant credit losses, which could have an adverse effect on its operating results. The Corporation makes various assumptions and judgments about the collectability of its loan portfolio, including the creditworthiness of its borrowers and counterparties and the value of the real estate and other assets serving as collateral for the repayment of loans. Credit risk also exists with respect to investment securities. For further discussion regarding the credit risk and the credit quality of the Corporation’s loan portfolio, see Notes 4 and 5 to the Unaudited Consolidated Financial Statements. For further discussion regarding credit risk associated with unfunded commitments, see Note 16 to the Unaudited Consolidated Financial Statements. For further discussion regarding the Corporation’s securities portfolio, see Note 3 to the Unaudited Consolidated Financial Statements.

Interest rate risk is the risk of loss to earnings due to movements in interest rates. Interest rate risk arises from differences between the timing of rate changes and the timing of cash flows. It exists because the repricing frequency and magnitude of interest-earning assets and interest-bearing liabilities are not identical. See the “Asset/Liability Management and Interest Rate Risk” section below for additional disclosure.

Liquidity risk is the risk that the Corporation will not have the ability to generate adequate amounts of cash in the most economical way for it to meet its maturing liability obligations and customer loan demand. Liquidity risk includes the inability to manage unplanned decreases or changes in funding sources. For detailed disclosure regarding liquidity management, see the “Liquidity and Capital Resources” section below.

Price and market risk refers to the risk of loss arising from adverse changes in interest rates and other relevant market rates and prices, such as equity prices. Interest rate risk, discussed above, is the most significant market risk to which the Corporation is exposed. The Corporation is also exposed to financial market risk and housing market risk.

Compliance risk represents the risk of regulatory sanctions or financial loss resulting from the failure to comply with laws, rules, and regulations and standards of good banking practice. Activities that may expose the Corporation to compliance risk include, but are not limited to, those dealing with the prevention of money laundering, privacy and data protection, adherence to all applicable laws and regulations, and employment and tax matters.

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

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

ERM is an overarching program that includes all areas of the Corporation. A framework approach is utilized to assign responsibility and to ensure that the various business units and activities involved in the risk management life-cycle are effectively integrated. The Corporation has adopted the “three lines of defense” strategy that is an industry best practice for ERM. Business units are the first line of defense in managing risk. They are responsible for identifying, measuring, monitoring, and controlling current and emerging risks. They must report on and escalate their concerns. Corporate functions such as Credit Risk Management, Financial Administration, Information Assurance, and Compliance represent the second line of defense. They are responsible for policy setting and for reviewing and challenging the risk management activities of the business units. They collaborate closely with business units on planning and resource allocation with respect to risk management. Internal Audit is a third line of defense. They provide independent assurance to the Board of Directors of the effectiveness of the first and second lines in fulfilling their risk management responsibilities.

For additional factors that could adversely impact Washington Trust’s future results of operations and financial condition, see Part II, Item 1A below and the section labeled “Risk Factors” in Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, as updated by our Quarterly Reports on Form 10-Q and other filings submitted to the SEC.

### Results of Operations

### Summary

The following table presents a summarized consolidated statement of operations:

*(Dollars in thousands)*

| Periods ended September 30, | Three Months 2024 | 2023 | Change $% |  | Nine Months 2024 | 2023 | Change $% |  |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Net interest income | $32,262 | $33,751 | ($1,489) | (4%) | $95,512 | $104,444 | ($8,932) | (9%) |
| Noninterest income | 16,272 | 15,226 | 1,046 | 7 | 50,095 | 42,834 | 7,261 | 17 |
| Total revenues | 48,534 | 48,977 | (443) | (1) | 145,607 | 147,278 | (1,671) | (1) |
| Provision for credit losses | 200 | 500 | (300) | (60) | 1,400 | 2,000 | (600) | (30) |
| Noninterest expense | 34,504 | 34,390 | 114 | — | 102,777 | 100,970 | 1,807 | 2 |
| Income before income taxes | 13,830 | 14,087 | (257) | (2) | 41,430 | 44,308 | (2,878) | (6) |
| Income tax expense | 2,849 | 2,926 | (77) | (3) | 8,698 | 9,079 | (381) | (4) |
| Net income | $10,981 | $11,161 | ($180) | (2%) | $32,732 | $35,229 | ($2,497) | (7%) |

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

| Periods ended September 30, | Three Months 2024 | 2023 | Nine Months 2024 | 2023 |
| --- | ---: | ---: | ---: | ---: |
| Diluted earnings per common share | $0.64 | $0.65 | $1.91 | $2.06 |
| Return on average assets (net income divided by average assets) | 0.60% | 0.62% | 0.60% | 0.68% |
| Return on average equity (net income available for common shareholders divided by average equity) | 8.99% | 9.65% | 9.25% | 10.19% |
| Net interest income as a percentage of total revenues | 66% | 69% | 66% | 71% |
| Noninterest income as a percentage of total revenues | 34% | 31% | 34% | 29% |

Net income totaled $11.0 million and $32.7 million, respectively, for the three and nine months ended September 30, 2024, compared to $11.2 million and $35.2 million, respectively, reported for the same periods in 2023. Year-to-date results largely reflected lower net interest income and a modest increase in noninterest expenses, partially offset by higher noninterest income and a relatively lower provision for credit losses.

The decline in net interest income in 2024 was driven by higher rates paid on, and increases in, average interest-bearing liability balances, which offset the benefit of higher yields on, and increases in, average interest-earning asset balances. Noninterest income benefited from a $2.1 litigation settlement received in the first quarter of 2024 and a net gain of $988 thousand recognized on the sale of a bank-owned operations facility in the second quarter of 2024. In addition, the increase in noninterest income in 2024 reflected higher mortgage banking and wealth management revenues, partially offset by lower loan related derivative income.

### Average Balances / Net Interest Margin - Fully Taxable Equivalent Basis

The following tables present daily average balance, interest, and yield/rate information, as well as net interest margin on an FTE basis. Tax-exempt income is converted to an FTE basis using the statutory federal income tax rate adjusted for applicable state income taxes net of the related federal tax benefit. Unrealized gains (losses) on available for sale securities, changes in fair value on mortgage loans held for sale, and basis adjustments associated with fair value hedges are excluded from the average balance and yield calculations. Nonaccrual loans, as well as interest recognized on these loans, are included in amounts presented for loans.

### Management's Discussion and Analysis

*(Dollars in thousands)*

| Three months ended September 30, Assets: | 2024 Average Balance | Interest | Yield/ Rate | 2023 Average Balance | Interest | Yield/ Rate | Change Average Balance | Interest | Yield/ Rate |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Cash, federal funds sold, and short-term investments | $229,326 | $3,174 | 5.51 | $102,608 | $1,344 | 5.20 | $126,718 | $1,830 | 0.31 |
| Mortgage loans held for sale | 21,899 | 366 | 6.65 | 23,057 | 332 | 5.71 | (1,158) | 34 | 0.94 |
| Taxable debt securities | 1,109,699 | 6,794 | 2.44 | 1,181,915 | 7,271 | 2.44 | (72,216) | (477) | — |
| Nontaxable debt securities | 85 | 1 | 4.68 | — | — | — | 85 | 1 | 4.68 |
| Total securities | 1,109,784 | 6,795 | 2.44 | 1,181,915 | 7,271 | 2.44 | (72,131) | (476) | — |
| FHLB stock | 62,420 | 1,262 | 8.04 | 46,889 | 878 | 7.43 | 15,531 | 384 | 0.61 |
| Commercial real estate | 2,143,466 | 34,518 | 6.41 | 2,004,204 | 31,526 | 6.24 | 139,262 | 2,992 | 0.17 |
| Commercial & industrial (1) | 573,400 | 9,368 | 6.50 | 609,604 | 9,896 | 6.44 | (36,204) | (528) | 0.06 |
| Total commercial | 2,716,866 | 43,886 | 6.43 | 2,613,808 | 41,422 | 6.29 | 103,058 | 2,464 | 0.14 |
| Residential real estate | 2,542,939 | 26,568 | 4.16 | 2,552,602 | 24,976 | 3.88 | (9,663) | 1,592 | 0.28 |
| Home equity | 299,227 | 5,554 | 7.38 | 303,144 | 4,514 | 5.91 | (3,917) | 1,040 | 1.47 |
| Other | 18,097 | 215 | 4.73 | 18,813 | 225 | 4.74 | (716) | (10) | (0.01) |
| Total consumer | 317,324 | 5,769 | 7.23 | 321,957 | 4,739 | 5.84 | (4,633) | 1,030 | 1.39 |
| Total loans | 5,577,129 | 76,223 | 5.44 | 5,488,367 | 71,137 | 5.14 | 88,762 | 5,086 | 0.30 |
| Total interest-earning assets | 7,000,558 | 87,820 | 4.99 | 6,842,836 | 80,962 | 4.69 | 157,722 | 6,858 | 0.30 |
| Noninterest-earning assets | 254,008 |  |  | 272,321 |  |  | (18,313) |  |  |
| Total assets | $7,254,566 |  |  | $7,115,157 |  |  | $139,409 |  |  |
| **Liabilities and Shareholders’ Equity:** |  |  |  |  |  |  |  |  |  |
| Interest-bearing demand deposits (in-market) | $556,245 | $6,288 | 4.50 | $461,760 | $5,060 | 4.35 | $94,485 | $1,228 | 0.15 |
| NOW accounts | 693,724 | 405 | 0.23 | 742,690 | 419 | 0.22 | (48,966) | (14) | 0.01 |
| Money market accounts | 1,122,649 | 11,221 | 3.98 | 1,173,284 | 9,929 | 3.36 | (50,635) | 1,292 | 0.62 |
| Savings accounts | 484,068 | 984 | 0.81 | 516,342 | 429 | 0.33 | (32,274) | 555 | 0.48 |
| Time deposits (in-market) | 1,188,452 | 12,234 | 4.10 | 1,080,395 | 9,880 | 3.63 | 108,057 | 2,354 | 0.47 |
| Interest-bearing in-market deposits | 4,045,138 | 31,132 | 3.06 | 3,974,471 | 25,717 | 2.57 | 70,667 | 5,415 | 0.49 |
| Wholesale brokered demand deposits | — | — | — | — | — | — | — | — | — |
| Wholesale brokered time deposits | 458,114 | 6,071 | 5.27 | 659,624 | 8,352 | 5.02 | (201,510) | (2,281) | 0.25 |
| Wholesale brokered deposits | 458,114 | 6,071 | 5.27 | 659,624 | 8,352 | 5.02 | (201,510) | (2,281) | 0.25 |
| Total interest-bearing deposits | 4,503,252 | 37,203 | 3.29 | 4,634,095 | 34,069 | 2.92 | (130,843) | 3,134 | 0.37 |
| FHLB advances | 1,423,804 | 17,717 | 4.95 | 1,053,370 | 12,497 | 4.71 | 370,434 | 5,220 | 0.24 |
| Junior subordinated debentures | 22,681 | 404 | 7.09 | 22,681 | 404 | 7.07 | — | — | 0.02 |
| Total interest-bearing liabilities | 5,949,737 | 55,324 | 3.70 | 5,710,146 | 46,970 | 3.26 | 239,591 | 8,354 | 0.44 |
| Noninterest-bearing demand deposits | 673,113 |  |  | 773,424 |  |  | (100,311) |  |  |
| Other liabilities | 146,045 |  |  | 173,572 |  |  | (27,527) |  |  |
| Shareholders’ equity | 485,654 |  |  | 458,015 |  |  | 27,639 |  |  |
| Total liabilities and shareholders’ equity | $7,254,549 |  |  | $7,115,157 |  |  | $139,392 |  |  |
| Net interest income (FTE) |  | $32,496 |  |  | $33,992 |  |  | ($1,496) |  |
| Interest rate spread |  |  | 1.29 |  |  | 1.43 |  |  | (0.14) |
| Net interest margin |  |  | 1.85 |  |  | 1.97 |  |  | (0.12) |

