UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒			Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended
			March 31, 2022			or

☐			Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from ______ to ______.

Commission file number:  001-32991

WASHINGTON TRUST BANCORP, INC.

(Exact name of registrant as specified in its charter)

Rhode Island						05-0404671
(State or other jurisdiction of incorporation or organization)						(IRS Employer Identification No.)

23 Broad Street
Westerly,			Rhode Island						02891
(Address of principal executive offices)									(Zip Code)

(401) 348-1200

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each class			Trading Symbol(s)			Name of each exchange on which registered
COMMON STOCK, $.0625 PAR VALUE PER SHARE			WASH			The NASDAQ Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer, smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. 

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

☐ Yes ☒ No

The number of shares of common stock of the registrant outstanding as of April 30, 2022 was 17,354,001.

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FORM 10-Q
WASHINGTON TRUST BANCORP, INC. AND SUBSIDIARIES
For the Quarter Ended March 31, 2022
TABLE OF CONTENTS
			Page Number
Glossary of Acronyms and Terms			3
PART I. Financial Information
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets as of March 31, 2022 and December 31, 2021			4
Consolidated Statements of Income for the three months ended March 31, 2022 and 2021			5
Consolidated Statements of Comprehensive Income (Loss) for the three months ended March 31, 2022 and 2021			6
Consolidated Statements of Changes in Shareholders’ Equity for the three months ended March 31, 2022 and 2021			7
Consolidated Statements of Cash Flows for the three months ended March 31, 2022 and 2021			8
Condensed Notes to Unaudited Consolidated Financial Statements:			9
Note 1 - Basis of Presentation			9
Note 2 - Recently Issued Accounting Pronouncements			9
Note 3 - Securities			10
Note 4 - Loans			13
Note 5 - Allowance for Credit Losses on Loans			21
Note 6 - Deposits			21
Note 7 - Borrowings			22
Note 8 - Shareholders’ Equity			22
Note 9 - Derivative Financial Instruments			24
Note 10 - Fair Value Measurements			27
Note 11 - Revenue from Contracts with Customers			31
Note 12 - Defined Benefit Pension Plans			33
Note 13 - Share-Based Compensation Arrangements			33
Note 14 - Business Segments			33
Note 15 - Other Comprehensive Income (Loss)			34
Note 16 - Earnings Per Common Share			35
Note 17 - Commitments and Contingencies			35
Note 18 - Subsequent Events			38
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations			39
Item 3. Quantitative and Qualitative Disclosures About Market Risk			67
Item 4. Controls and Procedures			67
PART II. Other Information
Item 1. Legal Proceedings			68
Item 1A. Risk Factors			68
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			68
Item 6. Exhibits			68
Signatures			69

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Glossary of Acronyms and Terms

The following is a list of acronyms and terms that are used throughout this Quarterly Report on Form 10-Q:

2021 Repurchase Program

Corporation’s Stock Repurchase Program adopted on November 10, 2021

2022 Incentive Plan

Washington Trust Bancorp, Inc. 2022 Long Term Incentive Plan

ACL

Allowance for credit losses

ALCO

Asset/Liability Committee

AOCL

Accumulated other comprehensive loss

ASC

Accounting Standards Codification

ASU

Accounting Standards Update

ATM

Automated teller machine

AUA

Assets under administration

Bancorp

Washington Trust Bancorp, Inc.

Bank

The Washington Trust Company, of Westerly

BOLI

Bank-owned life insurance

C&I

Commercial and industrial

CARES Act

Coronavirus Aid, Relief and Economic Security Act

CDARS

Certificate of Deposit Account Registry Service

Corporation

Bancorp and its subsidiaries

CRE

Commercial real estate

CRRSA Act

Coronavirus Response and Relief Supplemental Appropriations Act

DCF

Discounted cash flow

DDM

Demand Deposit Marketplace

EPS

Earnings per common share

ERM

Enterprise risk management

Exchange Act

Securities Exchange Act of 1934, as amended

FDIC

Federal Deposit Insurance Corporation

FHLB

Federal Home Loan Bank of Boston

FICO

Fair Isaac Corporation

FRBB

Federal Reserve Bank of Boston

FTE

Fully taxable equivalent

GAAP

Accounting principles generally accepted in the United States of America

ICS

Insured Cash Sweep

LTV

Loan to value

NIM

Net interest margin

OREO

Property acquired through foreclosure or repossession

PPP

Paycheck Protection Program

ROU

Right-of-use

S&P

Standard and Poors, Inc.

SBA

Small Business Administration

SEC

U.S. Securities and Exchange Commission

TDR

Troubled debt restructuring

Washington Trust

The Bancorp and its subsidiaries

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PART I.  Financial Information

Item 1.  Financial Statements

Washington Trust Bancorp, Inc. and Subsidiaries
Consolidated Balance Sheets (unaudited)			(Dollars in thousands, except par value)

			March 31, 2022			December 31, 2021
Assets:
Cash and due from banks			$224,807			$175,259
Short-term investments			3,289			3,234
Mortgage loans held for sale, at fair value			15,612			40,196
Available for sale debt securities, at fair value (amortized cost of $1,082,203, net of allowance for credit losses on securities of $0 at March 31, 2022; and amortized cost of $1,051,800; net of allowance for credit losses on securities of $0 at December 31, 2021)			1,008,184			1,042,859
Federal Home Loan Bank stock, at cost			8,452			13,031
Loans:
Total loans			4,283,852			4,272,925
Less: allowance for credit losses on loans			39,236			39,088
Net loans			4,244,616			4,233,837
Premises and equipment, net			28,878			28,908
Operating lease right-of-use assets			28,816			26,692
Investment in bank-owned life insurance			93,192			92,592
Goodwill			63,909			63,909
Identifiable intangible assets, net			5,198			5,414
Other assets			123,046			125,196
Total assets			$5,847,999			$5,851,127
Liabilities:
Deposits:
Noninterest-bearing deposits			$911,990			$945,229
Interest-bearing deposits			4,215,960			4,034,822
Total deposits			5,127,950			4,980,051
Federal Home Loan Bank advances			55,000			145,000
Junior subordinated debentures			22,681			22,681
Operating lease liabilities			31,169			29,010
Other liabilities			98,007			109,577
Total liabilities			5,334,807			5,286,319
Commitments and contingencies (Note 17)
Shareholders’ Equity:
Common stock of $.0625 par value; authorized 60,000,000 shares; 17,363,457 shares issued and 17,331,555 shares outstanding at March 31, 2022 and 17,363,457 shares issued and 17,330,818 shares outstanding at December 31, 2021			1,085			1,085
Paid-in capital			127,355			126,511
Retained earnings			465,295			458,310
Accumulated other comprehensive loss			(79,451)			(19,981)
Treasury stock, at cost; 31,902 shares at March 31, 2022 and 32,639 shares at December 31, 2021			(1,092)			(1,117)
Total shareholders’ equity			513,192			564,808
Total liabilities and shareholders’ equity			$5,847,999			$5,851,127

The accompanying notes are an integral part of these unaudited consolidated financial statements.

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Washington Trust Bancorp, Inc. and Subsidiaries
Consolidated Statements of Income (unaudited)			(Dollars and shares in thousands, except per share amounts)

Three months ended March 31,						2022						2021
Interest income:
Interest and fees on loans						$33,930						$34,159
Interest on mortgage loans held for sale						232						441
Taxable interest on debt securities						4,230						3,242
Dividends on Federal Home Loan Bank stock						67						133
Other interest income						78						33
Total interest and dividend income						38,537						38,008
Interest expense:
Deposits						3,103						3,663
Federal Home Loan Bank advances						244						1,380
Junior subordinated debentures						99						94
Total interest expense						3,446						5,137
Net interest income						35,091						32,871
Provision for credit losses						100						(2,000)
Net interest income after provision for credit losses						34,991						34,871
Noninterest income:
Wealth management revenues						10,531						9,895
Mortgage banking revenues						3,501						11,927
Card interchange fees						1,164						1,133
Service charges on deposit accounts						668						609
Loan related derivative income						301						467
Income from bank-owned life insurance						601						556
Other income						393						1,387
Total noninterest income						17,159						25,974
Noninterest expense:
Salaries and employee benefits						21,002						21,527
Outsourced services						3,242						3,200
Net occupancy						2,300						2,128
Equipment						918						994
Legal, audit and professional fees						770						597
FDIC deposit insurance costs						366						345
Advertising and promotion						351						222
Amortization of intangibles						217						226
Debt prepayment penalties						—						3,335
Other expenses						2,053						2,139
Total noninterest expense						31,219						34,713
Income before income taxes						20,931						26,132
Income tax expense						4,448						5,661
Net income						$16,483						$20,471
Net income available to common shareholders						$16,429						$20,415
Weighted average common shares outstanding - basic						17,331						17,275
Weighted average common shares outstanding - diluted						17,482						17,431
Per share information:			Basic earnings per common share			$0.95						$1.18
			Diluted earnings per common share			$0.94						$1.17

The accompanying notes are an integral part of these unaudited consolidated financial statements.

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Washington Trust Bancorp, Inc. and Subsidiaries
Consolidated Statements of Comprehensive Income (Loss) (unaudited)			(Dollars in thousands)

Three months ended March 31,			2022						2021
Net income			$16,483						$20,471
Other comprehensive income (loss), net of tax:
Net change in fair value of available for sale debt securities			(49,460)						(13,319)
Net change in fair value of cash flow hedges			(10,335)						297
Net change in defined benefit plan obligations			325						407
Total other comprehensive loss, net of tax			(59,470)						(12,615)
Total comprehensive (loss) income			($42,987)						$7,856

The accompanying notes are an integral part of these unaudited consolidated financial statements.

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Washington Trust Bancorp, Inc. and Subsidiaries
Consolidated Statements of Changes in Shareholders' Equity (unaudited)			(Dollars and shares in thousands)

For the three months ended March 31, 2022			Common Shares Outstanding			Common Stock			Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive Loss			Treasury Stock			Total
Balance at December 31, 2021			17,331			$1,085			$126,511			$458,310			($19,981)			($1,117)			$564,808
Net income			—			—			—			16,483			—			—			16,483
Total other comprehensive loss, net of tax			—			—			—			—			(59,470)			—			(59,470)
Cash dividends declared ($0.54 per share)			—			—			—			(9,498)			—			—			(9,498)
Share-based compensation			—			—			888			—			—			—			888
Exercise of stock options, issuance of other compensation-related equity awards, net of awards surrendered			1			—			(44)			—			—			25			(19)
Balance at March 31, 2022			17,332			$1,085			$127,355			$465,295			($79,451)			($1,092)			$513,192

For the three months ended March 31, 2021			Common Shares Outstanding			Common Stock			Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive Loss			Treasury Stock			Total
Balance at December 31, 2020			17,265			$1,085			$125,610			$418,246			($7,391)			($3,355)			$534,195
Net income			—			—			—			20,471			—			—			20,471
Total other comprehensive loss, net of tax			—			—			—			—			(12,615)			—			(12,615)
Cash dividends declared ($0.52 per share)			—			—			—			(9,119)			—			—			(9,119)
Share-based compensation			—			—			918			—			—			—			918
Exercise of stock options, issuance of other compensation-related equity awards, net of awards surrendered			41			—			(1,646)			—			—			1,395			(251)
Balance at March 31, 2021			17,306			$1,085			$124,882			$429,598			($20,006)			($1,960)			$533,599

The accompanying notes are an integral part of these unaudited consolidated financial statements.

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Washington Trust Bancorp, Inc. and Subsidiaries
Consolidated Statement of Cash Flows (unaudited)			(Dollars in thousands)

Three months ended March 31,						2022						2021
Cash flows from operating activities:
Net income						$16,483						$20,471
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Provision for credit losses						100						(2,000)
Depreciation of premises and equipment						838						828
Net amortization of premiums and discounts on debt securities and loans						966						882
Amortization of intangibles						217						226
Share-based compensation						888						918
Tax benefit from stock option exercises and other equity awards						10						9
Income from bank-owned life insurance						(601)						(556)
Net gains on loan sales, including changes in fair value						(3,085)						(11,858)
Proceeds from sales of loans, net						122,165						291,789
Loans originated for sale						(95,644)						(299,051)
(Increase) decrease in operating lease right-of-use assets						(2,124)						760
Increase (decrease) in operating lease liabilities						2,160						(744)
Decrease in other assets						21,289						30,504
(Decrease) in other liabilities						(25,100)						(35,544)
Net cash provided by (used in) operating activities						38,562						(3,366)
Cash flows from investing activities:
Purchases of:			Available for sale debt securities: Mortgage-backed			(74,919)						(130,496)
			Available for sale debt securities: Other			(250)						(77,528)
Maturities, calls and principal payments of:			Available for sale debt securities: Mortgage-backed			43,334						114,653
			Available for sale debt securities: Other			—						20,000
Net redemption of Federal Home Loan Bank stock						4,579						5,513
Purchases of other equity investments						(188)						—
Net (increase) decrease in loans						(8,700)						7,570
Purchases of loans						(465)						(1,539)
Purchases of premises and equipment						(834)						(911)
Net cash used in investing activities						(37,443)						(62,738)
Cash flows from financing activities:
Net increase in deposits						147,899						170,789
Proceeds from Federal Home Loan Bank advances						197,000						414,000
Repayment of Federal Home Loan Bank advances						(287,000)						(540,947)
Net proceeds from stock option exercises and issuance of other equity awards, net of awards surrendered						(19)						(251)
Cash dividends paid						(9,396)						(9,012)
Net cash provided by financing activities						48,484						34,579
Net increase (decrease) in cash and cash equivalents						49,603						(31,525)
Cash and cash equivalents at beginning of period						178,493						202,268
Cash and cash equivalents at end of period						$228,096						$170,743
Noncash Activities:
Loans charged off						$36						$64
Supplemental Disclosures:
Interest payments						$3,458						$6,222
Income tax payments						931						1,641

The accompanying notes are an integral part of these unaudited consolidated financial statements.

