WASHINGTON TRUST BANCORP INCWASH
WASHINGTON TRUST BANCORP INC Stock Compensation Disclosure
Share-Based Compensation Arrangements
The Corporation’s equity compensation plans include the 2003 Stock Incentive Plan, the 2013 Stock Option and Incentive Plan and the 2022 Long Term Incentive Plan, which have been approved by the Corporation’s Board of Directors and shareholders. Awards are being granted from the 2022 Long Term Incentive Plan, as there are no securities remaining available for grants under the 2003 Stock Incentive Plan or 2013 Stock Option and Incentive Plan.
The maximum number of shares of common stock that may be issued under the 2022 Long Term Incentive Plan is 770,486 at December 31, 2025 and is subject to adjustment in accordance with the terms of this plan. The types of permitted equity awards under the 2022 Long Term Incentive Plan include stock options (both incentive and non-qualified options), stock appreciation rights, restricted stock, restricted stock units, unrestricted stock, cash-based awards, and dividend equivalent rights.
See Item 12 for additional information regarding the equity compensation plans.
Reserved Shares
As of December 31, 2025, a total of 999,105 common stock shares were reserved for issuance under the 2003 Stock Incentive Plan, 2013 Stock Option and Incentive Plan and 2022 Long Term Incentive Plan.
Share-based Compensation Expense
The following table presents share-based compensation expense and the related income tax benefits recognized in the Consolidated Statements of Income (Loss) for stock options, restricted stock units and performance share units:
| (Dollars in thousands) | |||||||||||||||||
| Years ended December 31, | 2025 | 2024 | 2023 | ||||||||||||||
| Share-based compensation expense | $3,026 | $2,473 | $2,064 | ||||||||||||||
Related income tax benefits (1) | $547 | $441 | $492 | ||||||||||||||
(1)Includes $210 thousand, $183 thousand, and $34 thousand, respectively, of excess tax expense recognized upon the settlement of share-based compensation awards in 2025, 2024, and 2023.
As of December 31, 2025, there was $4.8 million of total unrecognized compensation cost related to share-based compensation arrangements, including stock options, restricted stock units and performance share units granted under the Plans. That cost is expected to be recognized over a weighted average period of 2.1 years.
Stock Options
The exercise price of each stock option may not be less than the fair market value of the Bancorp’s common stock on the date of grant, and options shall have a term of no more than ten years. Stock options are designated as either non-qualified or incentive stock options. For the years ended 2025, 2024 and 2023, all stock options granted by the Corporation were designated as non-qualified stock options.
Washington Trust uses historical data to estimate stock option exercise and employee departure behavior in the option-pricing model. The expected term of options granted was derived from the output of the option valuation model and represents the period of time that options granted are expected to be outstanding. Expected volatility was based on historical volatility of Washington Trust shares. The risk-free rate for periods within the contractual life of the stock option was based on the U.S. Treasury yield curve in effect at the date of grant.
The following presents the assumptions used in determining the grant date fair value of the stock option awards granted to certain key employees:
| 2025 | 2024 | 2023 | |||||||||||||||
| Options granted | 63,950 | 64,050 | 49,000 | ||||||||||||||
| Cliff vesting period (years) | 3 | 3 | 3 | ||||||||||||||
| Expected term (years) | 7 | 7 | 6.5 | ||||||||||||||
| Expected dividend yield | 5.61 | % | 4.99 | % | 4.38 | % | |||||||||||
| Weighted average expected volatility | 36.40 | % | 35.63 | % | 33.15 | % | |||||||||||
| Weighted average risk-free interest rate | 3.91 | % | 4.50 | % | 4.85 | % | |||||||||||
| Weighted average grant-date fair value | $6.92 | $7.89 | $6.71 | ||||||||||||||
The following table presents a summary of stock options outstanding as of and for the year ended December 31, 2025:
| Number of Stock Options | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term (Years) | Aggregate Intrinsic Value (000’s) | ||||||||||||||||||||
| Options outstanding at beginning of period | 432,220 | $42.84 | |||||||||||||||||||||
| Granted | 63,950 | 30.79 | |||||||||||||||||||||
| Exercised | — | — | |||||||||||||||||||||
| Forfeited or expired | (17,300) | 39.17 | |||||||||||||||||||||
| Options outstanding at end of period | 478,870 | $41.36 | 5.78 | $118 | |||||||||||||||||||
| Options exercisable at end of period | 305,870 | $47.79 | 3.94 | $— | |||||||||||||||||||
The total intrinsic value is the amount by which the fair value of the underlying stock exceeds the exercise price of an option on the exercise date. There were no stock options exercised in 2025 or 2023. The total intrinsic value of stock options exercised in 2024 was $56 thousand.