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

### Management's Discussion and Analysis

*(Dollars in thousands)*

| Nine months ended September 30, Assets: | 2024 Average Balance | Interest | Yield/ Rate | 2023 Average Balance | Interest | Yield/ Rate | Change Average Balance | Interest | Yield/ Rate |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Cash, federal funds sold, and short-term investments | $135,428 | $5,667 | 5.59 | $105,025 | $3,693 | 4.70 | $30,403 | $1,974 | 0.89 |
| Mortgage loans held for sale | 20,042 | 1,013 | 6.75 | 18,315 | 725 | 5.29 | 1,727 | 288 | 1.46 |
| Taxable debt securities | 1,128,507 | 20,834 | 2.47 | 1,192,536 | 21,868 | 2.45 | (64,029) | (1,034) | 0.02 |
| Nontaxable debt securities | 28 | 1 | 4.77 | — | — | — | 28 | 1 | 4.77 |
| Total debt securities | 1,128,535 | 20,835 | 2.47 | 1,192,536 | 21,868 | 2.45 | (64,001) | (1,033) | 0.02 |
| FHLB stock | 58,890 | 3,459 | 7.85 | 45,605 | 2,333 | 6.84 | 13,285 | 1,126 | 1.01 |
| Commercial real estate | 2,150,686 | 103,445 | 6.42 | 1,931,196 | 85,626 | 5.93 | 219,490 | 17,819 | 0.49 |
| Commercial & industrial (1) | 595,564 | 29,096 | 6.53 | 618,415 | 28,423 | 6.14 | (22,851) | 673 | 0.39 |
| Total commercial | 2,746,250 | 132,541 | 6.45 | 2,549,611 | 114,049 | 5.98 | 196,639 | 18,492 | 0.47 |
| Residential real estate | 2,568,457 | 79,572 | 4.14 | 2,452,088 | 69,777 | 3.80 | 116,369 | 9,795 | 0.34 |
| Home equity | 305,364 | 15,769 | 6.90 | 293,957 | 12,355 | 5.62 | 11,407 | 3,414 | 1.28 |
| Other | 18,527 | 666 | 4.80 | 17,685 | 616 | 4.66 | 842 | 50 | 0.14 |
| Total consumer | 323,891 | 16,435 | 6.78 | 311,642 | 12,971 | 5.56 | 12,249 | 3,464 | 1.22 |
| Total loans | 5,638,598 | 228,548 | 5.41 | 5,313,341 | 196,797 | 4.95 | 325,257 | 31,751 | 0.46 |
| Total interest-earning assets | 6,981,493 | 259,522 | 4.97 | 6,674,822 | 225,416 | 4.52 | 306,671 | 34,106 | 0.45 |
| Noninterest-earning assets | 256,527 |  |  | 259,334 |  |  | (2,807) |  |  |
| Total assets | $7,238,020 |  |  | $6,934,156 |  |  | $303,864 |  |  |
| **Liabilities and Shareholders’ Equity:** |  |  |  |  |  |  |  |  |  |
| Interest-bearing demand deposits (in-market) | $533,163 | $18,058 | 4.52 | $385,180 | $11,788 | 4.09 | $147,983 | $6,270 | 0.43 |
| NOW accounts | 709,115 | 1,168 | 0.22 | 781,546 | 1,177 | 0.20 | (72,431) | (9) | 0.02 |
| Money market accounts | 1,116,879 | 32,571 | 3.90 | 1,208,436 | 26,807 | 2.97 | (91,557) | 5,764 | 0.93 |
| Savings accounts | 485,665 | 2,540 | 0.70 | 534,784 | 1,065 | 0.27 | (49,119) | 1,475 | 0.43 |
| Time deposits (in-market) | 1,165,370 | 35,756 | 4.10 | 971,333 | 22,417 | 3.09 | 194,037 | 13,339 | 1.01 |
| Interest-bearing in-market deposits | 4,010,192 | 90,093 | 3.00 | 3,881,279 | 63,254 | 2.18 | 128,913 | 26,839 | 0.82 |
| Wholesale brokered demand deposits | — | — | — | 5,368 | 177 | 4.41 | (5,368) | (177) | (4.41) |
| Wholesale brokered time deposits | 558,015 | 21,870 | 5.24 | 579,871 | 19,931 | 4.60 | (21,856) | 1,939 | 0.64 |
| Wholesale brokered deposits | 558,015 | 21,870 | 5.24 | 585,239 | 20,108 | 4.59 | (27,224) | 1,762 | 0.65 |
| Total interest-bearing deposits | 4,568,207 | 111,963 | 3.27 | 4,466,518 | 83,362 | 2.50 | 101,689 | 28,601 | 0.77 |
| FHLB advances | 1,353,887 | 50,151 | 4.95 | 1,025,788 | 35,775 | 4.66 | 328,099 | 14,376 | 0.29 |
| Junior subordinated debentures | 22,681 | 1,213 | 7.14 | 22,681 | 1,132 | 6.67 | — | 81 | 0.47 |
| Total interest-bearing liabilities | 5,944,775 | 163,327 | 3.67 | 5,514,987 | 120,269 | 2.92 | 429,788 | 43,058 | 0.75 |
| Noninterest-bearing demand deposits | 663,355 |  |  | 792,706 |  |  | (129,351) |  |  |
| Other liabilities | 157,268 |  |  | 165,021 |  |  | (7,753) |  |  |
| Shareholders’ equity | 472,617 |  |  | 461,442 |  |  | 11,175 |  |  |
| Total liabilities and shareholders’ equity | $7,238,015 |  |  | $6,934,156 |  |  | $303,859 |  |  |
| Net interest income (FTE) |  | $96,195 |  |  | $105,147 |  |  | ($8,952) |  |
| Interest rate spread |  |  | 1.30 |  |  | 1.60 |  |  | (0.30) |
| Net interest margin |  |  | 1.84 |  |  | 2.11 |  |  | (0.27) |

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

### Net Interest Income

Net interest income, the primary source of our operating income, totaled $32.3 million and $95.5 million, respectively, for the three and nine months ended September 30, 2024, compared to $33.8 million and $104.4 million, respectively, for the same periods in 2023. Net interest income is affected by the level of and changes in interest rates, and changes in the amount and 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. There was no prepayment penalty fee income recognized in the three months ended September 30, 2024. Prepayment penalty fee income amounted to $66 thousand for the nine months ended September 30, 2024 and had essentially no benefit to NIM. This compared to $71 thousand (or 0 basis point benefit to NIM) and $245 thousand (or 1 basis point benefit to NIM), respectively, for the three and nine months ended in September 30, 2023.

The analysis of net interest income, NIM, and the yield on loans is also impacted by changes in the level of net amortization of premiums and discounts on securities and loans, which is included in interest income. Changes in market interest rates affect the level of loan prepayments and the receipt of payments on mortgage-backed securities. Prepayment speeds generally increase as market interest rates decline and decrease as market interest rates rise. Changes in prepayment speeds could increase or decrease the level of net amortization of premiums and discounts, thereby affecting interest income. As noted in the Unaudited Consolidated Statements of Cash Flows, net amortization of premiums and discounts on securities and loans (a net reduction to net interest income) amounted to $878 thousand for the nine months ended September 30, 2024, compared to $1.0 million for the same period in 2023.

FTE net interest income for the three and nine months ended September 30, 2024 amounted to $32.5 million and $96.2 million, respectively, down by $1.5 million and $9.0 million, respectively, from the same periods in 2023. For the three and nine months ended September 30, 2024, increases in average interest-bearing liability balances, net of increased average interest-earning assets, reduced net income by $493 thousand, and $4.9 million, respectively. Increases in funding costs outpaced increases in asset yields, reducing net interest income by $1.0 million and $4.1 million, respectively, for the three and nine months ended September 30, 2024.

NIM was 1.85% and 1.84%, respectively, for the three and nine months ended September 30, 2024, compared to 1.97% and 2.11%, respectively, for the same periods in 2023. While NIM benefited from higher market interest rates on loans, it was adversely impacted by a higher cost of funds.

Total average securities for the three and nine months ended September 30, 2024 decreased by $72.1 million and $64.0 million, respectively, from the average balances for the same periods a year earlier primarily due to routine pay-downs. The FTE rate of return on the securities portfolio for the three and nine months ended September 30, 2024 was 2.44% and 2.47%, respectively, compared to 2.44% and 2.45% respectively, for the same periods in 2023.

Total average loan balances for the three and nine months ended September 30, 2024 increased by $88.8 million and $325.3 million, respectively, from the average loan balances for the comparable 2023 periods, largely reflecting growth in average balances of CRE loans. The increase in average loan balances for the year-to-date period also reflected growth in the average balance of residential real estate loans. The yield on total loans for the three and nine months ended September 30, 2024 was 5.44% and 5.41%, respectively, compared to 5.14% and 4.95%, respectively, in the corresponding periods in 2023, reflecting higher market interest rates between periods.

Higher levels of wholesale funding were used to fund balance sheet growth. The average balance of FHLB advances for the three and nine months ended September 30, 2024 increased by $370.4 million and $328.1 million, respectively, compared to the average balances for the same periods in 2023. Due to increases in market interest rates between periods, the average rate paid on such advances for both the three and nine months ended September 30, 2024 was 4.95%, up from 4.71% and 4.66%, respectively, for the same periods in 2023. Included in total average interest-bearing deposits were wholesale brokered deposits, which decreased by $201.5 million and $27.2 million, respectively, from the same periods in 2023. The average rate paid on wholesale brokered deposits for the three and nine months ended September 30, 2024 was 5.27% and 5.24%, respectively, up from 5.02% and 4.59%, respectively, for the same periods in 2023.