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Condensed Notes to Unaudited Consolidated Financial Statements

Note 1 - Basis of Presentation

The Bancorp is a publicly-owned registered bank holding company that has elected to be a financial holding company.  The Bancorp’s subsidiaries include the Bank, a Rhode Island chartered financial institution founded in 1800, and Weston Securities Corporation.  Through its subsidiaries, the Bancorp offers a complete product line of financial services, including commercial, residential and consumer lending, retail and commercial deposit products, and wealth management services through its offices in Rhode Island, eastern Massachusetts and Connecticut.

The Unaudited Consolidated Financial Statements include the accounts of the Bancorp and its subsidiaries.  All intercompany balances and transactions have been eliminated in consolidation. Certain previously reported amounts have been reclassified to conform to the current year’s presentation.

The accounting and reporting policies of the Corporation conform to GAAP and to general practices of the banking industry.  In preparing the financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the balance sheet and revenues and expenses for the period.  Actual results could differ from those estimates. Management considers the ACL on loans to be a material estimate that is particularly susceptible to change.

The Unaudited Consolidated Financial Statements of the Corporation presented herein have been prepared pursuant to the rules of the SEC for quarterly reports on Form 10-Q and do not include all of the information and note disclosures required by GAAP. In the opinion of management, all adjustments (consisting of normal recurring adjustments) and disclosures considered necessary for the fair presentation of the accompanying Unaudited Consolidated Financial Statements have been included. Interim results are not necessarily indicative of the results of the entire year. The accompanying Unaudited Consolidated Financial Statements should be read in conjunction with the Audited Consolidated Financial Statements and notes thereto included in the Annual Report on Form 10-K for the fiscal year ended December 31, 2021.

Note 2 - Recently Issued Accounting Pronouncements

Accounting Standards Pending Adoption

Business Combinations - ASC 805

ASU No. 2021-08, “Accounting for Contract Assets and Contract Liabilities from Contracts with Customers” (“ASU 2021-08”), was issued in October 2021 to clarify the accounting for contract cost assets and contract liabilities acquired in a business combination. Under current GAAP, an acquirer generally recognizes assets acquired and liabilities assumed in a business combination at fair value on the acquisition date. The provisions of ASU 2021-08 clarify that contract cost assets and contract liabilities acquired in a business combination should be accounted for in accordance with ASC 606 as if the acquirer had originated the contracts. ASU 2021-08 is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, with early adoption permitted. The provisions under ASU 2021-08 are required to be applied prospectively. The adoption of ASU 2021-08 is not expected to have a material impact on the Corporation’s consolidated financial statements.

Financial Instruments - Credit Losses - ASC 326

ASU No. 2022-02, “Troubled Debt Restructurings and Vintage Disclosures” (“ASU 2022-02”), was issued in March 2022 to provide updates on the accounting treatment for TDRs and related disclosures requirements, as well as modifying the disclosure requirement associated with the existing credit quality indicators “vintage” disclosure. With respect to TDRs, ASU 2022-02 eliminates the recognition and measurement guidance for TDRs under current GAAP and instead requires that the Corporation evaluate whether the modification represents a new loan or a continuation of existing loan, consistent with the current GAAP treatment for other loan modifications. In addition, ASU 2022-02 eliminates existing disclosure requirements on TDRs and replaces with enhanced disclosure requirements related to loan modifications made to borrowers, including those experiencing financial difficulty. ASU 2022-02 also provides an update to the existing tabular vintage disclosure of credit quality indicators by requiring current period gross write-offs to be disclosed by year of origination for each loan segment. ASU 2022-02 is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, with early adoption permitted. The provisions under ASU 2022-02 should be applied on a prospective basis. However, the Corporation has the option to use a modified retrospective transition method related to the change in accounting treatment for TDRs with a cumulative effect of the the change in accounting principle recognized in the opening balance of retained earnings as of the adoption date. The Corporation is currently evaluating this ASU and has not yet determined the impact that the adoption of ASU 2022-02 will have on its consolidated financial statements.

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Condensed Notes to Unaudited Consolidated Financial Statements – (continued)

Note 3 - Securities

Available for Sale Debt Securities

The following tables present the amortized cost, gross unrealized holding gains, gross unrealized holding losses, ACL on securities and fair value of securities by major security type and class of security:

(Dollars in thousands)
March 31, 2022			Amortized Cost						Unrealized Gains						Unrealized Losses						ACL						Fair Value
Available for Sale Debt Securities:
Obligations of U.S. government-sponsored enterprises			$201,206						$—						($15,774)						$—						$185,432
Mortgage-backed securities issued by U.S. government agencies and U.S. government-sponsored enterprises			858,461						920						(57,811)						—						801,570
Individual name issuer trust preferred debt securities			9,377						—						(358)						—						9,019
Corporate bonds			13,159						—						(996)						—						12,163
Total available for sale debt securities			$1,082,203						$920						($74,939)						$—						$1,008,184

(Dollars in thousands)
December 31, 2021			Amortized Cost						Unrealized Gains						Unrealized Losses						ACL						Fair Value
Available for Sale Debt Securities:
Obligations of U.S. government-sponsored enterprises			$200,953						$12						($4,511)						$—						$196,454
Mortgage-backed securities issued by U.S. government agencies and U.S. government-sponsored enterprises			828,319						6,850						(10,207)						—						824,962
Individual name issuer trust preferred debt securities			9,373						—						(235)						—						9,138
Corporate bonds			13,155						—						(850)						—						12,305
Total available for sale debt securities			$1,051,800						$6,862						($15,803)						$—						$1,042,859

The Corporation excludes accrued interest from the amortized cost basis of debt securities and reports accrued interest in other assets in the Unaudited Consolidated Balance Sheets. Accrued interest receivable on available for sale debt securities totaled $2.2 million and $2.3 million, respectively, as of March 31, 2022 and December 31, 2021.

As of March 31, 2022 and December 31, 2021, securities with a fair value of $301.8 million and $332.0 million, respectively, were pledged as collateral for FHLB borrowings, potential borrowings with the FRBB, certain public deposits and for other purposes. See Note 7 for additional disclosure on FHLB borrowings.

The schedule of maturities of available for sale debt securities is presented below. Mortgage-backed securities are included based on weighted average maturities, adjusted for anticipated prepayments.  All other debt securities are included based on contractual maturities.  Actual maturities may differ from amounts presented because certain issuers have the right to call or prepay obligations with or without call or prepayment penalties.

(Dollars in thousands)
March 31, 2022			Amortized Cost			Fair Value
Due in one year or less			$139,387			$130,147
Due after one year to five years			371,924			347,322
Due after five years to ten years			420,816			390,659
Due after ten years			150,076			140,056
Total debt securities			$1,082,203			$1,008,184

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Condensed Notes to Unaudited Consolidated Financial Statements – (continued)

Included in the above table are debt securities with an amortized cost balance of $223.0 million and a fair value of $205.9 million at March 31, 2022 that are callable at the discretion of the issuers.  Final maturities of the callable securities range from 2 years to 15 years, with call features ranging from 1 month to 2 year.

Assessment of Available for Sale Debt Securities for Impairment

Management assesses the decline in fair value of investment securities on a regular basis. Unrealized losses on debt securities may occur from current market conditions, increases in interest rates since the time of purchase, a structural change in an investment, volatility of earnings of a specific issuer, or deterioration in credit quality of the issuer.  Management evaluates both qualitative and quantitative factors to assess whether an impairment exists.

A debt security is placed on nonaccrual status at the time any principal or interest payments become more than 90 days delinquent or if full collection of interest or principal becomes uncertain. Accrued interest for a debt security placed on nonaccrual is reversed against interest income. There were no debt securities on nonaccrual status at March 31, 2022 and 2021 and, therefore there was no accrued interest related to debt securities reversed against interest income for the three months ended March 31, 2022 and 2021.

The following tables summarize available for sale debt securities in an unrealized loss position, for which an ACL on securities has not been recorded, segregated by length of time that the securities have been in a continuous unrealized loss position:

(Dollars in thousands)			Less than 12 Months															12 Months or Longer															Total
March 31, 2022			#						Fair Value			Unrealized Losses						#						Fair Value			Unrealized Losses						#						Fair Value			Unrealized Losses
Obligations of U.S. government-sponsored enterprises			10						$89,928			($6,378)						10						$95,504			($9,396)						20						$185,432			($15,774)
Mortgage-backed securities issued by U.S. government agencies and U.S. government-sponsored enterprises			80						485,574			(33,595)						32						233,593			(24,216)						112						719,167			(57,811)
Individual name issuer trust preferred debt securities			—						—			—						3						9,019			(358)						3						9,019			(358)
Corporate bonds			—						—			—						4						12,163			(996)						4						12,163			(996)
Total			90						$575,502			($39,973)						49						$350,279			($34,966)						139						$925,781			($74,939)

(Dollars in thousands)			Less than 12 Months															12 Months or Longer															Total
December 31, 2021			#						Fair Value			Unrealized Losses						#						Fair Value			Unrealized Losses						#						Fair Value			Unrealized Losses
Obligations of U.S. government-sponsored enterprises			12						$152,733			($3,313)						6						$43,202			($1,198)						18						$195,935			($4,511)
Mortgage-backed securities issued by U.S. government agencies and U.S. government-sponsored enterprises			41						514,419			(7,270)						21						108,983			(2,937)						62						623,402			(10,207)
Individual name issuer trust preferred debt securities			—						—			—						3						9,138			(235)						3						9,138			(235)
Corporate bonds			—						—			—						4						12,305			(850)						4						12,305			(850)
Total			53						$667,152			($10,583)						34						$173,628			($5,220)						87						$840,780			($15,803)

Deterioration in credit quality of the underlying issuers of the securities, deterioration in the condition of the financial services industry, worsening of the current economic environment, or declines in real estate values, among other things, may further affect the fair value of these securities and increase the potential that certain unrealized losses be designated as credit losses, and the Corporation may incur write-downs.

Obligations of U.S. Government Agency and U.S. Government-Sponsored Enterprise Securities, including Mortgage-Backed Securities

The gross unrealized losses on U.S. government agency and U.S. government-sponsored debt securities, including mortgage-

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Condensed Notes to Unaudited Consolidated Financial Statements – (continued)

backed securities, were primarily attributable to relative changes in interest rates since the time of purchase. The contractual cash flows for these securities are guaranteed by U.S. government agencies and U.S. government-sponsored enterprises. The issuers of these securities continue to make timely principal and interest payments and none of these securities were past due at March 31, 2022. Management believes that the unrealized losses on these debt securities are a function of changes in investment spreads and interest rate movements and not changes in credit quality. Management expects to recover the entire amortized cost basis of these securities. Furthermore, the Corporation does not intend to sell these securities and it is likely that the Corporation will not be required to sell these securities before recovery of their cost basis, which may be maturity. Therefore, no allowance for credits losses on securities was recorded at March 31, 2022.

Individual Name Issuer Trust Preferred Debt Securities

Included in debt securities in an unrealized loss position at March 31, 2022 were three trust preferred securities issued by three individual companies in the banking sector. Management reviewed the collectability of these securities taking into consideration such factors as the financial condition of the issuers, reported regulatory capital ratios of the issuers, credit ratings, including ratings in effect as of the reporting period date, as well as credit rating changes between the reporting period date and the filing date of this report, and other information.  As of March 31, 2022, there was one individual name issuer trust preferred debt security with an amortized cost of $2.0 million and unrealized losses of $77 thousand that was rated below investment grade by S&P. We noted no additional downgrades to below investment grade between March 31, 2022 and the filing date of this report.  Based on the information available through the filing date of this report, all individual name issuer trust preferred debt securities held in our portfolio continue to accrue interest and make payments as expected with no payment deferrals or defaults on the part of the issuers. Management believes the unrealized losses on these debt securities are primarily attributable to changes in the investment spreads and interest rates and not changes in the credit quality of the issuers of the debt securities.  Management expects to recover the entire amortized cost basis of these securities.  Furthermore, the Corporation does not intend to sell these securities and it is likely that the Corporation will not be required to sell these securities before recovery of their cost basis, which may be maturity.  Therefore, no ACL on securities was recorded at March 31, 2022.

Corporate Bonds

At March 31, 2022, the Corporation had four corporate bond holdings with unrealized losses totaling $996 thousand. Management reviewed the collectability of these securities taking into consideration such factors as the financial condition of the issuers, reported regulatory capital ratios of the issuers, credit ratings, including ratings in effect as of the reporting period date, as well as credit rating changes between the reporting period date and the filing date of this report, and other information.  As of March 31, 2022, there was one corporate bond debt security with an amortized cost of $2.0 million and unrealized losses of $50 thousand that was rated below investment grade by S&P. We noted no additional downgrades to below investment grade between March 31, 2022 and the filing date of this report. Based on the information available through the filing date of this report, all corporate bond debt securities held in our portfolio continue to accrue interest and make payments as expected with no payment deferrals or defaults on the part of the issuers. Management believes the unrealized losses on these debt securities are primarily attributable to changes in the investment spreads and interest rates and not changes in the credit quality of the issuers of the debt securities. Management expects to recover the entire amortized cost basis of these securities. Furthermore, the Corporation does not intend to sell these securities and it is likely that the Corporation will not be required to sell these securities before recovery of their cost basis, which may be maturity.  Therefore, no ACL was recorded at March 31, 2022.