The following table presents additional information concerning options outstanding and options exercisable at December 31, 2025:
| Options Outstanding | Options Exercisable | |||||||||||||||||||
| Exercise Price Ranges | Number of Shares | Weighted Average Remaining Life (Years) | Weighted Average Exercise Price | Number of Shares | Weighted Average Exercise Price | |||||||||||||||
$20.01 to $30.00 | 46,050 | 7.80 | $26.42 | — | $— | |||||||||||||||
$30.01 to $40.00 | 186,139 | 7.83 | 31.60 | 59,189 | 32.23 | |||||||||||||||
$40.01 to $50.00 | 121,544 | 4.31 | 47.33 | 121,544 | 47.33 | |||||||||||||||
$50.01 to $60.00 | 125,137 | 3.41 | 55.60 | 125,137 | 55.60 | |||||||||||||||
| Total | 478,870 | 5.78 | $41.36 | 305,870 | $47.79 | |||||||||||||||
Restricted Stock Units
The Corporation grants restricted stock units to directors and certain key employees, which vest over 3-years with either cliff or graded vesting. The Corporation granted restricted stock units totaling 80,462, 74,751 and 30,862, respectively, in 2025, 2024 and 2023.
The following table presents a summary of restricted stock units as of and for the year ended December 31, 2025:
| Number of Shares | Weighted Average Grant Date Fair Value | ||||||||||
| Beginning of period | 108,590 | $30.98 | |||||||||
| Granted | 80,462 | 30.90 | |||||||||
| Vested | (17,552) | 46.79 | |||||||||
| Forfeited | — | — | |||||||||
| End of period | 171,500 | $29.33 | |||||||||
Performance Share Units
The Corporation grants performance share units to certain key employees providing the opportunity to earn shares of common stock over a 3-year performance period. The number of shares to be vested will be contingent upon the Corporation’s attainment of certain performance measures as detailed in the performance share unit award agreements.
The following table presents a summary of outstanding performance share units as of December 31, 2025:
| Grant Date Fair Value per Share | Weighted Average Current Performance Assumption | Expected Number of Shares | |||||||||||||||||||||
| Performance share units awarded in: | 2025 | $31.33 | 100% | 32,240 | |||||||||||||||||||
| 2024 | 24.70 | 100% | 39,053 | ||||||||||||||||||||
| 2023 | 47.35 | 84% | 28,006 | ||||||||||||||||||||
| Total | 99,299 | ||||||||||||||||||||||
The following table presents a summary of performance share units as of and for the year ended December 31, 2025:
| Number of Shares | Weighted Average Grant Date Fair Value | ||||||||||
| Beginning of period | 96,093 | $40.53 | |||||||||
| Granted | 32,240 | 31.33 | |||||||||
| Vested | (24,761) | 57.27 | |||||||||
Forfeited (1) | (4,273) | 43.56 | |||||||||
| End of period | 99,299 | $33.24 | |||||||||
(1)The number of forfeited shares also includes adjustments made to performance measure estimates on outstanding awards that have not yet vested.
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About Stock Compensation Disclosures
Stock-based compensation disclosures detail the equity awards granted to employees and executives — including stock options, restricted stock units (RSUs), and performance shares — along with the valuation methods and assumptions used to expense them. This section reveals the true cost of talent retention and the alignment between management incentives and shareholder interests.
Key signals: total unrecognized compensation expense and its expected recognition period signal future earnings headwinds from already-granted awards. For stock options, examine Black-Scholes assumptions — expected volatility, risk-free rate, and expected term — as understating any of these reduces reported compensation expense. Compare stock compensation expense as a percentage of revenue against peers to assess dilution cost. Watch vesting schedules for acceleration clauses tied to change-of-control events. Performance-based awards with undemanding targets may indicate weak governance. Add back stock compensation to operating cash flow to calculate a more conservative free cash flow figure.