As market interest rates rose between periods, deposit balances shifted from lower-cost deposits to higher-cost deposits. Average in-market interest-bearing deposits, which excludes wholesale brokered deposits, for the three and nine months ended September 30, 2024 increased by $70.7 million and $128.9 million, respectively, from the average balances for the same periods in 2023, with increases in time deposits and interest-bearing demand deposits. The average rate paid on in-market interest-bearing deposits for the three and nine months ended September 30, 2024 was 3.06% and 3.00%, respectively, up from 2.57% and 2.18%, respectively, for the same periods in 2023. The average balance of noninterest-bearing demand deposits for the three and nine months ended September 30, 2024 decreased by $100.3 million and $129.4 million, respectively, from the average balances for the same periods in 2023.

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

The following table presents certain information on an FTE basis regarding changes in our interest income and interest expense for the period indicated. The net change attributable to both volume and rate has been allocated proportionately.

*(Dollars in thousands)*

| Interest on Interest-Earning Assets: | Three Months Ended September 30, 2024 vs. 2023 Change Due to Volume | Rate | Net Change | Nine Months Ended September 30, 2024 vs. 2023 Change Due to Volume | Rate | Net Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Cash, federal funds sold, and other short-term investments | $1,750 | $80 | $1,830 | $1,191 | $783 | $1,974 |
| Mortgage loans held for sale | (17) | 51 | 34 | 73 | 215 | 288 |
| Taxable debt securities | (457) | (20) | (477) | (1,224) | 190 | (1,034) |
| Nontaxable debt securities | 1 | — | 1 | 1 | — | 1 |
| Total securities | (456) | (20) | (476) | (1,223) | 190 | (1,033) |
| FHLB stock | 310 | 74 | 384 | 745 | 381 | 1,126 |
| Commercial real estate | 2,214 | 778 | 2,992 | 10,266 | 7,553 | 17,819 |
| Commercial & industrial | (592) | 64 | (528) | (1,089) | 1,762 | 673 |
| Total commercial | 1,622 | 842 | 2,464 | 9,177 | 9,315 | 18,492 |
| Residential real estate | (97) | 1,689 | 1,592 | 3,370 | 6,425 | 9,795 |
| Home equity | (59) | 1,099 | 1,040 | 495 | 2,919 | 3,414 |
| Other | (9) | (1) | (10) | 30 | 20 | 50 |
| Total consumer | (68) | 1,098 | 1,030 | 525 | 2,939 | 3,464 |
| Total loans | 1,457 | 3,629 | 5,086 | 13,072 | 18,679 | 31,751 |
| Total interest income | 3,044 | 3,814 | 6,858 | 13,858 | 20,248 | 34,106 |
| **Interest on Interest-Bearing Liabilities:** |  |  |  |  |  |  |
| Interest-bearing demand deposits (in-market) | 1,063 | 165 | 1,228 | 4,913 | 1,357 | 6,270 |
| NOW accounts | (30) | 16 | (14) | (117) | 108 | (9) |
| Money market accounts | (444) | 1,736 | 1,292 | (2,158) | 7,922 | 5,764 |
| Savings accounts | (28) | 583 | 555 | (107) | 1,582 | 1,475 |
| Time deposits (in-market) | 1,040 | 1,314 | 2,354 | 5,048 | 8,291 | 13,339 |
| Interest-bearing in-market deposits | 1,601 | 3,814 | 5,415 | 7,579 | 19,260 | 26,839 |
| Wholesale brokered demand deposits | — | — | — | (89) | (88) | (177) |
| Wholesale brokered time deposits | (2,656) | 375 | (2,281) | (774) | 2,713 | 1,939 |
| Wholesale brokered deposits | (2,656) | 375 | (2,281) | (863) | 2,625 | 1,762 |
| Total interest-bearing deposits | (1,055) | 4,189 | 3,134 | 6,716 | 21,885 | 28,601 |
| FHLB advances | 4,592 | 628 | 5,220 | 12,004 | 2,372 | 14,376 |
| Junior subordinated debentures | — | — | — | — | 81 | 81 |
| Total interest expense | 3,537 | 4,817 | 8,354 | 18,720 | 24,338 | 43,058 |
| Net interest income (FTE) | ($493) | ($1,003) | ($1,496) | ($4,862) | ($4,090) | ($8,952) |

### Provision for Credit Losses

The provision for credit losses results from management’s review of the adequacy of the ACL. The ACL is management’s estimate, at the reporting date, of expected lifetime credit losses and includes consideration of current forecasted economic conditions. Estimating an appropriate level of ACL necessarily involves a high degree of judgment.

The following table presents the provision for credit losses:

*(Dollars in thousands)*

| Periods ended September 30, | Three Months 2024 | 2023 | Change $% |  | Nine Months 2024 | 2023 | Change $% |  |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Provision for credit losses on loans | $300 | $900 | ($600) | (67%) | $1,700 | $2,300 | ($600) | (26%) |
| Provision for credit losses on unfunded commitments | (100) | (400) | $300 | 75 | (300) | (300) | $— | — |
| Provision for credit losses | $200 | $500 | ($300) | (60%) | $1,400 | $2,000 | ($600) | (30%) |

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

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

Net charge-offs totaled $48 thousand for the three months ended September 30, 2024, compared to net charge-offs of $30 thousand for the same period in 2023. For the nine months ended September 30, 2024, net charge-offs totaled $127 thousand, compared to net charge-offs of $114 thousand for the same period in 2023.

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

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

### Noninterest Income

Noninterest income is an important source of revenue for Washington Trust. The principal categories of noninterest income are shown in the following table:

*(Dollars in thousands)*

| Periods ended September 30, Noninterest income: | Three Months 2024 | 2023 | Change $% |  | Nine Months 2024 | 2023 | Change $% |  |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Wealth management revenues | $9,989 | $8,948 | $1,041 | 12% | $29,005 | $26,659 | $2,346 | 9% |
| Mortgage banking revenues | 2,866 | 2,108 | 758 | 36 | 8,133 | 5,106 | 3,027 | 59 |
| Card interchange fees | 1,321 | 1,267 | 54 | 4 | 3,741 | 3,667 | 74 | 2 |
| Service charges on deposit accounts | 784 | 674 | 110 | 16 | 2,238 | 2,118 | 120 | 6 |
| Loan related derivative income | 126 | 1,082 | (956) | (88) | 459 | 1,278 | (819) | (64) |
| Income from bank-owned life insurance | 770 | 710 | 60 | 8 | 2,262 | 2,754 | (492) | (18) |
| Other income | 416 | 437 | (21) | (5) | 4,257 | 1,252 | 3,005 | 240 |
| Total noninterest income | $16,272 | $15,226 | $1,046 | 7% | $50,095 | $42,834 | $7,261 | 17% |

#### Noninterest Income Analysis

Revenue from wealth management services represented 58% of total noninterest income for the nine months ended September 30, 2024, compared to 62% for the same period in 2023. A substantial portion of wealth management revenues is dependent on the value of wealth management AUA and is closely tied to the performance of the financial markets. This portion of wealth management revenues is referred to as “asset-based” and includes trust and investment management fees. Wealth management revenues also include “transaction-based” revenues that are not primarily derived from the value of assets.

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

*(Dollars in thousands)*

| Periods ended September 30, Wealth management revenues: | Three Months 2024 | 2023 | Change $% |  | Nine Months 2024 | 2023 | Change $% |  |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Asset-based revenues | $9,770 | $8,683 | $1,087 | 13% | $28,098 | $25,674 | $2,424 | 9% |
| Transaction-based revenues | 219 | 265 | (46) | (17) | 907 | 985 | (78) | (8) |
| Total wealth management revenues | $9,989 | $8,948 | $1,041 | 12% | $29,005 | $26,659 | $2,346 | 9% |

Wealth management revenues for the three and nine months ended September 30, 2024 increased by $1.0 million and $2.3 million, respectively, from the same periods in 2023, reflecting an increase in asset-based revenues. The change in asset-based revenues correlated with the change in average AUA balances. The average balance of AUA for the three and nine months ended September 30, 2024 increased by 9% and 10%, respectively, from the average balance for the same periods in 2023.

The end of period AUA balance amounted to $7.1 billion at September 30, 2024. The following table presents the changes in wealth management AUA balances:

*(Dollars in thousands)*

| Periods ended September 30, Wealth management assets under administration: | Three Months 2024 | 2023 | Nine Months 2024 | 2023 |
| --- | ---: | ---: | ---: | ---: |
| Balance at the beginning of period | $6,803,491 | $6,350,260 | $6,588,406 | $5,961,990 |
| Net investment appreciation & income | 372,027 | (154,269) | 844,800 | 391,781 |
| Net client asset outflows | (123,110) | (64,596) | (380,798) | (222,376) |
| Balance at the end of period | $7,052,408 | $6,131,395 | $7,052,408 | $6,131,395 |

Mortgage banking revenues represented 16% of total noninterest income for nine months ended September 30, 2024, compared to 12% for the same period in 2023. These revenues are dependent on mortgage origination volume and are sensitive to interest rates and the condition of housing markets. While loan origination and refinancing activities decreased in response to increases in market interest rates, a larger proportion of loans were originated for sale in 2024. The composition of mortgage banking revenues and the volume of loans sold to the secondary market are shown in the following table:

*(Dollars in thousands)*

| Periods ended September 30, Mortgage banking revenues: | Three Months 2024 | 2023 | Change $% |  | Nine Months 2024 | 2023 | Change $% |  |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Realized gains on loan sales, net (1) | $2,492 | $1,746 | $746 | 43% | $6,283 | $3,149 | $3,134 | 100% |
| Changes in fair value, net (2) | (28) | (171) | 143 | 84 | 316 | 297 | 19 | 6 |
| Loan servicing fee income, net (3) | 402 | 533 | (131) | (25) | 1,534 | 1,660 | (126) | (8) |
| Total mortgage banking revenues | $2,866 | $2,108 | $758 | 36% | $8,133 | $5,106 | $3,027 | 59% |
| Loans sold to the secondary market (4) | $120,338 | $88,621 | $31,717 | 36% | $303,034 | $182,512 | $120,522 | 66% |

(1) Includes gains on loan sales, commission income on loans originated for others, servicing right gains, and gains (losses) on forward loan commitments.

(2) Represents fair value changes on mortgage loans held for sale and forward loan commitments.

(3) Represents loan servicing fee income, net of servicing right amortization and valuation adjustments.

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

For the three and nine months ended September 30, 2024, mortgage banking revenues were up by $758 thousand and $3.0 million, respectively, compared to the same periods in 2023. The increase in mortgage banking revenues was mainly attributable to increases in both sales volume and sales yield.