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Condensed Notes to Unaudited Consolidated Financial Statements – (continued)

Note 4 - Loans

The following table presents a summary of loans:

(Dollars in thousands)			March 31, 2022			December 31, 2021
Commercial:
Commercial real estate (1)			$1,628,620			$1,639,062
Commercial & industrial (2)			614,892			641,555
Total commercial			2,243,512			2,280,617
Residential Real Estate:
Residential real estate (3)			1,777,974			1,726,975
Consumer:
Home equity			246,097			247,697
Other (4)			16,269			17,636
Total consumer			262,366			265,333
Total loans (5)			$4,283,852			$4,272,925

(1)CRE consists of commercial mortgages primarily secured by income-producing property, as well as construction and development loans. Construction and development loans are made to businesses for land development or the on-site construction of industrial, commercial, or residential buildings.

(2)C&I consists of loans to businesses and individuals, a portion of which are fully or partially collateralized by real estate. C&I also includes $12.5 million and $38.0 million, respectively, of PPP loans as of March 31, 2022 and December 31, 2021.

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

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

(5)Includes net unamortized loan origination costs of $8.3 million and $6.7 million, respectively, at March 31, 2022 and December 31, 2021 and net unamortized premiums on purchased loans of $389 thousand and $414 thousand, respectively, at March 31, 2022 and December 31, 2021.

Loan balances exclude accrued interest receivable of $10.6 million and $10.3 million, respectively, as of March 31, 2022 and December 31, 2021.

As of both March 31, 2022 and December 31, 2021, loans amounting to $2.2 billion were pledged as collateral to the FHLB under a blanket pledge agreement and to the FRBB for the discount window. See Note 7 for additional disclosure regarding borrowings.

The Corporation elected to account for eligible loan modifications under Section 4013 of the CARES Act, as amended by the CRRSA Act. Eligible loan modifications from March 1, 2020 through January 1, 2022 made in response to the COVID-19 pandemic were not required to be classified as TDRs. During this period of time, we processed loan payment deferral modifications, or “deferments”, on 654 loans totaling $727.7 million. The vast majority of the deferments qualified as eligible loan modifications and were not classified as TDRs. As of March 31, 2022, all of these loans have exited their payment deferral period.

Concentrations of Credit Risk

A significant portion of our loan portfolio is concentrated among borrowers in southern New England and a substantial portion of the portfolio is collateralized by real estate in this area. The ability of single family residential and consumer borrowers to honor their repayment commitments is generally dependent on the level of overall economic activity within the market area and real estate values. The ability of commercial borrowers to honor their repayment commitments is dependent on the general economy, as well as the health of the real estate economic sector in the Corporation’s market area.

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Condensed Notes to Unaudited Consolidated Financial Statements – (continued)

Past Due Loans

Past due status is based on the contractual payment terms of the loan. The following tables present an aging analysis of past due loans, segregated by class of loans:

(Dollars in thousands)			Days Past Due
March 31, 2022			30-59						60-89						Over 90						Total Past Due						Current						Total Loans
Commercial:
Commercial real estate			$—						$—						$—						$—						$1,628,620						$1,628,620
Commercial & industrial			108						—						—						108						614,784						614,892
Total commercial			108						—						—						108						2,243,404						2,243,512
Residential Real Estate:
Residential real estate			1,299						—						5,168						6,467						1,771,507						1,777,974
Consumer:
Home equity			112						141						178						431						245,666						246,097
Other			30						—						—						30						16,239						16,269
Total consumer			142						141						178						461						261,905						262,366
Total loans			$1,549						$141						$5,346						$7,036						$4,276,816						$4,283,852

(Dollars in thousands)			Days Past Due
December 31, 2021			30-59						60-89						Over 90						Total Past Due						Current						Total Loans
Commercial:
Commercial real estate			$—						$—						$—						$—						$1,639,062						$1,639,062
Commercial & industrial			3						—						—						3						641,552						641,555
Total commercial			3						—						—						3						2,280,614						2,280,617
Residential Real Estate:
Residential real estate			1,784						3,176						4,662						9,622						1,717,353						1,726,975
Consumer:
Home equity			580						77						108						765						246,932						247,697
Other			21						—						—						21						17,615						17,636
Total consumer			601						77						108						786						264,547						265,333
Total loans			$2,388						$3,253						$4,770						$10,411						$4,262,514						$4,272,925

Included in past due loans as of March 31, 2022 and December 31, 2021, were nonaccrual loans of $5.7 million and $9.4 million, respectively. In addition, all loans 90 days or more past due at March 31, 2022 and December 31, 2021 were classified as nonaccrual.

Nonaccrual Loans

Loans, with the exception of certain well-secured loans that are in the process of collection, are placed on nonaccrual status and interest recognition is suspended when such loans are 90 days or more overdue with respect to principal and/or interest, or sooner if considered appropriate by management. Well-secured loans are permitted to remain on accrual status provided that full collection of principal and interest is assured and the loan is in the process of collection. Loans are also placed on nonaccrual status when, in the opinion of management, full collection of principal and interest is doubtful. When loans are placed on nonaccrual status, interest previously accrued but not collected is reversed against current period income.  Subsequent interest payments received on nonaccrual loans are applied to the outstanding principal balance of the loan or recognized as interest income depending on management’s assessment of the ultimate collectability of the loan. Loans are removed from nonaccrual status when they have been current as to principal and interest for a period of time, the borrower has demonstrated an ability to comply with repayment terms, and when, in management’s opinion, the loans are considered to be fully collectible.

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Condensed Notes to Unaudited Consolidated Financial Statements – (continued)

The following table is a summary of nonaccrual loans, segregated by class of loans:

(Dollars in thousands)			Mar 31, 2022			Dec 31, 2021
Commercial:
Commercial real estate			$—			$—
Commercial & industrial			—			—
Total commercial			—			—
Residential Real Estate:
Residential real estate			11,916			13,576
Consumer:
Home equity			673			627
Other			—			—
Total consumer			673			627
Total nonaccrual loans			$12,589			$14,203
Accruing loans 90 days or more past due			$—			$—

No ACL was deemed necessary on nonaccrual loans with carrying values of $4.2 million as of both March 31, 2022 and December 31, 2021.

Nonaccrual loans of $6.9 million and $4.8 million, respectively, at March 31, 2022 and December 31, 2021 were current as to the payment of principal and interest.

As of March 31, 2022 and December 31, 2021, nonaccrual loans secured by one- to four-family residential property amounting to $1.7 million and $1.5 million, respectively, were in process of foreclosure.

There were no significant commitments to lend additional funds to borrowers whose loans were on nonaccrual status at March 31, 2022.

The following table presents interest income recognized on nonaccrual loans:

(Dollars in thousands)
Three months ended March 31,			2022			2021
Commercial:
Commercial real estate			$—			$—
Commercial & industrial			—			1
Total commercial			—			1
Residential Real Estate:
Residential real estate			101			65
Consumer:
Home equity			7			24
Other			—			—
Total consumer			7			24
Total			$108			$90

Troubled Debt Restructurings

A loan that has been modified or renewed is considered to be a TDR when two conditions are met: (1) the borrower is experiencing financial difficulty and (2) concessions are made for the borrower’s benefit that would not otherwise be considered for a borrower or a transaction with similar credit risk characteristics. These concessions may include modifications of the terms of the debt such as deferral of payments, extension of maturity, reduction of principal balance,

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Condensed Notes to Unaudited Consolidated Financial Statements – (continued)

reduction of the stated interest rate other than normal market rate adjustments, or a combination of these concessions. Debt may be bifurcated with separate terms for each tranche of the restructured debt. Restructuring of a loan in lieu of aggressively enforcing the collection of the loan may benefit the Corporation by increasing the ultimate probability of collection.

The Corporation's ACL reflects the effects of a TDR when management reasonably expects at the reporting date that a TDR will be executed with an individual borrower. A TDR is considered reasonably expected no later than the point when management concludes that modification is the best course of action and it is at least reasonably possible that the troubled borrower will accept some form of concession to avoid a default. Reasonably expected TDRs and executed TDRs are evaluated individually to determine the required ACL. TDRs that did not involve a below-market rate concession and perform in accordance with their modified contractual terms for a reasonable period of time may be included in the Corporation’s existing pools based on the underlying risk characteristics of the loan to measure the ACL.

TDRs are classified as accruing or non-accruing based on management’s assessment of the collectability of the loan.  Loans that are already on nonaccrual status at the time of the restructuring generally remain on nonaccrual status for approximately six months before management considers such loans for return to accruing status.  Accruing restructured loans are placed into nonaccrual status if and when the borrower fails to comply with the restructured terms and management deems it unlikely that the borrower will return to a status of compliance in the near term and full collection of principal and interest is in doubt.

TDRs are reported as such for at least one year from the date of the restructuring.  In years after the restructuring, TDRs are removed from this classification if the restructuring did not involve a below-market rate concession and the loan is performing in accordance with their modified contractual terms for a reasonable period of time.

The recorded investment in TDRs consists of unpaid principal balance, net of charge-offs and unamortized deferred loan origination fees and costs. For accruing TDRs, the recorded investment also includes accrued interest.

The following table presents the recorded investment in TDRs and other pertinent information:

(Dollars in thousands)			Mar 31, 2022			Dec 31, 2021
Accruing TDRs			$16,540			$16,564
Nonaccrual TDRs			2,789			2,819
Total TDRs			$19,329			$19,383
Specific reserves on TDRs included in the ACL on loans			$146			$148
Additional commitments to lend to borrowers with TDRs			$—			$—

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Condensed Notes to Unaudited Consolidated Financial Statements – (continued)

During the three months ended March 31, 2022 and 2021, there were no loans modified in a TDR.

The following tables present information on TDRs modified within the previous 12 months for which there was a payment default:

(Dollars in thousands)			# of Loans												Recorded Investment
Three months ended March 31,			2022						2021						2022						2021
TDRs with a Payment Default:
Residential real estate			—						1						$—						$396
Home equity			—						—						—						—
Totals			—						1						$—						$396

Individually Analyzed Loans

Individually analyzed loans include nonaccrual commercial loans, reasonably expected TDRs and executed TDRs, as well as certain other loans based on the underlying risk characteristics and the discretion of management to individually analyze such loans.

As of March 31, 2022, the carrying value of individually analyzed loans amounted to $21.0 million, of which $14.4 million were considered collateral dependent. As of December 31, 2021, the carrying value of individually analyzed loans amounted to $21.1 million, of which $14.4 million were considered collateral dependent.

For collateral dependent loans where management has determined that foreclosure of the collateral is probable, or where the borrower is experiencing financial difficulty and repayment of the loan is to be provided substantially through the operation or sale of the collateral, the ACL is measured based on the difference between the fair value of the collateral and the amortized cost basis of the loan as of the measurement date. See Note 10 for additional disclosure regarding fair value of individually analyzed collateral dependent loans.

The following table presents the carrying value of collateral dependent individually analyzed loans:

(Dollars in thousands)			March 31, 2022									December 31, 2021
			Carrying Value			Related Allowance						Carrying Value			Related Allowance
Commercial:
Commercial real estate (1)			$10,593			$—						$10,603			$—
Commercial & industrial (2)			—			—						—			—
Total commercial			10,593			—						10,603			—
Residential Real Estate:
Residential real estate (3)			3,776			531						3,803			534
Consumer:
Home equity (3)			—			—						—			—
Other			—			—						—			—
Total consumer			—			—						—			—
Total			$14,369			$531						$14,406			$534

(1)    Secured by income-producing property.

(2)    Secured by business assets.

(3)     Secured by one- to four-family residential properties.

Credit Quality Indicators

Commercial

The Corporation utilizes an internal rating system to assign a risk to each of its commercial loans. Loans are rated on a scale of 1 to 10. This scale can be assigned to three broad categories including “pass” for ratings 1 through 6, “special mention” for 7-rated loans, and “classified” for loans rated 8, 9 or 10. The loan risk rating system takes into consideration parameters

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Condensed Notes to Unaudited Consolidated Financial Statements – (continued)

including the borrower’s financial condition, the borrower’s performance with respect to loan terms, the adequacy of collateral, the adequacy of guarantees and other credit quality characteristics. The Corporation takes the risk rating into consideration along with other credit attributes in the establishment of an appropriate allowance for loan losses. See Note 5 for additional information.

A description of the commercial loan categories is as follows:

Pass - Loans with acceptable credit quality, defined as ranging from superior or very strong to a status of lesser stature. Superior or very strong credit quality is characterized by a high degree of cash collateralization or strong balance sheet liquidity. Lesser stature loans have an acceptable level of credit quality, but may exhibit some weakness in various credit metrics such as collateral adequacy, cash flow, performance or may be in an industry or of a loan type known to have a higher degree of risk. These weaknesses may be mitigated by secondary sources of repayment, including SBA guarantees.

Special Mention - Loans with potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the asset or in the Bank’s position as creditor at some future date. Special Mention assets are not adversely classified and do not expose the Bank to sufficient risk to warrant adverse classification. Examples of these conditions include but are not limited to outdated or poor quality financial data, strains on liquidity and leverage, losses or negative trends in operating results, marginal cash flow, weaknesses in occupancy rates or trends in the case of commercial real estate and frequent delinquencies.

