WASHINGTON TRUST BANCORP INC (WASH)

Management's Discussion and Analysis

Non-GAAP Financial Measures and Reconciliation to GAAP

In addition to evaluating the Corporation’s results of operations in accordance with GAAP, management supplements this evaluation with an analysis of certain non-GAAP financial measures, such as adjusted noninterest income, adjusted noninterest expense, adjusted income before income taxes, adjusted income tax expense, adjusted effective tax rate, adjusted net income, adjusted diluted earnings per common share, adjusted return on average assets, and adjusted return on average equity.

We believe these non-GAAP financial measures are utilized by regulators and market analysts to evaluate the Corporation’s results of operations and financial condition, and therefore such information is useful to investors. In addition, these non-GAAP financial measures remove the impact of infrequent items that may obscure trends in the Corporation’s underlying performance. These disclosures should not be viewed as a substitute for financial results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures, which may be presented by other companies. Because non-GAAP financial measures are not standardized, it may not be possible to compare these financial measures with other companies' non-GAAP financial measures having the same or similar names.

Each presentation below reconciles the “as reported” GAAP measure to the adjusted non-GAAP measure.

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Management's Discussion and Analysis

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

(1)Recognized in the three months ended March 31, 2025.

(2)Calculated as income tax expense divided by income before income taxes.

(3)Calculated as income tax expense, adjusted for the tax impact of the adjustments as outlined in the table above, divided by income before income taxes, adjusted for the pre-tax impact of the adjustments as outlined in the table above.

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Management's Discussion and Analysis

The following table presents adjusted diluted earnings per common share:

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

(2)Recognized in the three months ended March 31, 2025.

(3)Net income, adjusted for the after-tax impact of adjustments as outlined in the table above, divided by weighted average diluted common and potential shares outstanding.

The following table presents adjusted return on average assets and adjusted return on average equity:

(1)Annualized based on the actual number of days in the period.

(2)Recognized in the three months ended March 31, 2025.

(3)Net income divided by total average assets.

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

(5)Net income divided by total average equity.

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

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Management's Discussion and Analysis

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 (including software-as-a-service) provided by third-party vendors, occupancy and facility-related costs, and other administrative expenses.

We continue to leverage our strong regional brand to build market share and remain steadfast in our commitment to provide superior service. We believe the key to future growth is providing customers with convenient in-person service and digital banking solutions. We have plans to open two new full-service branches later in 2026; one in Pawtucket and another in Bristol, Rhode Island.

Results of Operations

Summary

The following table presents a summarized consolidated statement of operations:

Net income totaled $16.0 million and $28.6 million, respectively, for the three and six months ended June 30, 2026, compared to $13.2 million and $25.4 million, respectively, reported for the same periods in 2025. The prior year results included the following infrequent transactions:

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

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

Excluding these items, adjusted net income (non-GAAP) for the three and six months ended June 30, 2026 was $16.0 million and $28.6 million, respectively, compared to $13.2 million and $25.0 million, respectively, for the same periods in 2025. These results reflected higher net interest income, as well as growth in wealth management and mortgage banking revenues, partially offset by an elevated provision for credit losses and higher salaries and benefits costs.

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Management's Discussion and Analysis

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

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Management's Discussion and Analysis

Average Balances / Net Interest Margin - Fully Taxable Equivalent Basis

The following table presents daily average balance, interest, and yield/rate information, as well as net interest margin on an FTE basis.  Tax-exempt income is converted to an FTE basis using the statutory federal income tax rate. 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 are included in amounts presented for loans. Interest income attributable to nonaccrual loans is included in accordance with accounting policy as disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025.

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Management's Discussion and Analysis

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

(1)Calculated as income tax expense (benefit) divided by income (loss) before income taxes.

(2)Calculated as income tax expense (benefit), adjusted for the tax impact of the adjustments as outlined in the table above, divided by income (loss) before income taxes, adjusted for the pre-tax impact of the adjustments as outlined in the table above.

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Management's Discussion and Analysis

The following table presents adjusted diluted earnings per common share and adjusted dividend payout ratio:

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

(2)Net income (loss) available to common shareholders, adjusted for the after-tax impact of adjustments as outlined in the table above, divided by weighted average diluted common and potential shares outstanding.

(3)Cash dividends declared per share divided by diluted earnings (loss) per common share.

(4)Cash dividends declared per share divided by diluted earnings (loss) per common share, adjusted for the after-tax impact of adjustments as outlined in the table above.

The following table presents adjusted return on average assets and adjusted return on average equity:

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

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

(3)Net income (loss) available to common shareholders divided by total average equity.

(4)Net income (loss) available to common shareholders, adjusted for the after-tax impact of adjustments as outlined in the table above, divided by total average equity.

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Management's Discussion and Analysis

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 (including software-as-a-service) provided by third-party vendors, occupancy and facility-related costs, and other administrative expenses.

We continue to leverage our strong regional brand to build market share and remain steadfast in our commitment to provide superior service. We believe the key to future growth is providing customers with convenient in-person service and digital banking solutions. We plan to open a new full-service branch in Pawtucket, Rhode Island in the latter half of 2026.

Results of Operations

Summary

The following table presents a summarized consolidated statement of operations:

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

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

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

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

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

◦Included in noninterest income (loss) in 2024 was a net pre-tax loss of $62.9 million when residential mortgage loans, that the Bank committed to sell, were reclassified to held for sale and written down to a fair value. The sale of these loans was completed on January 24, 2025.

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

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

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Management's Discussion and Analysis

Excluding these infrequent transactions, adjusted net income (non-GAAP) was $51.8 million in 2025, compared to $40.9 million in 2024. These results were driven by an increase in net interest income, largely reflecting the benefits of the balance sheet repositioning transactions mentioned above, and growth in wealth management and mortgage banking revenues, and were partially offset by higher salaries and benefits costs and an elevated provision for credit losses.

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

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Management's Discussion and Analysis

Average Balances/Net Interest Margin - Fully Taxable Equivalent Basis

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

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