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

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

Other income for the nine months ended September 30, 2024 was up by $3.0 million from the same period in 2023. Included in other income in 2024 was a net gain of $988 thousand recognized on the sale of a bank-owned operations facility in the second quarter and $2.1 million associated with a litigation settlement in the first quarter. Excluding the impact of these items, other income for the nine months ended September 30, 2024 was down modestly by $83 thousand from the same period in 2023.

### Noninterest Expense

The following table presents noninterest expense comparisons:

*(Dollars in thousands)*

| Periods ended September 30, Noninterest expense: | Three Months 2024 | 2023 | Change $% |  | Nine Months 2024 | 2023 | Change $% |  |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Salaries and employee benefits | $21,350 | $21,622 | ($272) | (1%) | $64,385 | $63,994 | $391 | 1% |
| Outsourced services | 4,185 | 3,737 | 448 | 12 | 12,061 | 10,854 | 1,207 | 11 |
| Net occupancy | 2,399 | 2,387 | 12 | 1 | 7,357 | 7,240 | 117 | 2 |
| Equipment | 924 | 1,107 | (183) | (17) | 2,902 | 3,185 | (283) | (9) |
| Legal, audit, and professional fees | 836 | 1,058 | (222) | (21) | 2,283 | 2,932 | (649) | (22) |
| FDIC deposit insurance costs | 1,402 | 1,185 | 217 | 18 | 4,247 | 3,428 | 819 | 24 |
| Advertising and promotion | 857 | 789 | 68 | 9 | 2,066 | 1,624 | 442 | 27 |
| Amortization of intangibles | 206 | 211 | (5) | (2) | 622 | 635 | (13) | (2) |
| Other | 2,345 | 2,294 | 51 | 2 | 6,854 | 7,078 | (224) | (3) |
| Total noninterest expense | $34,504 | $34,390 | $114 | —% | $102,777 | $100,970 | $1,807 | 2% |

#### Noninterest Expense Analysis

Salaries and employee benefits expense, the largest component of noninterest expense, for the three and nine months ended September 30, 2024 decreased by $272 thousand and increased by $391 thousand respectively, compared to the same periods in 2023. The changes included the impact of adjustments to performance-based compensation accruals, merit increases, and lower staffing levels.

Outsourced services expense for the three and nine months ended September 30, 2024 increased by $448 thousand and $1.2 million, respectively, compared to the same periods in the prior year. The increases reflected changes to and expansion of services, including software as a service, that are provided by third-party vendors.

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

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

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

### Income Taxes

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

*(Dollars in thousands)*

| Periods ended September 30, | Three Months 2024 | 2023 | Nine Months 2024 | 2023 |
| --- | ---: | ---: | ---: | ---: |
| Income tax expense | $2,849 | $2,926 | $8,698 | $9,079 |
| Effective income tax rate | 20.6% | 20.8% | 21.0% | 20.5% |
| Blended statutory rate | 25.5% | 24.0% | 25.5% | 24.0% |

The effective income tax rates in the table above differed from the blended statutory rates, primarily due to tax benefits related to income from BOLI, federal tax credits, and tax-exempt income. The blended statutory rates include the federal income tax rate of 21% and a blended state income tax rate net of a federal tax benefit. The increase in the blended statutory rates in the table above reflect the impact of a fourth quarter 2023 Massachusetts tax law change.

The Corporation’s net deferred tax assets amounted to $46.0 million at September 30, 2024, compared to $53.8 million at December 31, 2023. This decline largely reflected decreases in deferred tax assets associated with increases in fair value of securities available for sale due to changes in market interest rates.

### Segment Reporting

The Corporation manages its operations through two reportable business segments, consisting of Commercial Banking and Wealth Management Services. See Note 13 to the Unaudited Consolidated Financial Statements for additional disclosure related to business segments.

#### Commercial Banking

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

*(Dollars in thousands)*

| Periods ended September 30, | Three Months 2024 | 2023 | Change $% |  | Nine Months 2024 | 2023 | Change $% |  |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Net interest income | $32,262 | $33,741 | ($1,479) | (4%) | $95,512 | $104,407 | ($8,895) | (9%) |
| Provision for credit losses | 200 | 500 | (300) | (60) | 1,400 | 2,000 | (600) | (30) |
| Net interest income after provision for credit losses | 32,062 | 33,241 | (1,179) | (4) | 94,112 | 102,407 | (8,295) | (8) |
| Noninterest income | 6,177 | 6,105 | 72 | 1 | 18,400 | 15,679 | 2,721 | 17 |
| Noninterest expense | 27,401 | 26,611 | 790 | 3 | 81,353 | 77,383 | 3,970 | 5 |
| Income before income taxes | 10,838 | 12,735 | (1,897) | (15) | 31,159 | 40,703 | (9,544) | (23) |
| Income tax expense | 2,193 | 2,621 | (428) | (16) | 6,441 | 8,226 | (1,785) | (22) |
| Net income | $8,645 | $10,114 | ($1,469) | (15%) | $24,718 | $32,477 | ($7,759) | (24%) |

Net interest income for the Commercial Banking segment for the three and nine months ended September 30, 2024 decreased by $1.5 million and $8.9 million, respectively, from the same periods in 2023. Net interest income was adversely impacted by higher rates paid on, and increases in, average interest-bearing liability balances, which offset the benefit of higher yields on, and increases in, average interest-earning asset balances.

The provision for credit losses for the three and nine months ended September 30, 2024 decreased by $300 thousand and $600 thousand, respectively from the same periods in 2023. See additional discussion under the caption “Provision for Credit Losses” above.

Noninterest income derived from the Commercial Banking segment for the three and nine months ended September 30, 2024 was up by $72 thousand and $2.7 million, respectively, from the comparable periods in 2023. The year-to-date increase in Commercial Banking noninterest income reflected higher mortgage banking revenues and a net gain recognized in the second quarter of 2024 on the sale of a bank-owned operations facility. These were partially offset by lower income from loan related derivatives and BOLI. See additional discussion under the caption “Noninterest Income” above.

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

#### Wealth Management Services

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

*(Dollars in thousands)*

| Periods ended September 30, | Three Months 2024 | 2023 | Change $% |  | Nine Months 2024 | 2023 | Change $% |  |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Net interest income | $— | $10 | ($10) | (100%) | $— | $37 | ($37) | (100%) |
| Noninterest income | 10,095 | 9,121 | 974 | 11 | 31,695 | 27,155 | 4,540 | 17 |
| Noninterest expense | 7,103 | 7,779 | (676) | (9) | 21,424 | 23,587 | (2,163) | (9) |
| Income before income taxes | 2,992 | 1,352 | 1,640 | 121 | 10,271 | 3,605 | 6,666 | 185 |
| Income tax expense | 656 | 305 | 351 | 115 | 2,257 | 853 | 1,404 | 165 |
| Net income | $2,336 | $1,047 | $1,289 | 123% | $8,014 | $2,752 | $5,262 | 191% |

For the three and nine months ended September 30, 2024, noninterest income derived from the Wealth Management Services segment increased by $974 thousand and $4.5 million, respectively, from the same periods in 2023, reflecting an increase in asset-based revenues. The year-to-date increase also included income of $2.1 million associated with a litigation settlement in the first quarter of 2024. See further discussion under the caption “Noninterest Income” above.

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

### Financial Condition

### Summary

The following table presents selected financial condition data:

*(Dollars in thousands)*

|  | September 30, 2024 | December 31, 2023 | Change $% |  |
| --- | ---: | ---: | ---: | ---: |
| Cash and due from banks | $206,971 | $86,824 | $120,147 | 138% |
| Total securities | 973,266 | 1,000,380 | (27,114) | (3) |
| Total loans | 5,514,870 | 5,647,706 | (132,836) | (2) |
| Allowance for credit losses on loans | 42,630 | 41,057 | 1,573 | 4 |
| Total assets | 7,141,571 | 7,202,847 | (61,276) | (1) |
| Total deposits | 5,171,890 | 5,348,160 | (176,270) | (3) |
| FHLB advances | 1,300,000 | 1,190,000 | 110,000 | 9 |
| Total shareholders’ equity | 502,229 | 472,686 | 29,543 | 6 |

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

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

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

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

Total deposit balances decreased by $176.3 million from the end of 2023, reflecting a decline in wholesale brokered time deposits that was partially offset by in-market deposit growth. FHLB advances increased by $110.0 million, or 9%, from December 31, 2023.

Shareholders’ equity increased by $29.5 million, or 6%. Net income and an increase in the AOCL component of shareholders' equity were partially offset by dividend declarations.

### Securities

Investment security activity is monitored by the Investment Committee, the members of which also sit on the ALCO. Asset and liability management objectives are the primary influence on the Corporation’s investment activities. However, the Corporation also recognizes that there are certain specific risks inherent in investment activities. The securities portfolio is managed in accordance with regulatory guidelines and established internal corporate investment policies that provide limitations on specific risk factors such as market risk, credit risk and concentration, liquidity risk, and operational risk to help monitor risks associated with investing in securities. Reports on the activities conducted by the Investment Committee and the ALCO are presented to the Board of Directors on a regular basis.

The Corporation’s securities portfolio is managed to generate interest income, to implement interest rate risk management strategies, and to provide a readily available source of liquidity for balance sheet management. Securities are designated as either available for sale, held to maturity or trading at the time of purchase. The Corporation does not maintain a portfolio of trading securities and does not have securities designated as held to maturity. Securities available for sale may be sold in response to changes in market conditions, prepayment risk, rate fluctuations, liquidity, or capital requirements. Debt securities available for sale are reported at fair value, with any unrealized gains and losses excluded from earnings and reported as a separate component of shareholders’ equity, net of tax, until realized.

#### Determination of Fair Value

The Corporation uses an independent pricing service to obtain quoted prices. The prices provided by the independent pricing service are generally based on observable market data in active markets. The determination of whether markets are active or inactive is based upon the level of trading activity for a particular security class. Management reviews the independent pricing service’s documentation to gain an understanding of the appropriateness of the pricing methodologies. Management also reviews the prices provided by the independent pricing service for reasonableness based upon current trading levels for similar securities. If the prices appear unusual, they are re-examined and the value is either confirmed or revised. In addition, management periodically performs independent price tests of securities to ensure proper valuation and to verify our understanding of how securities are priced. As of September 30, 2024 and December 31, 2023, management did not make any adjustments to the prices provided by the pricing service.

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

See Notes 3 and 7 to the Unaudited Consolidated Financial Statements for additional information regarding the determination of fair value of investment securities.