Classified - Loans identified as “substandard,” “doubtful” or “loss” based on criteria consistent with guidelines provided by banking regulators. A “substandard” loan has defined weaknesses which make payment default or principal exposure likely, but not yet certain. Such loans are apt to be dependent upon collateral liquidation, a secondary source of repayment or an event outside of the normal course of business. The loans are closely watched and are either already on nonaccrual status or may be placed on nonaccrual status when management determines there is uncertainty of collectability. A “doubtful” loan is placed on nonaccrual status and has a high probability of loss, but the extent of the loss is difficult to quantify due to dependency upon collateral having a value that is difficult to determine or upon some near-term event which lacks certainty. A loan in the “loss” category is considered generally uncollectible or the timing or amount of payments cannot be determined. “Loss” is not intended to imply that the loan has no recovery value, but rather, it is not practical or desirable to continue to carry the asset.

The Corporation’s procedures call for loan risk ratings and classifications to be revised whenever information becomes available that indicates a change is warranted. On a quarterly basis, management reviews a watched asset list, which generally consists of commercial loans that are risk-rated 6 or worse, highly leveraged transaction loans, high-volatility commercial real estate and other selected loans. Management’s review focuses on the current status of the loans, the appropriateness of risk ratings and strategies to improve the credit.

An annual credit review program is conducted by a third party to provide an independent evaluation of the creditworthiness of the commercial loan portfolio, the quality of the underwriting and credit risk management practices and the appropriateness of the risk rating classifications. This review is supplemented with selected targeted internal reviews of the commercial loan portfolio.

Residential and Consumer

Management monitors the relatively homogeneous residential real estate and consumer loan portfolios on an ongoing basis using delinquency information by loan type.

In addition, other techniques are utilized to monitor indicators of credit deterioration in the residential real estate loans and home equity consumer loans. Among these techniques is the periodic tracking of loans with an updated FICO score and an updated estimated LTV ratio. LTV is estimated based on such factors as geographic location, the original appraised value and changes in median home prices, and takes into consideration the age of the loan. The results of these analyses and other credit review procedures, including selected targeted internal reviews, are taken into account in the determination of qualitative loss factors for residential real estate and home equity consumer credits.

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Condensed Notes to Unaudited Consolidated Financial Statements – (continued)

The following table summarizes the Corporation’s loan portfolio by credit quality indicator and loan portfolio segment as of March 31, 2022:

(Dollars in thousands)			Term Loans Amortized Cost by Origination Year
			2022			2021			2020			2019			2018			Prior			Revolving Loans Amortized Cost			Revolving Loans Converted to Term Loans			Total
Commercial:
CRE:
Pass			$138,105			$390,948			$209,963			$230,338			$208,730			$384,605			$8,206			$1,617			$1,572,512
Special Mention			—			9,047			291			13,295			9,720			12,885			277			—			45,515
Classified			—			—			949			—			2,685			6,959			—			—			10,593
Total CRE			138,105			399,995			211,203			243,633			221,135			404,449			8,483			1,617			1,628,620
C&I:
Pass			9,593			85,132			78,438			102,252			94,577			126,646			91,555			887			589,080
Special Mention			530			—			—			569			4,556			18,211			1,186			—			25,052
Classified			—			—			—			63			—			1			696			—			760
Total C&I			10,123			85,132			78,438			102,884			99,133			144,858			93,437			887			614,892
Residential Real Estate:
Residential real estate:
Current			152,448			729,453			312,951			145,184			80,870			350,601			—			—			1,771,507
Past Due			—			—			1,400			270			2,373			2,424			—			—			6,467
Total residential real estate			152,448			729,453			314,351			145,454			83,243			353,025			—			—			1,777,974
Consumer:
Home equity:
Current			2,561			9,149			4,703			3,107			2,412			4,040			211,618			8,076			245,666
Past Due			—			—			—			—			—			184			75			172			431
Total home equity			2,561			9,149			4,703			3,107			2,412			4,224			211,693			8,248			246,097
Other:
Current			466			5,249			2,811			1,079			316			6,064			254			—			16,239
Past Due			14			5			9			—			—			2			—			—			30
Total other			480			5,254			2,820			1,079			316			6,066			254			—			16,269
Total Loans			$303,717			$1,228,983			$611,515			$496,157			$406,239			$912,622			$313,867			$10,752			$4,283,852

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Condensed Notes to Unaudited Consolidated Financial Statements – (continued)

The following table summarizes the Corporation’s loan portfolio by credit quality indicator and loan portfolio segment as of December 31, 2021:

(Dollars in thousands)			Term Loans Amortized Cost by Origination Year
			2021			2020			2019			2018			2017			Prior			Revolving Loans Amortized Cost			Revolving Loans Converted to Term Loans			Total
Commercial:
CRE:
Pass			$417,705			$212,649			$260,940			$206,164			$163,132			$266,067			$7,015			$2,202			$1,535,874
Special Mention			9,089			489			33,982			28,432			—			20,273			320			—			92,585
Classified			—			958			—			2,685			6,959			1			—			—			10,603
Total CRE			426,794			214,096			294,922			237,281			170,091			286,341			7,335			2,202			1,639,062
C&I:
Pass			116,959			78,601			104,827			87,619			51,579			83,182			89,686			911			613,364
Special Mention			—			—			606			4,599			6,195			15,605			1,186			—			28,191
Classified			—			—			—			—			—			—			—			—			—
Total C&I			116,959			78,601			105,433			92,218			57,774			98,787			90,872			911			641,555
Residential Real Estate:
Residential real estate:
Current			733,658			353,742			158,140			85,656			88,365			297,792			—			—			1,717,353
Past Due			—			1,402			1,167			2,379			763			3,911			—			—			9,622
Total residential real estate			733,658			355,144			159,307			88,035			89,128			301,703			—			—			1,726,975
Consumer:
Home equity:
Current			10,434			5,850			3,703			2,380			1,064			3,592			211,488			8,421			246,932
Past Due			—			—			185			—			—			245			115			220			765
Total home equity			10,434			5,850			3,888			2,380			1,064			3,837			211,603			8,641			247,697
Other:
Current			5,536			3,264			1,313			407			747			6,090			258			—			17,615
Past Due			21			—			—			—			—			—			—			—			21
Total other			5,557			3,264			1,313			407			747			6,090			258			—			17,636
Total Loans			$1,293,402			$656,955			$564,863			$420,321			$318,804			$696,758			$310,068			$11,754			$4,272,925

Consistent with industry practice, Washington Trust may renew commercial loans at or immediately prior to their maturity. In the tables above, renewals subject to full credit evaluation before being granted are reported as originations in the period renewed.

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Condensed Notes to Unaudited Consolidated Financial Statements – (continued)

Note 5 - Allowance for Credit Losses on Loans

The ACL on loans is management’s estimate, at the reporting date, of expected credit losses over the expected life of the loans. The level of the ACL on loans is based on management’s ongoing review of all relevant information, from internal and external sources, relating to past events, current conditions and reasonable and supportable forecasts. Historical credit loss experience provides the basis for the calculation of loss given default and the estimation of expected credit losses. Qualitative adjustments are made for differences in specific risk characteristics, such as differences in underwriting standards, portfolio mix, delinquency level, or term, as well as for changes in environmental conditions, that may not be reflected in historical loss rates.

The following table presents the activity in the ACL on loans for the three months ended March 31, 2022:

(Dollars in thousands)			Commercial												Consumer
			CRE			C&I			Total Commercial			Residential Real Estate			Home Equity			Other			Total Consumer			Total
Beginning Balance			$18,933			$10,832			$29,765			$7,860			$1,069			$394			$1,463			$39,088
Charge-offs			—			(5)			(5)			—			—			(31)			(31)			(36)
Recoveries			145			6			151			21			2			10			12			184
Provision			(618)			389			(229)			185			27			17			44			—
Ending Balance			$18,460			$11,222			$29,682			$8,066			$1,098			$390			$1,488			$39,236

The following table presents the activity in the ACL on loans for the three months ended March 31, 2021:

(Dollars in thousands)			Commercial												Consumer
			CRE			C&I			Total Commercial			Residential Real Estate			Home Equity			Other			Total Consumer			Total
Beginning Balance			$22,065			$12,228			$34,293			$8,042			$1,300			$471			$1,771			$44,106
Charge-offs			—			(3)			(3)			(50)			—			(11)			(11)			(64)
Recoveries			—			2			2			33			2			9			11			46
Provision			(768)			162			(606)			(1,556)			129			82			211			(1,951)
Ending Balance			$21,297			$12,389			$33,686			$6,469			$1,431			$551			$1,982			$42,137

Note 6 - Deposits

The following table presents a summary of deposits:

(Dollars in thousands)			Mar 31, 2022						Dec 31, 2021
Noninterest-bearing demand deposits			$911,990						$945,229
Interest-bearing demand deposits			248,914						251,032
NOW accounts			893,603						867,138
Money market accounts			1,295,339						1,072,864
Savings accounts			566,461						555,177
Time deposits (1)			1,211,643						1,288,611
Total deposits			$5,127,950						$4,980,051

(1)Includes wholesale brokered time deposit balances of $401,785 and $515,228, respectively, as of March 31, 2022 and December 31, 2021.

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Condensed Notes to Unaudited Consolidated Financial Statements – (continued)

Note 7 - Borrowings

Advances payable to the FHLB amounted to $55.0 million and $145.0 million, respectively, at March 31, 2022 and December 31, 2021.

As of March 31, 2022 and December 31, 2021, the Bank had access to a $40.0 million unused line of credit with the FHLB. Additionally, the Bank had a $102.0 million standby letter of credit with the FHLB at March 31, 2022. The Bank had remaining available borrowing capacity of $1.6 billion with the FHLB at both March 31, 2022 and December 31, 2021. The Bank pledges certain qualified investment securities and loans as collateral to the FHLB.

The following table presents maturities and weighted average interest rates on FHLB advances outstanding as of March 31, 2022:

(Dollars in thousands)			Scheduled Maturity						Weighted Average Rate
April 1, 2022 to December 31, 2022			$20,000						0.65		%
2023			35,000						0.45
2024			—						—
2025			—						—
2026			—						—
2027 and thereafter			—						—
Balance at March 31, 2022			$55,000						0.52		%

Note 8 - Shareholders' Equity

Stock Repurchase Program

The 2021 Repurchase Program authorizes the repurchase of up to 850,000 shares, or approximately 5%, of the Corporation’s outstanding common stock. This authority may be exercised from time to time and in such amounts as market conditions warrant, and subject to regulatory considerations. The timing and actual number of shares repurchased will depend on a variety of factors including price, corporate and regulatory requirements, market conditions, and other corporate liquidity requirements and priorities. The 2021 Repurchase Program expires on December 31, 2022 and may be modified, suspended, or discontinued at any time. As of March 31, 2022, no shares have been repurchased under the 2021 Repurchase Program.

-22-

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Condensed Notes to Unaudited Consolidated Financial Statements – (continued)

Regulatory Capital Requirements

Capital levels at March 31, 2022 exceeded the regulatory minimum levels to be considered “well capitalized.”

The following table presents the Corporation’s and the Bank’s actual capital amounts and ratios, as well as the corresponding minimum and well capitalized regulatory amounts and ratios that were in effect during the respective periods:

(Dollars in thousands)			Actual												For Capital Adequacy Purposes												To Be “Well Capitalized” Under Prompt Corrective Action Provisions
			Amount						Ratio						Amount						Ratio						Amount						Ratio
March 31, 2022
Total Capital (to Risk-Weighted Assets):
Corporation			$586,872						14.15		%				$331,834						8.00		%				N/A						N/A
Bank			574,138						13.85						331,722						8.00						$414,652						10.00		%
Tier 1 Capital (to Risk-Weighted Assets):
Corporation			552,481						13.32						248,875						6.00						N/A						N/A
Bank			539,747						13.02						248,791						6.00						331,722						8.00
Common Equity Tier 1 Capital (to Risk-Weighted Assets):
Corporation			530,482						12.79						186,656						4.50						N/A						N/A
Bank			539,747						13.02						186,593						4.50						269,524						6.50
Tier 1 Capital (to Average Assets): (1)
Corporation			552,481						9.46						233,500						4.00						N/A						N/A
Bank			539,747						9.25						233,387						4.00						291,734						5.00
December 31, 2021
Total Capital (to Risk-Weighted Assets):
Corporation			578,137						14.01						330,105						8.00						N/A						N/A
Bank			565,087						13.70						330,025						8.00						412,532						10.00
Tier 1 Capital (to Risk-Weighted Assets):
Corporation			546,362						13.24						247,578						6.00						N/A						N/A
Bank			533,312						12.93						247,519						6.00						330,025						8.00
Common Equity Tier 1 Capital (to Risk-Weighted Assets):
Corporation			524,363						12.71						185,684						4.50						N/A						N/A
Bank			533,312						12.93						185,639						4.50						268,146						6.50
Tier 1 Capital (to Average Assets): (1)
Corporation			546,362						9.36						233,534						4.00						N/A						N/A
Bank			533,312						9.14						233,434						4.00						291,793						5.00

(1)    Leverage ratio.

In addition to the minimum regulatory capital required for capital adequacy purposes outlined in the table above, the Corporation is required to maintain a minimum capital conservation buffer, in the form of common equity, of 2.50% in order to avoid restrictions on capital distributions and discretionary bonuses. The Corporation’s capital levels exceeded the minimum regulatory capital requirements plus the capital conservation buffer at March 31, 2022 and December 31, 2021.