#### Securities Portfolio

The carrying amounts of securities held are as follows:

*(Dollars in thousands)*

| Available for Sale Debt Securities: | September 30, 2024 Amount | % of Total | December 31, 2023 Amount | % of Total |
| --- | ---: | ---: | ---: | ---: |
| Obligations of U.S. government-sponsored enterprises | $231,944 | 24% | $225,742 | 23% |
| Mortgage-backed securities issued by U.S. government agencies and U.S. government-sponsored enterprises | 718,907 | 74 | 753,956 | 75 |
| Obligations of states and political subdivisions | 664 | — | — | — |
| Individual name issuer trust preferred debt securities | 9,193 | 1 | 8,793 | 1 |
| Corporate bonds | 12,558 | 1 | 11,889 | 1 |
| Total available for sale debt securities | $973,266 | 100% | $1,000,380 | 100% |

The securities portfolio represented 14% of total assets at both September 30, 2024 and December 31, 2023. The largest component of the securities portfolio is mortgage-backed securities, all of which are issued by U.S. government agencies or U.S. government-sponsored enterprises.

The securities portfolio decreased by $27.1 million, or 3%, from the end of 2023. This decrease included $54.1 million of routine pay-downs on mortgage-backed securities and an increase of $26.9 million (pre-tax) in the fair value of available for sale securities.

As of September 30, 2024, the carrying amount of available for sale debt securities included net unrealized losses of $125.4 million, compared to net unrealized losses of $152.2 million as of December 31, 2023. The net unrealized losses were primarily concentrated in obligations of U.S. government agencies and U.S. government-sponsored enterprises, including mortgage-backed securities, and primarily attributable to relative changes in market interest rates since the time of purchase. See Note 3 to the Unaudited Consolidated Financial Statements for additional information.

### Loans

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

The following is a summary of loans:

*(Dollars in thousands)*

| Commercial: | September 30, 2024 Amount | % of Total | December 31, 2023 Amount | % of Total |
| --- | ---: | ---: | ---: | ---: |
| Commercial real estate | $2,102,091 | 38% | $2,106,359 | 37% |
| Commercial & industrial | 566,279 | 10 | 605,072 | 11 |
| Total commercial | 2,668,370 | 48 | 2,711,431 | 48 |
| **Residential Real Estate:** |  |  |  |  |
| Residential real estate (1) | 2,529,397 | 46 | 2,604,478 | 46 |
| **Consumer:** |  |  |  |  |
| Home equity | 299,379 | 5 | 312,594 | 6 |
| Other | 17,724 | 1 | 19,203 | — |
| Total consumer | 317,103 | 6 | 331,797 | 6 |
| Total loans | $5,514,870 | 100% | $5,647,706 | 100% |

(1) Includes a $19 thousand negative basis adjustment associated with fair value hedges at September 30, 2024. See Note 6 to the Unaudited Consolidated Financial Statements for additional disclosure.

#### Commercial Loans

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

In making commercial loans, we may occasionally solicit the participation of other banks. The Bank also participates in commercial loans originated by other banks. In such cases, these loans are individually underwritten by us using standards similar to those employed for our self-originated loans. Our participation in commercial loans originated by other banks amounted to $679.2 million and $652.7 million, respectively, at September 30, 2024 and December 31, 2023. Our participation in commercial loans originated by other banks also includes shared national credits. Shared national credits are defined as participation in loans or loan commitments of at least $100.0 million that are shared by three or more banks.

Commercial loans fall into two main categories, CRE and C&I loans. CRE loans consist of commercial mortgages secured by non-owner occupied real property where the primary source of repayment is derived from rental income associated with the property or the proceeds of the sale, refinancing or permanent financing of the property. CRE loans also include construction loans made to businesses for land development or the on-site construction of industrial, commercial, or residential buildings. C&I loans primarily provide working capital, equipment financing, and financing for other business-related purposes. C&I loans are frequently collateralized by equipment, inventory, accounts receivable, and/or general business assets. A portion of the Bank’s C&I loans is also collateralized by owner occupied real estate. C&I loans also include tax-exempt loans made to states and political subdivisions, as well as industrial development or revenue bonds issued through quasi-public corporations for the benefit of a private or non-profit entity where that entity rather than the governmental entity is obligated to pay the debt service.

From time to time, commercial loans may be reclassified between CRE and C&I categories, reflecting underlying changes in loans to/from owner occupied from/to non-owner occupied. Additionally, certain construction loans may be reclassified to C&I when the construction phase is complete and the loan transitions to permanent financing.

#### Commercial Real Estate Loans

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

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

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

Shared national credit balances outstanding included in the CRE loan portfolio at September 30, 2024 and December 31, 2023, totaled $82.8 million and $47.4 million, respectively. At September 30, 2024 and December 31, 2023, balances of $62.3 million and $29.0 million, respectively, were included in the pass-rated category of commercial loan credit quality and balances of $20.5 million and $18.4 million, respectively, were included in the classified category. All of these loans were current with respect to contractual payment terms at both dates.

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

*(Dollars in thousands)*

|  | September 30, 2024 Outstanding Balance | % of Total | December 31, 2023 Outstanding Balance | % of Total |
| --- | ---: | ---: | ---: | ---: |
| Connecticut | $826,212 | 39% | $815,975 | 39% |
| Massachusetts | 650,891 | 31 | 645,736 | 31 |
| Rhode Island | 434,111 | 21 | 430,899 | 20 |
| Subtotal | 1,911,214 | 91 | 1,892,610 | 90 |
| All other states | 190,877 | 9 | 213,749 | 10 |
| Total | $2,102,091 | 100% | $2,106,359 | 100% |

-58-

Management considers the CRE portfolio to be well-diversified with loans across several property types. The following table presents a summary of CRE loans by property type segmentation:

*(Dollars in thousands)*

| CRE Portfolio Segmentation: | September 30, 2024 Outstanding Balance (1) | % of Total | December 31, 2023 Outstanding Balance (1) | % of Total |
| --- | ---: | ---: | ---: | ---: |
| Multi-family | $540,792 | 26% | $546,694 | 26% |
| Retail | 428,217 | 20 | 434,913 | 21 |
| Industrial and warehouse | 337,950 | 16 | 307,987 | 15 |
| Office | 296,545 | 14 | 284,199 | 13 |
| Hospitality | 203,972 | 10 | 235,015 | 11 |
| Healthcare facility | 202,854 | 10 | 175,490 | 8 |
| Mixed-use | 29,231 | 1 | 49,079 | 2 |
| Other | 62,530 | 3 | 72,982 | 4 |
| Total CRE loans | $2,102,091 | 100% | $2,106,359 | 100% |
| Average CRE loan size (2) | $5,192 |  | $5,366 |  |
| Largest individual CRE loan outstanding | $65,475 |  | $65,458 |  |

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

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

Multi-family totaled $540.8 million as of September 30, 2024, and is our largest single CRE segment, representing 26% of the total CRE portfolio. This segment includes non-owner occupied residential properties consisting of four or more units that are rented to tenants. At September 30, 2024, the credit quality of the multi-family segment was 100% pass-rated. Also, there were no nonaccrual loans and all loans were current with respect to payment terms at September 30, 2024.

In 2024, there continues to be heightened focus in the banking industry on the CRE office sector, given the continuation of remote work and an increase in vacancies across the office market. As of September 30, 2024, Washington Trust’s CRE office loan segment totaled $296.5 million, or 5% of total loans and 14% of the total CRE loans. The loans are secured by non-owner occupied office properties, including medical office and lab space, located in our primary lending market area of southern New England - Connecticut, Massachusetts, and Rhode Island. Furthermore, approximately 68% of the CRE office segment balance of $296.5 million is secured by properties located in suburban areas. As of September 30, 2024, 96% of the CRE office segment was current with respect to payment terms, and 94% of the CRE office segment was on accruing status. Additionally, the credit quality of the CRE office loan segment was 84% pass-rated, 2% special mention-rated, and 14% classified as of September 30, 2024.

#### Commercial and Industrial Loans

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

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

Shared national credit balances outstanding included in the C&I loan portfolio totaled $71.9 million and $66.3 million, respectively, at September 30, 2024 and December 31, 2023. All of these loans were included in the pass-rated category of commercial loan credit quality and were current with respect to contractual payment terms at both dates.

Management considers the C&I portfolio to be well-diversified with loans across several industries. The following table presents a summary of C&I loan by industry segmentation:

*(Dollars in thousands)*

| C&I Portfolio Segmentation: | September 30, 2024 Outstanding Balance (1) | % of Total | December 31, 2023 Outstanding Balance (1) | % of Total |
| --- | ---: | ---: | ---: | ---: |
| Healthcare and social assistance | $131,120 | 23% | $166,490 | 28% |
| Real estate rental and leasing | 69,069 | 12 | 70,540 | 12 |
| Transportation and warehousing | 56,620 | 10 | 63,789 | 11 |
| Manufacturing | 48,239 | 9 | 54,905 | 9 |
| Educational services | 42,860 | 8 | 41,968 | 7 |
| Retail trade | 41,232 | 7 | 43,746 | 7 |
| Finance and insurance | 25,362 | 4 | 33,617 | 6 |
| Information | 22,168 | 4 | 22,674 | 4 |
| Arts, entertainment, and recreation | 20,557 | 4 | 22,249 | 4 |
| Accommodation and food services | 11,693 | 2 | 13,502 | 2 |
| Professional, scientific, and technical services | 10,729 | 2 | 7,998 | 1 |
| Public administration | 2,570 | — | 3,019 | — |
| Other | 84,060 | 15 | 60,575 | 9 |
| Total C&I loans | $566,279 | 100% | $605,072 | 100% |
| Average C&I loan size (2) | $832 |  | $844 |  |
| Largest individual C&I loan outstanding | $25,476 |  | $25,324 |  |

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

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

Healthcare and social assistance totaled $131.1 million as of September 30, 2024, and is our largest single C&I segment, representing 23% of the total C&I portfolio. This segment includes specialty medical practices, elder services, and community and mental health centers. At September 30, 2024, the credit quality of the healthcare and social assistance segment was 86% pass-rated and 14% was special mention. Also, there were no nonaccrual loans and all loans were current with respect to payment terms at September 30, 2024.

#### Residential Real Estate Loans

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

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

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

*(Dollars in thousands)*

|  | September 30, 2024 Amount | % of Total | December 31, 2023 Amount | % of Total |
| --- | ---: | ---: | ---: | ---: |
| Massachusetts | $1,857,706 | 74% | $1,928,206 | 74% |
| Rhode Island | 488,094 | 19 | 481,289 | 19 |
| Connecticut | 155,858 | 6 | 165,933 | 6 |
| Subtotal | 2,501,658 | 99 | 2,575,428 | 99 |
| All other states | 27,739 | 1 | 29,050 | 1 |
| Total (1) | $2,529,397 | 100% | $2,604,478 | 100% |

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

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.

The table below presents residential real estate loan origination activity:

*(Dollars in thousands)*

| Periods ended September 30, | Three Months 2024 Amount | % of Total | 2023 Amount | % of Total | Nine Months 2024 Amount | % of Total | 2023 Amount | % of Total |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Originations for retention in portfolio (1) | $26,317 | 19% | $161,603 | 67% | $77,311 | 20% | $420,065 | 70% |
| Originations for sale to the secondary market (2) | 115,117 | 81 | 78,339 | 33 | 303,943 | 80 | 184,097 | 30 |
| Total | $141,434 | 100% | $239,942 | 100% | $381,254 | 100% | $604,162 | 100% |

(1) Includes the full commitment amount of homeowner construction loans.

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

Residential real estate loan origination and refinancing activities decreased in response to increases in market interest rates and changes in the housing markets. The proportion of residential real estate loans originated for portfolio has decreased for balance sheet management purposes.

The table below presents residential real estate loan sales activity:

*(Dollars in thousands)*

| Periods ended September 30, | Three Months 2024 Amount | % of Total | 2023 Amount | % of Total | Nine Months 2024 Amount | % of Total | 2023 Amount | % of Total |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Loans sold with servicing rights retained | $17,881 | 15% | $34,046 | 38% | $66,508 | 22% | $79,887 | 44% |
| Loans sold with servicing rights released (1) | 102,457 | 85 | 54,575 | 62 | 236,526 | 78 | 102,625 | 56 |
| Total | $120,338 | 100% | $88,621 | 100% | $303,034 | 100% | $182,512 | 100% |

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

We have active relationships with various secondary market investors that purchase residential real estate loans we originate. In addition to managing our interest rate risk position and earnings through the sale of these loans, we are also able to manage our liquidity position through timely sales of residential real estate loans to the secondary market.

Loans are sold with servicing retained or released. Loans sold with servicing rights retained result in the capitalization of servicing rights. Loan servicing rights are included in other assets and are subsequently amortized as an offset to mortgage banking revenues over the estimated period of servicing. The net balance of capitalized servicing rights amounted to $7.8 million and $8.5 million, respectively, as of September 30, 2024 and December 31, 2023. The balance of residential mortgage loans serviced for others, which are not included in the Unaudited Consolidated Balance Sheets, amounted to $1.4 billion and $1.5 billion, respectively, as of September 30, 2024 and December 31, 2023.

#### Consumer Loans

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

Consumer loans include home equity loans and lines of credit and personal installment loans. Home equity lines of credit and home equity loans represented 94% of the total consumer portfolio at September 30, 2024. Our home equity line and home equity loan origination activities are conducted primarily in southern New England. The Bank estimates that approximately 50% of the combined home equity lines of credit and home equity loan balances are first lien positions or subordinate to other Washington Trust mortgages.

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

### Asset Quality

The Corporation continually monitors the asset quality of the loan portfolio using all available information.

In the course of resolving problem loans, the Corporation may choose to modify the contractual terms of certain loans. A loan that has been modified is considered a TLM when the modification is made to a borrower experiencing financial difficulty and the modification has a direct impact to the contractual cash flows. The decision to modify a loan, versus aggressively enforcing the collection of the loan, may benefit the Corporation by increasing the ultimate probability of collection. See Note 4 to the Unaudited Consolidated Financial Statements for additional information regarding TLMs.

#### Nonperforming Assets

Nonperforming assets include nonaccrual loans and OREO.

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

*(Dollars in thousands)*

| Commercial: | September 30, 2024 | December 31, 2023 |
| --- | ---: | ---: |
| Commercial real estate | $18,259 | $32,827 |
| Commercial & industrial | 616 | 682 |
| Total commercial | 18,875 | 33,509 |
| **Residential Real Estate:** |  |  |
| Residential real estate | 10,517 | 9,626 |
| **Consumer:** |  |  |
| Home equity | 1,750 | 1,483 |
| Other | — | — |
| Total consumer | 1,750 | 1,483 |
| Total nonaccrual loans | 31,142 | 44,618 |
| OREO, net | — | 683 |
| Total nonperforming assets | $31,142 | $45,301 |
| Nonperforming assets to total assets | 0.44% | 0.63% |
| Nonperforming loans to total loans | 0.56% | 0.79% |
| Total past due loans to total loans | 0.37% | 0.20% |
| Allowance for credit losses on loans to total loans | 0.77% | 0.73% |
| Allowance for credit losses on loans to nonaccrual loans | 136.89% | 92.02% |
| Accruing loans 90 days or more past due | $— | $— |

#### Nonaccrual Loans

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

The following table presents the activity in nonaccrual loans:

*(Dollars in thousands)*

| For the periods ended September 30, | Three Months 2024 | 2023 | Nine Months 2024 | 2023 |
| --- | ---: | ---: | ---: | ---: |
| Balance at beginning of period | $30,479 | $10,407 | $44,618 | $12,846 |
| Additions to nonaccrual status | 1,880 | 25,088 | 2,867 | 28,258 |
| Loans returned to accruing status | (268) | (197) | (14,401) | (1,636) |
| Loans charged-off | (59) | (44) | (182) | (157) |
| Loans transferred to other real estate owned | — | — | — | (683) |
| Payments, payoffs, and other changes | (890) | (1,602) | (1,760) | (4,976) |
| Balance at end of period | $31,142 | $33,652 | $31,142 | $33,652 |

The following table presents additional detail on nonaccrual loans:

*(Dollars in thousands)*

| Commercial: | September 30, 2024 Current | Days Past Due 30-89 | 90 or More | Total Nonaccrual | % (1) | December 31, 2023 Current | Days Past Due 30-89 | 90 or More | Total Nonaccrual | % (1) |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Commercial real estate | $7,783 | $10,476 | $— | $18,259 | 0.87% | $32,827 | $— | $— | $32,827 | 1.56% |
| Commercial & industrial | 616 | — | — | 616 | 0.11 | 682 | — | — | 682 | 0.11 |
| Total commercial | 8,399 | 10,476 | — | 18,875 | 0.71 | 33,509 | — | — | 33,509 | 1.24 |
| **Residential Real Estate:** |  |  |  |  |  |  |  |  |  |  |
| Residential real estate | 4,306 | 4,032 | 2,179 | 10,517 | 0.42 | 4,105 | 3,512 | 2,009 | 9,626 | 0.37 |
| **Consumer:** |  |  |  |  |  |  |  |  |  |  |
| Home equity | 319 | 684 | 747 | 1,750 | 0.58 | 127 | 621 | 735 | 1,483 | 0.47 |
| Other | — | — | — | — | — | — | — | — | — | — |
| Total consumer | 319 | 684 | 747 | 1,750 | 0.55 | 127 | 621 | 735 | 1,483 | 0.45 |
| Total nonaccrual loans | $13,024 | $15,192 | $2,926 | $31,142 | 0.56% | $37,741 | $4,133 | $2,744 | $44,618 | 0.79% |

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

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

As of September 30, 2024, the composition of nonaccrual loans was 61% commercial and 39% residential and consumer. This compared to 75% commercial and 25% residential and consumer as of December 31, 2023.

Total nonaccrual loans decreased by $13.5 million from the end of 2023, reflecting a decline in nonaccrual commercial real estate loans. Nonaccrual commercial real estate loans decreased by $14.6 million from the balance at December 31, 2023, primarily due to one loan secured by a healthcare facility that returned to accruing status in the first quarter of 2024.

As of September 30, 2024, the balance of nonaccrual commercial real estate loans consisted of two collateral dependent loans. One loan for $10.5 million is secured by an office property in Massachusetts and is past due, as the loan matured in the third quarter of 2024. The other loan for $7.8 million is secured by an office property in Connecticut, is current with respect to payment terms and was modified as a TLM in 2023. These loans were individually assessed for credit impairment and based on the estimated fair value of the collateral less estimated costs to sell (when appropriate), specific reserves of $500 thousand were deemed necessary at September 30, 2024.

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

2024 were four loans purchased for portfolio and serviced by others amounting to $933 thousand. Management monitors the collection efforts of its third-party servicers as part of its assessment of the collectability of nonperforming loans.

#### Past Due Loans

The following table presents past due loans by category:

*(Dollars in thousands)*

| Commercial: | September 30, 2024 Amount | % (1) | December 31, 2023 Amount | % (1) |
| --- | ---: | ---: | ---: | ---: |
| Commercial real estate | $10,476 | 0.50% | $— | —% |
| Commercial & industrial | 3 | — | 10 | — |
| Total commercial | 10,479 | 0.39 | 10 | — |
| **Residential Real Estate:** |  |  |  |  |
| Residential real estate | 6,947 | 0.27 | 8,116 | 0.31 |
| **Consumer:** |  |  |  |  |
| Home equity | 2,800 | 0.94 | 3,196 | 1.02 |
| Other | 75 | 0.42 | 23 | 0.12 |
| Total consumer | 2,875 | 0.91 | 3,219 | 0.97 |
| Total past due loans | $20,301 | 0.37% | $11,345 | 0.20% |

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

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

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

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

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

### Potential Problem Loans

The Corporation classifies certain loans as “substandard,” “doubtful,” or “loss” based on criteria consistent with guidelines provided by banking regulators. Potential problem loans include classified accruing commercial loans that were less than 90 days past due at September 30, 2024 and other loans for which known information about possible credit problems of the related borrowers causes management to have doubts as to the ability of such borrowers to comply with the present loan repayment terms and which may result in disclosure of such loans as nonperforming at some time in the future. Potential problem loans are not included in the amounts of nonaccrual loans presented above.

Potential problem loans are assessed for loss exposure using the methods described in Note 4 to the Unaudited Consolidated Financial Statements under the caption “Credit Quality Indicators.” Management cannot predict the extent to which economic conditions or other factors may impact borrowers and the potential problem loans. Accordingly, there can be no assurance that other loans will not become 90 days or more past due, be placed on nonaccrual, become modified, or require an increased allowance coverage and provision for credit losses on loans.

Management has identified $25.1 million in potential problem loans at September 30, 2024, compared to $22.9 million at December 31, 2023. The balances of potential problem loans largely consisted of two CRE loans secured by office properties in Massachusetts and Connecticut. At September 30, 2024 and December 31, 2023, these loans were current with respect to payment terms.

### Allowance for Credit Losses on Loans

The ACL on loans is management’s estimate of expected lifetime credit losses on loans carried at amortized cost. The ACL on loans is established through a provision for credit losses recognized in earnings. The ACL on loans is reduced by charge-offs on loans and is increased by recoveries of amounts previously charged off.

The Corporation’s general practice is to identify problem credits early and recognize full or partial charge-offs as promptly as practicable when it is determined that the collection of loan principal is unlikely. Full or partial charge-offs on collateral dependent individually analyzed loans are recognized when the collateral is deemed to be insufficient to support the carrying value of the loan. The Corporation does not recognize a recovery when new appraisals indicate a subsequent increase in value.