The Bancorp owns the common stock of two capital trusts, which have issued trust preferred securities. In accordance with GAAP, the capital trusts are treated as unconsolidated subsidiaries. At both March 31, 2022 and December 31, 2021, $22.0 million in trust preferred securities were included in the Tier 1 capital of the Corporation for regulatory capital reporting purposes pursuant to the capital adequacy guidelines of the Board of Governors of the Federal Reserve System.

In accordance with regulatory capital rules, the Corporation elected the option to delay the estimated impact of ASC 326 on its regulatory capital over a two-year deferral and subsequent three-year transition period ending December 31, 2024. As a result, capital ratios exclude the full impact of the increased ACL on loans and unfunded loan commitments attributed to the adoption of ASC 326, adjusted for an approximation of the after-tax provision for credit losses attributable to ASC 326

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Condensed Notes to Unaudited Consolidated Financial Statements – (continued)

relative to the incurred loss methodology during the two-year deferral period. The cumulative difference at the end of the deferral period is being phased-in to regulatory capital over the three-year transition period, which began January 1, 2022.

Note 9 - Derivative Financial Instruments

The Corporation’s derivative financial instruments are used to manage differences in the amount, timing and duration of the Corporation’s known or expected cash receipts and its known or expected cash payments principally to manage the Corporation’s interest rate risk. Additionally, the Corporation enters into interest rate derivatives to accommodate the business requirements of its customers. All derivatives are recognized as either assets or liabilities on the balance sheet and are measured at fair value.  The accounting for changes in the fair value of derivatives depends on the intended use of the derivative and resulting designation.

Interest Rate Risk Management Agreements

Interest rate risk management agreements, such as caps, swaps and floors, are used from time to time as part of the Corporation’s interest rate risk management strategy. Interest rate swaps are agreements in which the Corporation and another party agree to exchange interest payments (e.g., fixed-rate for variable-rate payments) computed on a notional principal amount. Interest rate caps and floors represent options purchased by the Corporation to manage the interest rate paid throughout the term of the option contract. The credit risk associated with these transactions is the risk of default by the counterparty. To minimize this risk, the Corporation enters into interest rate agreements only with highly rated counterparties that management believes to be creditworthy. The notional amounts of these agreements do not represent amounts exchanged by the parties and, thus, are not a measure of the potential loss exposure.

Cash Flow Hedging Instruments

As of March 31, 2022 and December 31, 2021, the Corporation had an interest rate swap contract with a total notional amount of $20.0 million that was designated as a cash flow hedge to hedge the interest rate risk associated with short-term variable rate FHLB advances. The interest rate swap on borrowings matures in December 2023.

As of March 31, 2022 and December 31, 2021, the Corporation had an interest rate swap contract with a total notional amount of $300.0 million that was designated as a cash flow hedge to hedge the interest rate risk associated with a pool of variable rate commercial loans. The interest rate swap on loans matures in May 2026.

The changes in fair value of derivatives designated as cash flow hedges are recorded in other comprehensive income (loss) and subsequently reclassified to earnings when gains or losses are realized.

Loan Related Derivative Contracts

Interest Rate Swap Contracts with Customers

The Corporation enters into interest rate swap contracts to help commercial loan borrowers manage their interest rate risk.  The interest rate swap contracts with commercial loan borrowers allow them to convert variable-rate loan payments to fixed-rate loan payments.  When the Corporation enters into an interest rate swap contract with a commercial loan borrower, it simultaneously enters into a “mirror” swap contract with a third party.  The third party exchanges the client’s fixed-rate loan payments for variable-rate loan payments.  The Corporation retains the risk that is associated with the potential failure of counterparties and the risk inherent in originating loans.  

As of March 31, 2022 and December 31, 2021, Washington Trust had interest rate swap contracts with commercial loan borrowers with notional amounts of $979.4 million and $1.0 billion, respectively, and equal amounts of “mirror” swap contracts with third party financial institutions.  These derivatives are not designated as hedges and therefore, changes in fair value are recognized in earnings.

Risk Participation Agreements

The Corporation has entered into risk participation agreements with other banks in commercial loan arrangements. Participating banks guarantee the performance on borrower-related interest rate swap contracts. These derivatives are not designated as hedges and therefore, changes in fair value are recognized in earnings.

Under a risk participation-out agreement, a derivative asset, the Corporation participates out a portion of the credit risk associated with the interest rate swap position executed with the commercial borrower for a fee paid to the participating bank. Under a risk participation-in agreement, a derivative liability, the Corporation assumes, or participates in, a portion of the

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Condensed Notes to Unaudited Consolidated Financial Statements – (continued)

credit risk associated with the interest rate swap position with the commercial borrower for a fee received from the other bank.

As of March 31, 2022, the notional amounts of risk participation-out agreements and risk participation-in agreements were $73.8 million and $162.8 million, respectively, compared to $74.2 million and $163.2 million, respectively, as of December 31, 2021.

Mortgage Loan Commitments

Interest rate lock commitments are extended to borrowers and relate to the origination of mortgage loans held for sale.  To mitigate the interest rate risk and pricing risk associated with rate locks and mortgage loans held for sale, the Corporation enters into forward sale commitments. Forward sale commitments are contracts for delayed delivery or net settlement of the underlying instrument, such as a residential real estate mortgage loan, where the seller agrees to deliver on a specified future date, either a specified instrument at a specified price or yield or the net cash equivalent of an underlying instrument. Both interest rate lock commitments and forward sale commitments are derivative financial instruments, but do not meet criteria for hedge accounting and therefore, the changes in fair value of these commitments are reflected in earnings.

As of March 31, 2022, the notional amounts of interest rate lock commitments and forward sale commitments were $40.1 million and $67.6 million, respectively, compared to $49.8 million and $103.6 million, respectively, as of December 31, 2021.

The following table presents the fair values of derivative instruments in the Unaudited Consolidated Balance Sheets:

(Dollars in thousands)			Derivative Assets															Derivative Liabilities
						Fair Value															Fair Value
			Balance Sheet Location			Mar 31, 2022						Dec 31, 2021						Balance Sheet Location			Mar 31, 2022						Dec 31, 2021
Derivatives Designated as Cash Flow Hedging Instruments:
Interest rate risk management contracts:
Interest rate swaps			Other assets			$201						$182						Other liabilities			$18,947						$5,301
Derivatives not Designated as Hedging Instruments:
Loan related derivative contracts:
Interest rate swaps with customers			Other assets			7,088						32,361						Other liabilities			21,656						2,015
Mirror swaps with counterparties			Other assets			21,518						2,001						Other liabilities			7,141						32,480
Risk participation agreements			Other assets			—						1						Other liabilities			2						2
Mortgage loan commitments:
Interest rate lock commitments			Other assets			407						1,256						Other liabilities			85						—
Forward sale commitments			Other assets			985						54						Other liabilities			69						905
Gross amounts						30,199						35,855									47,900						40,703
Less: amounts offset (1)						13,961						2,167									13,961						2,167
Derivative balances, net of offset						16,238						33,688									33,939						38,536
Less: collateral pledged (2)						—						—									10,848						34,539
Net amounts						$16,238						$33,688									$23,091						$3,997

(1)Interest rate risk management contracts and loan related derivative contracts with counterparties are subject to master netting arrangements.

(2)Collateral pledged to derivative counterparties is in the form of cash. Washington Trust may need to post additional collateral in the future in proportion to potential increases in unrealized loss positions.

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Condensed Notes to Unaudited Consolidated Financial Statements – (continued)

The following table presents the effect of derivative instruments in the Unaudited Consolidated Statements of Changes in Shareholders’ Equity and Unaudited Consolidated Statements of Income:

(Dollars in thousands)			Gain (Loss) Recognized in Other Comprehensive Income (Loss), Net of Tax
Three months ended March 31,			2022						2021
Derivatives Designated as Cash Flow Hedging Instruments:
Interest rate risk management contracts:
Interest rate swaps			($10,335)						$297
Total			($10,335)						$297

For derivatives designated as cash flow hedging instruments, see Note 15 for additional disclosure pertaining to the amounts and location of reclassifications from AOCL into earnings.

(Dollars in thousands)						Amount of Gain (Loss) Recognized in Income on Derivatives
Three months ended March 31,			Statement of Income Location			2022						2021
Derivatives not Designated as Hedging Instruments:
Loan related derivative contracts:
Interest rate swaps with customers			Loan related derivative income			($40,822)						($30,231)
Mirror swaps with counterparties			Loan related derivative income			41,122						30,683
Risk participation agreements			Loan related derivative income			1						15
Mortgage loan commitments:
Interest rate lock commitments			Mortgage banking revenues			(934)						(4,529)
Forward sale commitments			Mortgage banking revenues			2,991						7,285
Total						$2,358						$3,223

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Condensed Notes to Unaudited Consolidated Financial Statements – (continued)

Note 10 - Fair Value Measurements

The Corporation uses fair value measurements to record fair value adjustments on certain assets and liabilities and to determine fair value disclosures.  Items recorded at fair value on a recurring basis include securities available for sale, mortgage loans held for sale and derivatives.  Additionally, from time to time, we may be required to record at fair value other assets on a nonrecurring basis, such as collateral dependent individually analyzed loans, property acquired through foreclosure or repossession and mortgage servicing rights.  These nonrecurring fair value adjustments typically involve the application of lower of cost or market accounting or write-downs of individual assets.

Fair value is a market-based measurement, not an entity-specific measurement.  Fair value measurements are determined based on the assumptions the market participants would use in pricing the asset or liability.  In addition, GAAP specifies a hierarchy of valuation techniques based on whether the types of valuation information, or “inputs”, are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Corporation’s market assumptions. These two types of inputs have created the following fair value hierarchy:

•Level 1 – Quoted prices for identical assets or liabilities in active markets.

•Level 2 – 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 inputs and significant value drivers are observable in active markets.

•Level 3 – Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable in the markets and which reflect the Corporation’s market assumptions.

Fair Value Option Election

GAAP allows for the irrevocable option to elect fair value accounting for the initial and subsequent measurement for certain financial assets and liabilities on a contract-by-contract basis. The Corporation has elected the fair value option for mortgage loans held for sale to better match changes in fair value of the loans with changes in the fair value of the forward sale commitment contracts used to economically hedge them.

The following table presents a summary of mortgage loans held for sale accounted for under the fair value option:

(Dollars in thousands)			March 31, 2022			December 31, 2021
Aggregate fair value			$15,612			$40,196
Aggregate principal balance			15,692			39,201
Difference between fair value and principal balance			($80)			$995

Changes in fair value of mortgage loans held for sale accounted for under the fair value option election are included in mortgage banking revenues in the Unaudited Consolidated Statements of Income. Changes in fair value amounted to a decrease to mortgage banking revenues of $1.1 million and $1.5 million, respectively, for the three months ended March 31, 2022 and 2021.

There were no mortgage loans held for sale 90 days or more past due as of March 31, 2022 and December 31, 2021.

Valuation Techniques

Debt Securities

Available for sale debt securities are recorded at fair value on a recurring basis.  When available, the Corporation uses quoted market prices to determine the fair value of debt securities; such items are classified as Level 1. There were no Level 1 debt securities held at March 31, 2022 and December 31, 2021.

Level 2 debt securities are traded less frequently than exchange-traded instruments. The fair value of these securities is determined using matrix pricing with inputs that are observable in the market or can be derived principally from or corroborated by observable market data.  This category includes obligations of U.S. government-sponsored enterprises, including mortgage-backed securities, individual name issuer trust preferred debt securities and corporate bonds.

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Condensed Notes to Unaudited Consolidated Financial Statements – (continued)

Debt securities not actively traded whose fair value is determined through the use of cash flows utilizing inputs that are unobservable are classified as Level 3. There were no Level 3 debt securities held at March 31, 2022 and December 31, 2021.

Mortgage Loans Held for Sale

The fair value of mortgage loans held for sale is estimated based on current market prices for similar loans in the secondary market and therefore are classified as Level 2 assets.

Collateral Dependent Individually Analyzed Loans

The fair value of collateral dependent individually analyzed loans is determined based upon the appraised fair value of the underlying collateral. Such collateral primarily consists of real estate and, to a lesser extent, other business assets. For collateral dependent loans that are expected to be repaid substantially through the sale of the collateral, management adjusts the fair value for estimated costs to sell. Management may also adjust appraised values to reflect estimated market value declines or apply other discounts to appraised values resulting from its knowledge of the collateral. Internal valuations may be utilized to determine the fair value of other business assets. Collateral dependent individually analyzed loans are categorized as Level 3.

Derivatives

Interest rate swaps are traded in over-the-counter markets where quoted market prices are not readily available.  Fair value measurements are determined using independent valuation software, which utilizes the present value of future cash flows discounted using market observable inputs such as forward rate assumptions. The Corporation evaluates the credit risk of its counterparties, as well as that of the Corporation.  Accordingly, factors such as the likelihood of default by the Corporation and its counterparties, its net exposures and remaining contractual life are considered in determining if any fair value adjustments related to credit risk are required.  Counterparty exposure is evaluated by netting positions that are subject to master netting agreements, as well as considering the amount of collateral securing the position, if any. The Corporation has determined that the majority of the inputs used to value its derivative positions fall within Level 2 of the fair value hierarchy. However, the credit valuation adjustments utilize Level 3 inputs. As of March 31, 2022 and December 31, 2021, the Corporation has assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and has determined that the credit valuation adjustments are not significant to the overall valuation of its derivatives. As a result, the Corporation has classified its derivative valuations in their entirety as Level 2.