Appraisals are generally obtained with values determined on an “as is” basis from independent appraisal firms for real estate collateral dependent commercial loans in the process of collection or when warranted by other deterioration in the borrower’s credit status. New appraisals are generally obtained for nonaccrual loans or when management believes it is warranted. The Corporation has continued to maintain appropriate professional standards regarding the professional qualifications of appraisers and has an internal review process to monitor the quality of appraisals.

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

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

*(Dollars in thousands)*

|  | September 30, 2024 Loans | Related Allowance | Allowance / Loans | December 31, 2023 Loans | Related Allowance | Allowance / Loans |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Individually analyzed loans | $19,903 | $500 | 2.51% | $34,640 | $97 | 0.28% |
| Pooled (collectively evaluated) loans (1) | 5,494,986 | 42,130 | 0.77 | 5,613,066 | 40,960 | 0.73 |
| Total | $5,514,889 | $42,630 | 0.77% | $5,647,706 | $41,057 | 0.73% |

(1) The amount reported for pooled loans excludes a $19 thousand negative basis adjustment associated with fair value hedges at September 30, 2024. See Note 6 to the Unaudited Consolidated Financial Statements for additional disclosure.

Management employs a process and methodology to estimate the ACL on loans that evaluates both quantitative and qualitative factors. The methodology for evaluating quantitative factors consists of two basic components. The first component involves pooling loans into portfolio segments for loans that share similar risk characteristics. The second component involves individually analyzed loans that do not share similar risk characteristics with loans that are pooled into portfolio segments.

The ACL for individually analyzed loans is measured using a DCF method based upon the loan’s contractual effective interest rate, or at the loan’s observable market price, or, if the loan was collateral dependent, at the fair value of the collateral.

The ACL for pooled loans is measured utilizing a DCF methodology to estimate credit losses for each pooled portfolio segment. The methodology incorporates a probability of default and loss given default framework. Loss given default is estimated based on historical credit loss experience. Probability of default is estimated using a regression model that incorporates econometric factors. Management utilizes forecasted econometric factors with a one-year reasonable and supportable forecast period and one-year straight-line reversion period in order to estimate the probability of default for each loan portfolio segment. The DCF methodology combines the probability of default, the loss given default, prepayment speeds, and remaining life of the loan to estimate a reserve for each loan. The sum of all the loan level reserves are aggregated for each portfolio segment and a loss rate factor is derived. Quantitative loss factors for pooled loans are also supplemented by certain qualitative risk factors reflecting management’s view of how losses may vary from those represented by quantitative loss rates.

The ACL on loans amounted to $42.6 million at September 30, 2024, up by $1.6 million, or 4%, from the balance at December 31, 2023. The ACL on loans as a percentage of total loans, also known as the reserve coverage ratio, was 0.77% at September 30, 2024, compared to 0.73% at December 31, 2023.

The Corporation recorded a provision for credit losses on loans of $300 thousand and $1.7 million, respectively, for the three and nine months ended September 30, 2024. The provision for credit losses in 2024 largely reflected continued, yet subsiding, slowdown of loan prepayment speeds and modest specific reserve allocations on an individually analyzed nonaccrual commercial loan, partially offset by a decline in loan balances and relatively stable to improving forecasted economic conditions.

Net charge-offs totaled $48 thousand for the three months ended September 30, 2024, compared to $30 thousand for the same period in 2023. For the nine months ended September 30, 2024, net charge-offs totaled $127 thousand, compared to net charge-offs of $114 thousand for the same period in 2023.

The ACL on loans is an estimate and ultimate losses may vary from management’s estimate. Deteriorating conditions or assumptions could lead to further increases in the ACL on loans; conversely, improving conditions or assumptions could lead to further reductions in the ACL on loans.

The following table presents the allocation of the ACL on loans by portfolio segment. The total ACL on loans is available to absorb losses from any segment of the loan portfolio.

*(Dollars in thousands)*

| Commercial: | September 30, 2024 Allocated ACL | ACL to Loans | Loans to Total Portfolio (1) | December 31, 2023 Allocated ACL | ACL to Loans | Loans to Total Portfolio (1) |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Commercial real estate | $25,758 | 1.23% | 38% | $24,144 | 1.15% | 37% |
| Commercial & industrial | 7,403 | 1.31 | 10 | 8,088 | 1.34 | 11 |
| Total commercial | 33,161 | 1.24 | 48 | 32,232 | 1.19 | 48 |
| **Residential Real Estate:** |  |  |  |  |  |  |
| Residential real estate | 8,063 | 0.32 | 46 | 7,403 | 0.28 | 46 |
| **Consumer:** |  |  |  |  |  |  |
| Home equity | 1,086 | 0.36 | 5 | 1,048 | 0.34 | 6 |
| Other | 320 | 1.81 | 1 | 374 | 1.95 | — |
| Total consumer | 1,406 | 0.44 | 6 | 1,422 | 0.43 | 6 |
| Total ACL on loans at end of period | $42,630 | 0.77% | 100% | $41,057 | 0.73% | 100% |

(1) Percentage of loans outstanding in respective class to total loans outstanding.

### Sources of Funds

Our sources of funds include in-market deposits, wholesale brokered deposits, FHLB advances, other borrowings, and proceeds from the sales, maturities, and payments of loans and investment securities. The Corporation uses funds to originate and purchase loans, purchase investment securities, conduct operations, expand the branch network, and pay dividends to shareholders.

### Deposits

The Corporation offers a wide variety of deposit products to consumer and business customers. Deposits provide an important source of funding for the Bank, as well as an ongoing stream of fee revenue.

The Bank is a participant in the DDM program, ICS program, and the CDARS program. The Bank uses these deposit sweep services to place customer and client funds into interest-bearing demand accounts, money market accounts, and/or time deposits issued by other participating banks. Customer and client funds are placed at one or more participating banks to ensure that each deposit customer is eligible for the full amount of FDIC insurance. As a program participant, we receive reciprocal amounts of deposits from other participating banks. We consider these reciprocal deposit balances to be in-market deposits as distinguished from traditional wholesale brokered deposits.

The following table presents a summary of deposits:

*(Dollars in thousands)*

|  | September 30, 2024 Amount | % of Total | December 31, 2023 Amount | % of Total | Change in Balance $% |  |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Noninterest-bearing demand deposits | $665,706 | 13% | $693,746 | 13% | ($28,040) | (4%) |
| Interest-bearing demand deposits | 596,319 | 12 | 504,959 | 9 | 91,360 | 18 |
| NOW accounts | 685,531 | 13 | 767,036 | 14 | (81,505) | (11) |
| Money market accounts | 1,146,426 | 22 | 1,096,959 | 21 | 49,467 | 5 |
| Savings accounts | 490,285 | 9 | 497,223 | 9 | (6,938) | (1) |
| Time deposits (in-market) | 1,207,626 | 24 | 1,134,187 | 22 | 73,439 | 6 |
| Total in-market deposits | 4,791,893 | 93 | 4,694,110 | 88 | 97,783 | 2 |
| Wholesale brokered time deposits | 379,997 | 7 | 654,050 | 12 | (274,053) | (42) |
| Total deposits | $5,171,890 | 100% | $5,348,160 | 100% | ($176,270) | (3%) |

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

Wholesale brokered time deposits decreased by $274.1 million, or 42%, from December 31, 2023, reflecting maturities and a shift in wholesale funding mix based on pricing. See disclosure regarding FHLB advances under the caption “Borrowings” below.

In-market deposits, which exclude wholesale brokered time deposits, were up by $97.8 million, or 2%, from the balance at December 31, 2023. Growing deposits continues to be highly competitive in our market area and demand for higher-cost deposit products is strong. Washington Trust has made recent investments in technology to enhance our customers’ experience and we remain focused on maintaining and growing depositor relationships.

As of September 30, 2024, in-market deposits were approximately 59% retail and 41% commercial. Our in-market deposits are well-diversified by industry and customer type. The average size of our in-market deposit accounts was approximately $36 thousand at September 30, 2024.

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

*(Dollars in thousands)*

| Uninsured Deposits: | September 30, 2024 Balance | % of Total Deposits | December 31, 2023 Balance | % of Total Deposits |
| --- | ---: | ---: | ---: | ---: |
| Uninsured deposits (1) | $1,360,176 | 26% | $1,260,672 | 24% |
| Less: affiliate deposits (2) | 101,028 | 2 | 92,645 | 2 |
| Uninsured deposits, excluding affiliate deposits | 1,259,148 | 24 | 1,168,027 | 22 |
| Less: fully-collateralized preferred deposits (3) | 205,668 | 4 | 204,327 | 4 |
| Uninsured deposits, after exclusions | $1,053,480 | 20% | $963,700 | 18% |

(1) Determined in accordance with regulatory reporting requirements, which includes affiliate deposits and fully-collateralized preferred deposits.

(2) Uninsured deposit balances of Washington Trust Bancorp, Inc. and its subsidiaries that are eliminated in consolidation.

(3) Uninsured deposits of states and political subdivisions, which are secured or collateralized as required by state law.

### Borrowings

Borrowings primarily consist of FHLB advances, which are used as a source of funding for liquidity and interest rate risk management purposes. FHLB advances totaled $1.3 billion at September 30, 2024, up by $110.0 million, or 9%, from the balance at the end of 2023, reflecting a shift to utilize higher levels of FHLB advances and lower levels of wholesale brokered time certificates as a wholesale funding source.

For additional information regarding FHLB advances see Note 9 to the Unaudited Consolidated Financial Statements.

### 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 65% of total average assets in the nine months ended September 30, 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.

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

*(Dollars in thousands)*

| Contingent Liquidity: | September 30, 2024 | December 31, 2023 |
| --- | ---: | ---: |
| Federal Home Loan Bank of Boston (1) | $930,951 | $1,086,607 |
| Federal Reserve Bank of Boston (2) | 85,009 | 65,759 |
| Noninterest-bearing cash | 33,694 | 54,970 |
| Unencumbered securities | 662,991 | 680,857 |
| Total contingent liquidity | $1,712,645 | $1,888,193 |
| Percentage of total contingent liquidity to uninsured deposits | 125.9% | 149.8% |
| Percentage of total contingent liquidity to uninsured deposits, after exclusions | 162.6% | 195.9% |

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

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

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

The ALCO establishes and monitors internal liquidity measures to manage liquidity exposure. Liquidity remained within target ranges established by the ALCO during the nine months ended September 30, 2024. Based on its assessment of the liquidity considerations described above, management believes the Corporation’s sources of funding meet anticipated funding needs.