Fair value measurements of forward loan commitments (interest rate lock commitments and forward sale commitments) are primarily based on current market prices for similar assets in the secondary market for mortgage loans and therefore are classified as Level 2 assets. The fair value of interest rate lock commitments is also dependent on the ultimate closing of the loans. Pull-through rates are based on the Corporation’s historical data and reflect the Corporation’s best estimate of the likelihood that a commitment will result in a closed loan. Although the pull-through rates are Level 3 inputs, the Corporation has assessed the significance of the impact of pull-through rates on the overall valuation of its interest rate lock commitments and has determined that they are not significant to the overall valuation. As a result, the Corporation has classified its interest rate lock commitments as Level 2.

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Condensed Notes to Unaudited Consolidated Financial Statements – (continued)

Items Recorded at Fair Value on a Recurring Basis

The following tables present the balances of assets and liabilities reported at fair value on a recurring basis:

(Dollars in thousands)			Total			Quoted Prices in Active Markets for Identical Assets (Level 1)			Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
March 31, 2022
Assets:
Available for sale debt securities:
Obligations of U.S. government-sponsored enterprises			$185,432			$—			$185,432			$—
Mortgage-backed securities issued by U.S. government agencies and U.S. government-sponsored enterprises			801,570			—			801,570			—
Individual name issuer trust preferred debt securities			9,019			—			9,019			—
Corporate bonds			12,163			—			12,163			—
Mortgage loans held for sale			15,612			—			15,612			—
Derivative assets			16,238			—			16,238			—
Total assets at fair value on a recurring basis			$1,040,034			$—			$1,040,034			$—
Liabilities:
Derivative liabilities			$33,939			$—			$33,939			$—
Total liabilities at fair value on a recurring basis			$33,939			$—			$33,939			$—

(Dollars in thousands)			Total			Quoted Prices in Active Markets for Identical Assets (Level 1)			Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
December 31, 2021
Assets:
Available for sale debt securities:
Obligations of U.S. government-sponsored enterprises			$196,454			$—			$196,454			$—
Mortgage-backed securities issued by U.S. government agencies and U.S. government-sponsored enterprises			824,962			—			824,962			—
Individual name issuer trust preferred debt securities			9,138			—			9,138			—
Corporate bonds			12,305			—			12,305			—
Mortgage loans held for sale			40,196			—			40,196			—
Derivative assets			33,688			—			33,688			—
Total assets at fair value on a recurring basis			$1,116,743			$—			$1,116,743			$—
Liabilities:
Derivative liabilities			$38,536			$—			$38,536			$—
Total liabilities at fair value on a recurring basis			$38,536			$—			$38,536			$—

Items Recorded at Fair Value on a Nonrecurring Basis

There were no assets written down to fair value during the three months ended March 31, 2022.

During 2021, two collateral dependent individually analyzed loans were written down to fair value. One loan with a carrying value of $3.1 million was paid in full in the fourth quarter of 2021. The second loan with a carrying value of $533 thousand was fully reserved for as of December 31, 2021.

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Condensed Notes to Unaudited Consolidated Financial Statements – (continued)

The following table presents valuation techniques and unobservable inputs for assets measured at fair value on a nonrecurring basis for which the Corporation has utilized Level 3 inputs to determine fair value:

(Dollars in thousands)

Fair Value

Valuation Technique

Unobservable Input

Inputs Utilized (Weighted Average)

December 31, 2021

Collateral dependent individually analyzed loans

$—

Appraisals of collateral

Discount for costs to sell

14%

Appraisal adjustments

100%

Valuation of Financial Instruments

The estimated fair values and related carrying amounts for financial instruments for which fair value is only disclosed are presented below as of the periods indicated. The tables exclude financial instruments for which the carrying value approximates fair value such as cash and cash equivalents, FHLB stock, accrued interest receivable, bank-owned life insurance, non-maturity deposits and accrued interest payable. The Corporation considers cash and cash equivalents, accrued interest receivable and accrued interest payable as level 1 measurements within the fair value hierarchy. The Corporation considers FHLB stock, bank-owned life insurance and non-maturity deposits as level 2 measurements.

(Dollars in thousands)
March 31, 2022			Carrying Amount			Total Fair Value			Quoted Prices in Active Markets for Identical Assets (Level 1)			Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
Financial Assets:
Loans, net of allowance for credit losses on loans			$4,244,616			$4,184,223			$—			$—			$4,184,223
Financial Liabilities:
Time deposits			$1,211,643			$1,215,055			$—			$1,215,055			$—
FHLB advances			55,000			54,425			—			54,425			—
Junior subordinated debentures			22,681			18,665			—			18,665			—

(Dollars in thousands)
December 31, 2021			Carrying Amount			Total Fair Value			Quoted Prices in Active Markets for Identical Assets (Level 1)			Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
Financial Assets:
Loans, net of allowance for credit losses on loans			$4,233,837			$4,145,516			$—			$—			$4,145,516
Financial Liabilities:
Time deposits			$1,288,611			$1,294,053			$—			$1,294,053			$—
FHLB advances			145,000			144,862			—			144,862			—
Junior subordinated debentures			22,681			20,181			—			20,181			—

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Condensed Notes to Unaudited Consolidated Financial Statements – (continued)

Note 11 - Revenue from Contracts with Customers

The following tables summarize total revenues as presented in the Unaudited Consolidated Statements of Income and the related amounts that are from contracts with customers within the scope of ASC 606. As shown below, a substantial portion of our revenues are specifically excluded from the scope of ASC 606.

For the three months ended March 31,			2022									2021
(Dollars in thousands)			Revenue (1)			ASC 606 Revenue (2)						Revenue (1)			ASC 606 Revenue (2)
Net interest income			$35,091			$—						$32,871			$—
Noninterest income:
Asset-based wealth management revenues			10,211			10,211						9,583			9,583
Transaction-based wealth management revenues			320			320						312			312
Total wealth management revenues			10,531			10,531						9,895			9,895
Mortgage banking revenues			3,501			—						11,927			—
Card interchange fees			1,164			1,164						1,133			1,133
Service charges on deposit accounts			668			668						609			609
Loan related derivative income			301			—						467			—
Income from bank-owned life insurance			601			—						556			—
Other income			393			286						1,387			1,245
Total noninterest income			17,159			12,649						25,974			12,882
Total revenues			$52,250			$12,649						$58,845			$12,882

(1)As reported in the Unaudited Consolidated Statements of Income.

(2)Revenue from contracts with customers in scope of ASC 606.

The Corporation recognizes revenue that is transactional in nature and such revenue is earned at a point in time. Revenue that is recognized at a point in time includes card interchange fees (fee income related to debit card transactions), ATM fees, wire transfer fees, overdraft charge fees, and stop-payment and returned check fees. Such revenue is derived from transactional information and is recognized as revenue immediately as the transactions occur or upon providing the service to complete the customer’s transaction.

The Corporation recognizes revenue over a period of time, generally monthly, as services are performed and performance obligations are satisfied. Such revenue includes wealth management revenues and service charges on deposit accounts. Wealth management revenues are categorized as either asset-based revenues or transaction-based revenues. Asset-based revenues include trust and investment management fees that are earned based upon a percentage of asset values under administration. Transaction-based revenues include tax preparation fees, commissions and other service fees. Fee revenue from service charges on deposit accounts represent service charges assessed to customers who hold deposit accounts at the Bank.

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Condensed Notes to Unaudited Consolidated Financial Statements – (continued)

The following table presents revenue from contracts with customers based on the timing of revenue recognition:

(Dollars in thousands)
Three months ended March 31,			2022			2021
Revenue recognized at a point in time:
Card interchange fees			$1,164			$1,133
Service charges on deposit accounts			549			481
Other income			229			1,203
Revenue recognized over time:
Wealth management revenues			10,531			9,895
Service charges on deposit accounts			119			128
Other income			57			42
Total revenues from contracts in scope of Topic 606			$12,649			$12,882

Receivables for revenue from contracts with customers primarily consist of amounts due for wealth management services performed for which the Corporation’s performance obligations have been fully satisfied. Receivables amounted to $4.9 million and $6.6 million, respectively, at March 31, 2022 and December 31, 2021 and were included in other assets in the Unaudited Consolidated Balance Sheets.

Deferred revenues, which are considered contract liabilities under ASC 606, represent advance consideration received from customers for which the Corporation has a remaining performance obligation to fulfill. Contract liabilities are recognized as revenue over the life of the contract as the performance obligations are satisfied. The balances of contract liabilities were insignificant at both March 31, 2022 and December 31, 2021 and were included in other liabilities in the Unaudited Consolidated Balance Sheets.

For commissions and incentives that are in scope of ASC 606, such as those paid to employees in our wealth management services and commercial banking segments in order to obtain customer contracts, contract cost assets are established. The contract cost assets are capitalized and amortized over the estimated useful life that the asset is expected to generate benefits. The carrying value of contract cost assets amounted to $2.0 million at March 31, 2022, compared to $1.9 million at December 31, 2021 and were included in other assets in the Unaudited Consolidated Balance Sheets. The amortization of contract cost assets is recorded within salaries and employee benefits expense in the Unaudited Consolidated Statements of Income.

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Condensed Notes to Unaudited Consolidated Financial Statements – (continued)

Note 12 - Defined Benefit Pension Plans

Washington Trust maintains a qualified pension plan for the benefit of certain eligible employees who were hired prior to October 1, 2007. Washington Trust also has non-qualified retirement plans to provide supplemental retirement benefits to certain employees, as defined in the plans. The defined benefit pension plans were previously amended to freeze benefit accruals after a 10-year transition period ending in December 2023.

The following table presents components of net periodic benefit cost and other amounts recognized in other comprehensive income (loss), on a pre-tax basis:

(Dollars in thousands)			Qualified Pension Plan									Non-Qualified Retirement Plans
Three months ended March 31,			2022			2021															2022			2021
Net Periodic Benefit Cost:
Service cost (1)			$516			$592															$54			$52
Interest cost (2)			592			645															106			84
Expected return on plan assets (2)			(1,159)			(1,204)															—			—
Recognized net actuarial loss (2)			255			387															173			158
Net periodic benefit cost			$204			$420															$333			$294

(1)Included in salaries and employee benefits expense in the Unaudited Consolidated Statements of Income.

(2)Included in other expenses in the Unaudited Consolidated Statements of Income.

The following table presents the measurement date and weighted-average assumptions used to determine net periodic benefit cost:

			Qualified Pension Plan												Non-Qualified Retirement Plans
For the three months ended March 31,			2022						2021						2022						2021
Measurement date			Dec 31, 2021						Dec 31, 2020						Dec 31, 2021						Dec 31, 2020
Equivalent single discount rate for benefit obligations			3.00%						2.71%						2.89%						2.51%
Equivalent single discount rate for service cost			3.11						2.86						3.16						2.94
Equivalent single discount rate for interest cost			2.67						2.16						2.48						1.97
Expected long-term return on plan assets			5.25						5.75						N/A						N/A
Rate of compensation increase			3.75						3.75						3.75						3.75

Note 13 - Share-Based Compensation Arrangements

During the three months ended March 31, 2022, the Corporation granted performance share unit and restricted stock unit awards.

Performance share units were granted to certain key employees providing them the opportunity to earn shares of common stock over a 3-year performance period. The weighted average fair value of the performance share units was $59.31. 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. Based on the most recent performance assumption available, it is estimated that 42,728 shares will be earned.

In addition, the Corporation granted to certain key employees 3,157 restricted stock units with 3-year cliff vesting. The weighted average grant date fair value of the restricted stock units was $59.31.

Note 14 - Business Segments

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

Management uses an allocation methodology to allocate income and expenses to the business lines. Direct activities are assigned to the appropriate business segment to which the activity relates. Indirect activities, such as corporate, technology and other support functions, are allocated to business segments primarily based upon full-time equivalent employee computations.

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Condensed Notes to Unaudited Consolidated Financial Statements – (continued)

Commercial Banking

The Commercial Banking segment includes commercial, residential and consumer lending activities; mortgage banking activities; deposit generation; cash management activities; banking activities, including customer support and the operation of ATMs, telephone banking, internet banking and mobile banking services; as well as investment portfolio and wholesale funding activities.

Wealth Management Services

The Wealth Management Services segment includes investment management; holistic financial planning services; personal trust and estate services, including services as trustee, personal representative, custodian and guardian; settlement of decedents’ estates; and institutional trust services, including custody and fiduciary services.