### Contractual Obligations, Commitments, and Off-Balance Sheet Arrangements

In the ordinary course of business, the Corporation enters into contractual obligations that require future cash payments. These include payments related to lease obligations, time deposits with stated maturity dates, and borrowings. Also, in the ordinary course of business, the Corporation engages in a variety of financial transactions that, in accordance with GAAP, are not recorded in the financial statements, or are recorded in amounts that differ from the notional amounts. These financial transactions include commitments to extend credit, standby letters of credit, forward loan commitments, loan related derivative contracts and interest rate risk management contracts. For additional information on derivative financial instruments and financial instruments with off-balance sheet risk see Notes 6 and 16 to the Unaudited Consolidated Financial Statements.

### Capital Resources

Total shareholders’ equity amounted to $502.2 million at September 30, 2024, up by $29.5 million from December 31, 2023. Net income of $32.7 million and an increase of $24.0 million in the AOCL component of shareholders' equity were partially offset by $29.0 million in dividend declarations. The increase in AOCL largely reflected increases in the fair value of available for sale debt securities due to changes in market interest rates. See Note 6 to the Unaudited Consolidated Financial Statements for additional discussion regarding the previously terminated cash flow hedge.

Washington Trust declared a quarterly dividend of 56 cents per share for the three months ended September 30, 2024, unchanged from the 56 cents per share declared for the same period in 2023. On a year-to-date basis, dividend declarations totaled $1.68 per share in 2024, unchanged from the $1.68 per share declared in 2023.

The ratio of total equity to total assets amounted to 7.03% and 6.56%, respectively, at September 30, 2024 and December 31, 2023. Book value per share was $29.44 at September 30, 2024, compared to $27.75 at December 31, 2023.

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

See Note 10 to the Unaudited Consolidated Financial Statements for additional discussion regarding shareholders’ equity.

### Asset/Liability Management and Interest Rate Risk

Interest rate risk is the risk to earnings due to changes in interest rates. The ALCO is responsible for establishing policy guidelines on liquidity and acceptable exposure to interest rate risk. Quarterly, the ALCO reports on the status of liquidity and interest rate risk matters to the Corporation’s Audit Committee. The objective of the ALCO is to manage assets and funding sources to produce results that are consistent with the Corporation’s liquidity, capital adequacy, growth, risk, and profitability goals.

The Corporation utilizes the size and duration of the investment securities portfolio, the size and duration of the wholesale funding portfolio, interest rate contracts, and the pricing and structure of loans and deposits, to manage interest rate risk. The interest rate contracts may include interest rate swaps, caps, floors, and collars. These interest rate contracts involve, to varying degrees, credit risk and interest rate risk. Credit risk is the possibility that a loss may occur if a counterparty to a transaction fails to perform according to terms of the contract. The notional amount of the interest rate contracts is the amount upon which interest and other payments are based. The notional amount is not exchanged, and therefore, should not be taken as a measure of credit risk. See Note 6 to the Unaudited Consolidated Financial Statements for additional information.

The ALCO uses income simulation to measure interest rate risk inherent in the Corporation’s financial instruments at a given point in time by showing the effect of interest rate shifts on net interest income over a 12-month horizon and a 13- to 24-month horizon. The simulations assume that the size and general composition of the Corporation’s balance sheet remain static over the simulation horizons, with the exception of certain deposit mix shifts from low-cost savings to higher-cost time deposits in selected interest rate scenarios. Additionally, the simulations take into account the specific repricing, maturity, call options, and prepayment characteristics of differing financial instruments that may vary under different interest rate scenarios. Mortgage-backed securities and residential real estate loans involve a level of risk that unforeseen changes in prepayment speeds may cause related cash flows to vary significantly in differing rate environments. Such changes could affect the level of reinvestment risk associated with cash flow from these instruments, as well as their market value. Changes in prepayment speeds could also increase or decrease the amortization of premium or accretion of discounts related to such instruments, thereby affecting interest income. The characteristics of financial instrument classes are reviewed periodically by the ALCO to ensure their accuracy and consistency.

Deposit balances may also be subject to possible outflow to non-bank alternatives in a rising rate environment. This may cause interest rate sensitivity to differ from the results as presented. Another significant simulation assumption is the sensitivity of savings deposits to fluctuations in interest rates. Income simulation results assume that changes in both savings deposit rates and balances are related to changes in short-term interest rates. The relationship between short-term interest rate changes and deposit rate and balance changes may differ from the ALCO’s estimates used in income simulation.

The ALCO reviews simulation results to determine whether the Corporation’s exposure to a decline in net interest income remains within established tolerance levels over the simulation horizons and to develop appropriate strategies to manage this exposure. As of September 30, 2024 and December 31, 2023, net interest income simulations indicated that exposure to changing interest rates over the simulation horizons remained within tolerance levels established by the Corporation. All changes are measured in comparison to the projected net interest income that would result from an “unchanged” rate scenario where both interest rates and the composition of the Corporation’s balance sheet remain stable.

The ALCO regularly reviews a wide variety of interest rate shift scenario results to evaluate interest rate risk exposure, including parallel changes in interest rates and scenarios showing the effect of steepening or flattening changes in the yield curve. Because income simulations assume that the Corporation’s balance sheet will remain static over the simulation horizon, the results do not reflect adjustments in strategy that the ALCO could implement in response to rate shifts. It should also be noted that the static balance sheet assumption does not necessarily reflect the Corporation’s expectation for future balance sheet growth, which is a function of the business environment and customer behavior.

While the ALCO reviews and updates simulation assumptions and also periodically back-tests the simulation results to ensure that the assumptions are reasonable and current, income simulation may not always prove to be an accurate indicator of interest rate risk or future NIM. Over time, the repricing, maturity, and prepayment characteristics of financial instruments and the composition of the Corporation’s balance sheet may change to a different degree than estimated.

The following table sets forth the estimated change in net interest income from an unchanged rate scenario over the periods indicated for parallel changes in market interest rates using the Corporation’s on- and off-balance sheet financial instruments as of September 30, 2024 and December 31, 2023. Interest rates are assumed to shift by parallel rate changes as shown in the table below. Further, deposits are assumed to have certain minimum rate levels below which they will not fall. It should be noted that the rate scenarios shown do not necessarily reflect the ALCO’s view of the “most likely” change in interest rates over the periods indicated.

|  | September 30, 2024 Months 1 - 12 | Months 13 - 24 | December 31, 2023 Months 1 - 12 | Months 13 - 24 |
| --- | ---: | ---: | ---: | ---: |
| 100 basis point rate decrease | (3.62)% | 0.42% | (3.38)% | 0.94% |
| 200 basis point rate decrease | (7.36) | 0.26 | (6.82) | 1.53 |
| 300 basis point rate decrease | (11.30) | (0.73) | (10.38) | 1.59 |
| 100 basis point rate increase | 1.28 | (5.11) | 0.72 | (6.08) |
| 200 basis point rate increase | 4.82 | (6.43) | 4.16 | (7.57) |
| 300 basis point rate increase | 8.37 | (8.42) | 7.55 | (9.21) |

The relative change in interest rate sensitivity from December 31, 2023, as shown in the above table, was attributable to changes in balance sheet composition and market interest rates. The changes in balance sheet composition included a temporary increase in rate-sensitive cash balances on deposit at correspondent banks, reductions in loans, and a lower level of wholesale funding given in-market deposit growth. Furthermore, additional interest rate management derivative contracts were executed to hedge interest rate risk.

The ALCO estimates that as interest rates change, interest-earning assets would reprice more quickly than interest-bearing liabilities. In-market deposit rate changes are modeled to lag behind other market interest rates in both pace and magnitude. Additionally, prepayments of loans and securities generally increase as market interest rates decline and decrease as market interest rates rise.

Additionally, the Corporation monitors the potential change in market value of its available for sale debt securities in changing interest rate environments. The purpose is to determine market value exposure that may not be captured by income simulation, but which might result in changes to the Corporation’s capital position. Results are calculated using industry-standard analytical techniques and securities data.

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

*(Dollars in thousands)*

| Security Type | Down 100 Basis Points | Up 200 Basis Points |
| --- | ---: | ---: |
| Obligations of U.S. government-sponsored enterprise securities (callable) | $7,037 | ($14,859) |
| Mortgage-backed securities issued by U.S. government agencies and U.S. government-sponsored enterprises | 44,551 | (95,915) |
| Obligations of states and political subdivisions | 31 | (101) |
| Trust preferred debt and other corporate debt securities | 51 | (100) |
| Total change in market value as of September 30, 2024 | $51,670 | ($110,975) |
| Total change in market value as of December 31, 2023 | $59,659 | ($117,334) |

### Critical Accounting Policies and Estimates

Estimates and assumptions are necessary in the application of certain accounting policies and procedures and can be susceptible to significant change. Critical accounting policies are defined as those that involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on the Corporation’s financial condition or results of operations.

Management considers its accounting policy relating to the ACL on loans to be a critical accounting policy. There have been no material changes in the Corporation’s critical accounting policies and estimates from those disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023.

### Recently Issued Accounting Pronouncements

See Note 2 to the Unaudited Consolidated Financial Statements for details of recently issued accounting pronouncements and their expected impact on the Corporation’s financial statements.

## Market risk

As filed, 621 characters.

Information regarding quantitative and qualitative disclosures about market risk appears under Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” under the caption “Asset/Liability Management and Interest Rate Risk.”

For factors that could adversely impact Washington Trust’s future results of operations and financial condition, see Part II, Item 1A below and the section labeled “Risk Factors” in Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, as updated by our Quarterly Reports on Form 10-Q and other filings submitted to the SEC.

## Controls and procedures

As filed, 1,563 characters.

### Disclosure Controls and Procedures

As required by Rule 13a-15 under the Exchange Act, the Corporation carried out an evaluation under the supervision and with the participation of the Corporation’s management, including the Corporation’s principal executive officer and principal financial officer, of the Corporation’s disclosure controls and procedures as of the period ended September 30, 2024. Based upon that evaluation, the principal executive officer and principal financial officer concluded that the Corporation’s disclosure controls and procedures are effective and designed to ensure that information required to be disclosed by the Corporation in the reports it files or submits under the Exchange Act is (i) recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated to the Corporation’s management including its Chief Executive Officer and Chief Financial Officer as appropriate to allow timely decisions regarding required disclosures. The Corporation will continue to review and document its disclosure controls and procedures and consider such changes in future evaluations of the effectiveness of such controls and procedures, as it deems appropriate.

### Internal Control Over Financial Reporting

There has been no change in the Corporation’s internal controls over financial reporting during the quarter ended September 30, 2024 that has materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

## Risk factors

As filed, 212 characters.

There have been no material changes in the risk factors described in Part I, Item 1A. “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2023 filed with the SEC on February 26, 2024.

Filed Nov 7, 2024.
Source: SEC EDGAR, the filing index for accession 0000737468-24-000041. Last ingested by Listed: Oct 26, 2026, 10:10 ET. No prices; not investment advice.