The following table presents the statement of operations and total assets for Washington Trust’s reportable segments:

(Dollars in thousands)			Commercial Banking									Wealth Management Services									Consolidated Total
Three months ended March 31,			2022			2021						2022			2021						2022			2021
Net interest income (expense)			$35,108			$32,885						($17)			($14)						$35,091			$32,871
Provision for credit losses			100			(2,000)						—			—						100			(2,000)
Net interest income (expense) after provision for credit losses			35,008			34,885						(17)			(14)						34,991			34,871
Noninterest income			6,512			14,990						10,647			10,984						17,159			25,974
Noninterest expenses:
Depreciation and amortization expense			711			677						344			377						1,055			1,054
Other noninterest expenses			22,611			26,564						7,553			7,095						30,164			33,659
Total noninterest expenses			23,322			27,241						7,897			7,472						31,219			34,713
Income before income taxes			18,198			22,634						2,733			3,498						20,931			26,132
Income tax expense			3,797			4,835						651			826						4,448			5,661
Net income			$14,401			$17,799						$2,082			$2,672						$16,483			$20,471
Total assets at period end			$5,773,796			$5,646,209						$74,203			$73,180						$5,847,999			$5,719,389
Expenditures for long-lived assets			730			835						104			76						834			911

Note 15 - Other Comprehensive Income (Loss)

The following tables present the activity in other comprehensive income (loss):

Three months ended March 31,			2022												2021
(Dollars in thousands)			Pre-tax Amounts			Income Taxes			Net of Tax						Pre-tax Amounts			Income Taxes			Net of Tax
Securities available for sale:
Changes in fair value of available for sale debt securities			($65,078)			($15,618)			($49,460)						($17,525)			($4,206)			($13,319)
Cash flow hedges:
Change in fair value of cash flow hedges			(13,201)			(3,168)			(10,033)						109			26			83
Net cash flow hedge (gains) losses reclassified into earnings (1)			(399)			(97)			(302)						281			67			214
Net change in fair value of cash flow hedges			(13,600)			(3,265)			(10,335)						390			93			297
Defined benefit plan obligations:
Amortization of net actuarial losses (2)			428			103			325						545			138			407
Total other comprehensive loss			($78,250)			($18,780)			($59,470)						($16,590)			($3,975)			($12,615)

(1)The pre-tax amounts for the three months ended March 31, 2022 are included in interest expense on FHLB advances and interest and fees on loans in the Unaudited Consolidated Statements of Income.

(2)The pre-tax amounts are included in other expenses in the Unaudited Consolidated Statements of Income.

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Condensed Notes to Unaudited Consolidated Financial Statements – (continued)

The following tables present the changes in accumulated other comprehensive income (loss) by component, net of tax:

(Dollars in thousands)			Net Unrealized Losses on Available For Sale Debt Securities												Net Unrealized Losses on Cash Flow Hedges						Net Unrealized Losses on Defined Benefit Plan Obligations						Total
For the three months ended March 31, 2022
Balance at December 31, 2021			($6,795)												($4,013)						($9,173)						($19,981)
Other comprehensive loss before reclassifications			(49,460)												(10,033)						—						(59,493)
Amounts reclassified from accumulated other comprehensive loss			—												(302)						325						23
Net other comprehensive (loss) income			(49,460)												(10,335)						325						(59,470)
Balance at March 31, 2022			($56,255)												($14,348)						($8,848)						($79,451)

(Dollars in thousands)			Net Unrealized Gains (Losses) on Available For Sale Debt Securities												Net Unrealized Losses on Cash Flow Hedges						Net Unrealized Losses on Defined Benefit Plan Obligations						Total
For the three months ended March 31, 2021
Balance at December 31, 2020			$9,881												($1,447)						($15,825)						($7,391)
Other comprehensive (loss) income before reclassifications			(13,319)												83						—						(13,236)
Amounts reclassified from accumulated other comprehensive loss			—												214						407						621
Net other comprehensive (loss) income			(13,319)												297						407						(12,615)
Balance at March 31, 2021			($3,438)												($1,150)						($15,418)						($20,006)

Note 16 - Earnings per Common Share

The following table presents the calculation of earnings per common share:

(Dollars and shares in thousands, except per share amounts)
Three months ended March 31,			2022						2021
Earnings for basic and diluted earnings per common share:
Net income			$16,483						$20,471
Less: dividends and undistributed earnings allocated to participating securities			(54)						(56)
Net income available to common shareholders			$16,429						$20,415
Shares:
Weighted average common shares			17,331						17,275
Dilutive effect of common stock equivalents			151						156
Weighted average diluted common shares			17,482						17,431
Earnings per common share:
Basic earnings per common share			$0.95						$1.18
Diluted earnings per common share			$0.94						$1.17

Weighted average common stock equivalents, not included in common stock equivalents above because they were anti-dilutive, totaled 94,175 and 149,575, respectively, for the three months ended March 31, 2022 and 2021.

Note 17 - Commitments and Contingencies

Financial Instruments with Off-Balance Sheet Risk

The Corporation is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers and to manage the Corporation’s exposure to fluctuations in interest rates.  These financial

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Condensed Notes to Unaudited Consolidated Financial Statements – (continued)

instruments include commitments to extend credit, standby letters of credit, forward loan commitments, loan related derivative contracts and interest rate risk management contracts.  These instruments involve, to varying degrees, elements of credit risk in excess of the amount recognized in the Unaudited Consolidated Balance Sheets.  The contract or notional amounts of these instruments reflect the extent of involvement the Corporation has in particular classes of financial instruments.

Financial Instruments Whose Contract Amounts Represent Credit Risk (Unfunded Commitments)

Commitments to Extend Credit

Commitments to extend credit are agreements to lend to a customer as long as there are no violations of any condition established in the contract.  Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee.  Since some of the commitments are expected to expire without being drawn upon, total commitment amounts do not necessarily represent future cash requirements.  Each borrower’s creditworthiness is evaluated on a case-by-case basis.  The amount of collateral obtained is based on management’s credit evaluation of the borrower.

Standby Letters of Credit

Standby letters of credit are conditional commitments issued to guarantee the performance of a customer to a third party. These standby letters of credit are primarily issued to support the financing needs of the Bank’s commercial customers. The credit risk involved in issuing standby letters of credit is essentially the same as that involved in extending loan facilities to customers. The collateral supporting those commitments is essentially the same as for other commitments. Most standby letters of credit extend for one year. The maximum potential amount of undiscounted future payments, not reduced by amounts that may be recovered, totaled $11.8 million as of March 31, 2022 and December 31, 2021, respectively. At March 31, 2022 and December 31, 2021, there were no liabilities to beneficiaries resulting from standby letters of credit.  Fee income on standby letters of credit was insignificant for the three months ended March 31, 2022 and 2021.

A substantial portion of the standby letters of credit were supported by pledged collateral. The collateral obtained is determined based on management’s credit evaluation of the customer. Should the Corporation be required to make payments to the beneficiary, repayment from the customer to the Corporation is required.

Financial Instruments Whose Notional Amounts Exceed the Amount of Credit Risk

Mortgage Loan Commitments

Interest rate lock commitments are extended to borrowers and relate to the origination of mortgage loans held for sale. To mitigate the interest rate risk and pricing risk associated with these rate locks and mortgage loans held for sale, the Corporation enters into forward sale commitments.  Both interest rate lock commitments and forward sale commitments are derivative financial instruments.

Loan Related Derivative Contracts

The Corporation’s credit policies with respect to interest rate swap agreements with commercial borrowers are similar to those used for loans.  The interest rate swaps with other counterparties are generally subject to bilateral collateralization terms.

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Condensed Notes to Unaudited Consolidated Financial Statements – (continued)

The following table presents the contractual and notional amounts of financial instruments with off-balance sheet risk:

(Dollars in thousands)			Mar 31, 2022						Dec 31, 2021
Financial instruments whose contract amounts represent credit risk (unfunded commitments):
Commitments to extend credit:
Commercial loans			$579,639						$516,344
Home equity lines			381,332						367,784
Other loans			147,954						122,492
Standby letters of credit			11,812						11,844
Financial instruments whose notional amounts exceed the amounts of credit risk:
Mortgage loan commitments:
Interest rate lock commitments			40,103						49,800
Forward sale commitments			67,614						103,626
Loan related derivative contracts:
Interest rate swaps with customers			989,501						1,022,388
Mirror swaps with counterparties			989,501						1,022,388
Risk participation-in agreements			162,821						163,207
Interest rate risk management contracts:
Interest rate swaps			320,000						320,000

See Note 9 for additional disclosure pertaining to derivative financial instruments.

ACL on Unfunded Commitments

The ACL on unfunded commitments is management’s estimate of expected credit losses over the expected contractual term (or life) in which the Corporation is exposed to credit risk via a contractual obligation to extend credit, unless that obligation is unconditionally cancellable by the Corporation. Unfunded commitments for home equity lines of credit and commercial demand loans are considered unconditionally cancellable for regulatory capital purposes and, therefore, are excluded from the calculation to estimate the ACL on unfunded commitments. For each portfolio, estimated loss rates and funding factors are applied to the corresponding balance of unfunded commitments. For each portfolio, the estimated loss rates applied to unfunded commitments are the same quantitative and qualitative loss rates applied to the corresponding on-balance sheet amounts in determining the ACL on loans. The estimated funding factor applied to unfunded commitments represents the likelihood that the funding will occur and is based upon the Corporation’s average historical utilization rate for each portfolio.

The ACL on unfunded commitments is included in other liabilities in the Unaudited Consolidated Balance Sheets. The ACL on unfunded commitments is adjusted through a provision for credit losses recognized in the Unaudited Consolidated Statements of Income.

The activity in the ACL on unfunded commitments for the three months ended March 31, 2022 is presented below:

(Dollars in thousands)			Commercial												Consumer
			CRE			C&I			Total Commercial			Residential Real Estate			Home Equity			Other			Total Consumer			Total
Beginning Balance			$1,267			$816			$2,083			$62			$—			$16			$16			$2,161
Provision			68			21			89			10			—			1			1			100
Ending Balance			$1,335			$837			$2,172			$72			$—			$17			$17			$2,261

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Condensed Notes to Unaudited Consolidated Financial Statements – (continued)

The activity in the ACL on unfunded commitments for the three months ended March 31, 2021 is presented below:

(Dollars in thousands)			Commercial												Consumer
			CRE			C&I			Total Commercial			Residential Real Estate			Home Equity			Other			Total Consumer			Total
Beginning Balance			$907			$1,402			$2,309			$54			$—			$19			$19			$2,382
Provision			46			(88)			(42)			(8)			—			1			1			(49)
Ending Balance			$953			$1,314			$2,267			$46			$—			$20			$20			$2,333

Other Contingencies

Litigation

The Corporation is involved in various claims and legal proceedings arising out of the ordinary course of business. Management is of the opinion, based on its review with counsel of the development of such matters to date, that the ultimate disposition of such matters will not materially affect the consolidated balance sheets or statements of income of the Corporation.

Note 18 - Subsequent Events

On April 26, 2022, the Bancorp's shareholders approved the 2022 Incentive Plan. The maximum number of shares of common stock that may be issued under the 2022 Incentive Plan is 600,000. The type of permitted equity awards under the 2022 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.

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Management's Discussion and Analysis

Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with the Corporation’s Audited Consolidated Financial Statements and notes thereto included in the Annual Report on Form 10-K for the year ended December 31, 2021, 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 months ended March 31, 2022 are not necessarily indicative of the results for the full-year ended December 31, 2022 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:

•ongoing disruptions in our business and operations, and changes in consumer behavior due to the ongoing COVID-19 pandemic;

•changes in political, business and economic conditions, including inflation, or legislative or regulatory initiatives;

•the possibility that future credits losses are higher than currently expected due to changes in economic assumptions or adverse economic developments;

•volatility in national and international financial markets;

•interest rate changes or volatility, as well as changes in the balance and mix of loans and deposits;

•reductions in the market value or outflows of wealth management AUA;

•decreases in the value of securities and other assets;

•changes in loan demand and collectability;

•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;

•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, 2021, 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

The Corporation offers a comprehensive product line of banking and financial services to individuals and businesses, including commercial, residential and consumer lending, retail and commercial deposit products, and wealth management services through its offices in Rhode Island, eastern Massachusetts and Connecticut; its ATMs; telephone banking; mobile banking and its internet website (www.washtrust.com).

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

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Management's Discussion and Analysis

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 2022, we plan to open a new full-service branch in Cumberland, Rhode Island.

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 enterprise risk management 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 Note 4 and Note 5 to the Unaudited Consolidated Financial Statements. For further discussion regarding credit risk associated with unfunded commitments, see Note 17 to the Unaudited Consolidated Financial Statements. For further discussion regarding the Corporation’s securities portfolio, see Note 3 to the Unaudited Consolidated Financial Statements.

Interest rate risk is the risk of loss to future earnings due to changes in interest rates. 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 for it to meet its maturing liability obligations and customer loan demand. 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 which 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 systems and controls, and external influences such as market conditions, fraudulent activities, natural disasters and security risks.

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Management's Discussion and Analysis

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

For additional factors that could adversely impact Washington Trust’s future results of operations and financial condition, see the section labeled “Risk Factors” in Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, as updated by our Quarterly Reports on Form 10-Q and other filings submitted to the SEC.

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Management's Discussion and Analysis

Results of Operations

The following table presents a summarized consolidated statement of operations:

(Dollars in thousands)												Change
Three months ended March 31,			2022			2021						$			%
Net interest income			$35,091			$32,871						$2,220			7		%
Noninterest income			17,159			25,974						(8,815)			(34)
Total revenues			52,250			58,845						(6,595)			(11)
Provision for credit losses			100			(2,000)						2,100			105
Noninterest expense			31,219			34,713						(3,494)			(10)
Income before income taxes			20,931			26,132						(5,201)			(20)
Income tax expense			4,448			5,661						(1,213)			(21)
Net income			$16,483			$20,471						($3,988)			(19		%)

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

Three months ended March 31,			2022			2021
Diluted earnings per common share			$0.94			$1.17
Return on average assets (net income divided by average assets)			1.14		%	1.45		%
Return on average equity (net income available for common shareholders divided by average equity)			12.04		%	15.55		%
Net interest income as a percentage of total revenues			67		%	56		%
Noninterest income as a percentage of total revenues			33		%	44		%

Net income totaled $16.5 million for the three months ended March 31, 2022, compared to $20.5 million for the same period in 2021.

In 2022, net interest income largely benefited from lower funding costs, a reduction in average wholesale funding balances and an increase in average interest-earning asset balances. The decrease in noninterest income reflected lower mortgage banking revenues and other income, partially offset by higher wealth management revenues. The provision for credit losses recognized for the three months ended March 31, 2022 was modest, reflecting continued low loss rates, strong asset and credit quality metrics, as well as our current estimate of forecasted economic conditions. This compared to a release of credit loss reserves in first quarter of 2021. Noninterest expenses for the three months ended March 31, 2021 included debt prepayment penalty expense of $3.3 million associated with paying off higher yielding FHLB advances, while there was no such expense incurred for the three months ended March 31, 2022. The year-over-year decline in noninterest expenses also reflected a decrease in salaries and employee benefits expense.

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Management's Discussion and Analysis

Average Balances / Net Interest Margin - Fully Taxable Equivalent Basis

The following table presents average balance and interest rate information.  Tax-exempt income is converted to a 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 and changes in fair value on mortgage loans held for sale are excluded from the average balance and yield calculations. Nonaccrual loans, as well as interest recognized on these loans, are included in amounts presented for loans.

Three months ended March 31,			2022												2021												Change
(Dollars in thousands)			Average Balance			Interest			Yield/ Rate						Average Balance			Interest			Yield/ Rate						Average Balance			Interest			Yield/ Rate
Assets:
Cash, federal funds sold and short-term investments			$183,684			$78			0.17						$154,895			$33			0.09						$28,789			$45			0.08
Mortgage loans held for sale			28,471			232			3.30						61,408			441			2.91						(32,937)			(209)			0.39
Taxable debt securities			1,071,745			4,230			1.60						915,864			3,242			1.44						155,881			988			0.16
FHLB stock			12,294			67			2.21						28,867			133			1.87						(16,573)			(66)			0.34
Commercial real estate			1,631,819			11,891			2.96						1,625,859			11,359			2.83						5,960			532			0.13
Commercial & industrial			634,869			6,226			3.98						839,740			7,866			3.80						(204,871)			(1,640)			0.18
Total commercial			2,266,688			18,117			3.24						2,465,599			19,225			3.16						(198,911)			(1,108)			0.08
Residential real estate			1,740,087			13,987			3.26						1,454,323			12,817			3.57						285,764			1,170			(0.31)
Home equity			246,766			1,875			3.08						257,733			2,122			3.34						(10,967)			(247)			(0.26)
Other			16,933			195			4.67						20,106			241			4.86						(3,173)			(46)			(0.19)
Total consumer			263,699			2,070			3.18						277,839			2,363			3.45						(14,140)			(293)			(0.27)
Total loans			4,270,474			34,174			3.25						4,197,761			34,405			3.32						72,713			(231)			(0.07)
Total interest-earning assets			5,566,668			38,781			2.83						5,358,795			38,254			2.90						207,873			527			(0.07)
Noninterest-earning assets			298,000												353,136												(55,136)
Total assets			$5,864,668												$5,711,931												$152,737
Liabilities and Shareholders’ Equity:
Interest-bearing demand deposits			$248,395			$70			0.11						$183,989			$96			0.21						$64,406			($26)			(0.10)
NOW accounts			847,848			130			0.06						697,964			102			0.06						149,884			28			—
Money market accounts			1,174,833			615			0.21						909,890			714			0.32						264,943			(99)			(0.11)
Savings accounts			561,339			71			0.05						489,851			69			0.06						71,488			2			(0.01)
Time deposits (in-market)			793,169			2,017			1.03						703,580			2,238			1.29						89,589			(221)			(0.26)
Total interest-bearing in-market deposits			3,625,584			2,903			0.32						2,985,274			3,219			0.44						640,310			(316)			(0.12)
Wholesale brokered time deposits			455,785			200			0.18						579,149			444			0.31						(123,364)			(244)			(0.13)
Total interest-bearing deposits			4,081,369			3,103			0.31						3,564,423			3,663			0.42						516,946			(560)			(0.11)
FHLB advances			150,922			244			0.66						542,684			1,380			1.03						(391,762)			(1,136)			(0.37)
Junior subordinated debentures			22,681			99			1.77						22,681			94			1.68						—			5			0.09
Total interest-bearing liabilities			4,254,972			3,446			0.33						4,129,788			5,137			0.50						125,184			(1,691)			(0.17)
Noninterest-bearing demand deposits			940,220												890,628												49,592
Other liabilities			116,291												159,244												(42,953)
Shareholders’ equity			553,185												532,271												20,914
Total liabilities and shareholders’ equity			$5,864,668												$5,711,931												$152,737
Net interest income (FTE)						$35,335												$33,117												$2,218
Interest rate spread									2.50												2.40												0.10
Net interest margin									2.57												2.51												0.06

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Management's Discussion and Analysis

Interest income amounts presented in the preceding table include the following adjustments for taxable equivalency:

(Dollars in thousands)
Three months ended March 31,			2022			2021			Change
Commercial loans			$244			$246			($2)

Net Interest Income

Net interest income, the primary source of our operating income, totaled $35.1 million for the three months ended March 31, 2022, compared to $32.9 million for the same period in 2021. 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 and securities to be comparable to taxable loans and securities.

The analysis of net interest income, NIM and the yield on loans may be impacted by the periodic recognition of prepayment penalty fee income associated with loan payoffs. Prepayment penalty fee income associated with loan payoffs amounted to $76 thousand (or 0 basis point benefit to NIM) for the three months ended March 31, 2022, compared to $217 thousand (or 2 basis points benefit to NIM) for the same period in 2021.

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. Additionally, as PPP loans are forgiven by the SBA, related unamortized net fee balances are accelerated and amortized, increasing net 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 interest income) amounted to $966 thousand for the three months ended March 31, 2022, compared $882 thousand for the same period in 2021.

Accelerated amortization of net deferred fee balances on PPP loans forgiven by the SBA amounted to $819 thousand (or 6 basis points benefit to NIM) for the three months ended March 31, 2022, compared to $1.2 million (or 10 basis points benefit to NIM) for the same period in 2021.

FTE net interest income for the three months ended March 31, 2022 amounted to $35.3 million, up by $2.2 million, or 7%, from the same period in 2021. Declines in funding costs contributed $1.4 million of net interest income for the three months ended March 31, 2022. In addition, growth in average interest-earning assets and declines in average interest-bearing liability balances contributed approximately $856 thousand of net interest income for the three months ended March 31, 2022.

NIM was 2.57% for the three months ended March 31, 2022, compared to 2.51% for the same period in 2021. NIM benefited from lower funding costs and a reduction in average wholesale funding balances. It also benefited from accelerated amortization of net deferred fee balances on PPP loans that were forgiven by the SBA and loan prepayment fees. Excluding the impact of both accelerated net deferred fee amortization on PPP loans and commercial loan prepayment fee income, the NIM amounted to 2.51% for the three months ended March 31, 2022, compared to 2.40% for the same period in 2021.

Total average securities for the three months ended March 31, 2022 increased by $155.9 million, or 17%, from the average balances for the same period a year earlier. The FTE rate of return on the securities portfolio for the three months ended March 31, 2022 was 1.60%, compared to 1.44% for the same period in 2021, reflecting purchases of relatively higher yielding debt securities and higher market interest rates.

Total average loan balances for the three months ended March 31, 2022 increased by $72.7 million, or 2%, from the average loan balances for the comparable 2021 period. The increase reflected growth in average residential real estate loan balances, partially offset by a decline in commercial loans concentrated in PPP loans. The yield on total loans for the three months ended March 31, 2022 was 3.25%, compared to 3.32% for the same period in 2021. The yield on total loans benefited from accelerated amortization of net deferred fee balances on PPP loans that were forgiven by the SBA and commercial loan

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Management's Discussion and Analysis

prepayment fee income. Excluding the impact of these items for both periods, the yield on total loans for the three months ended March 31, 2022 was 3.16%, down by 2 basis points, from 3.18% for the same period in 2021.

The average balance of FHLB advances for the three months ended March 31, 2022 decreased by $391.8 million, compared to the average balances for the same period in 2021. The average rate paid on such advances for the three months ended March 31, 2022 was 0.66%, down by 37 basis points from 1.03% for the same period in 2021, reflecting maturities and payoffs of higher-yielding FHLB advances and lower market interest rates in the prior year.

Included in total average interest-bearing deposits were out-of-market wholesale brokered time deposits, which decreased by $123.4 million from the same period in 2021. The average rate paid on wholesale brokered time deposits for the three months ended March 31, 2022 was 0.18%, compared to 0.31% for the same period in 2021, reflecting lower market interest rates in the prior year.

Average in-market interest-bearing deposits, which excludes wholesale brokered time deposits, for the three months ended March 31, 2022 increased by $640.3 million, or 21%, from the average balances for the same period in 2021. The increases reflected growth across all in-market interest-bearing deposit categories. The average rate paid on in-market interest-bearing deposits for the three months ended March 31, 2022 was 0.32%, down by 12 basis points from 0.44% for the same period in 2021, largely due to downward repricing of interest-bearing in-market deposits reflecting lower market interest rates in the prior year.

The average balance of noninterest-bearing demand deposits for the three months ended March 31, 2022 increased by $49.6 million, or 6%, from the average balance for the same period in 2021. See additional disclosure under the caption “Sources of Funds.”

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Management's Discussion and Analysis

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

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

(Dollars in thousands)			Three Months Ended March 31, 2022 vs. 2021
			Change Due to
			Volume			Rate			Net Change
Interest on Interest-Earning Assets:
Cash, federal funds sold and other short-term investments			$8			$37			$45
Mortgage loans held for sale			(262)			53			(209)
Taxable debt securities			598			390			988
FHLB stock			(87)			21			(66)
Commercial real estate			39			493			532
Commercial & industrial			(1,998)			358			(1,640)
Total commercial			(1,959)			851			(1,108)
Residential real estate			2,353			(1,183)			1,170
Home equity			(87)			(160)			(247)
Other			(37)			(9)			(46)
Total consumer			(124)			(169)			(293)
Total loans			270			(501)			(231)
Total interest income			527			—			527
Interest on Interest-Bearing Liabilities:
Interest-bearing demand deposits			27			(53)			(26)
NOW accounts			28			—			28
Money market accounts			181			(280)			(99)
Savings accounts			12			(10)			2
Time deposits (in-market)			264			(485)			(221)
Total interest-bearing in-market deposits			512			(828)			(316)
Wholesale brokered time deposits			(82)			(162)			(244)
Total interest-bearing deposits			430			(990)			(560)
FHLB advances			(759)			(377)			(1,136)
Junior subordinated debentures			—			5			5
Total interest expense			(329)			(1,362)			(1,691)
Net interest income (FTE)			$856			$1,362			$2,218

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 of expected lifetime credit losses as of the reporting date and includes consideration of current forecasted economic conditions. Estimating an appropriate level of ACL necessarily involves a high degree of judgment.

For the three months ended March 31, 2022, there was a positive $100 thousand provision for credit losses (or a charge) recognized, compared to a negative $2.0 million provision for credit losses (or a benefit) recognized for the same period in 2021. For the three months ended March 31, 2022, the provision related to an increase in the ACL on unfunded commitments. There was no provision for credit losses on loans recognized for the three months ended March 31, 2022, reflecting continued low loss rates, strong asset and credit quality metrics, as well as our current estimate of forecasted economic conditions. The release of credit loss reserves in 2021 reflected an improvement in forecasted economic conditions following higher credit provisioning in 2020, which was attributable to the emergence of the COVID-19 pandemic.

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Management's Discussion and Analysis

Net recoveries totaled $148 thousand in the three months ended March 31, 2022, compared to net charge-offs of $18 thousand for the same period in 2021.

The ACL on loans was $39.2 million, or 0.92% of total loans, at March 31, 2022, compared to an ACL on loans of $39.1 million, or 0.91% of total loans, at December 31, 2021.

See additional discussion under the caption “Asset Quality” for further information on 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)															Change
Three months ended March 31,			2022						2021						$						%
Noninterest income:
Wealth management revenues			$10,531						$9,895						$636						6		%
Mortgage banking revenues			3,501						11,927						(8,426)						(71)
Card interchange fees			1,164						1,133						31						3
Service charges on deposit accounts			668						609						59						10
Loan related derivative income			301						467						(166)						(36)
Income from bank-owned life insurance			601						556						45						8
Other income			393						1,387						(994)						(72)
Total noninterest income			$17,159						$25,974						($8,815)						(34		%)

Noninterest Income Analysis

Revenue from wealth management services represented 61% of total noninterest income for the three months ended March 31, 2022, compared to 38% for the same period in 2021. 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, such as commissions and other service fees 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)															Change
Three months ended March 31,			2022						2021						$						%
Wealth management revenues:
Asset-based revenues			$10,211						$9,583						$628						7		%
Transaction-based revenues			320						312						8						3
Total wealth management revenues			$10,531						$9,895						$636						6		%

Wealth management revenues for the three months ended March 31, 2022 increased by $636 thousand, or 6%, from the comparable period in 2021, reflecting growth in asset-based revenues. The increase in asset-based revenues correlated with the increase in AUA balances.

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Management's Discussion and Analysis

The following table presents the changes in wealth management AUA:

(Dollars in thousands)
Three months ended March 31,			2022						2021
Wealth management assets under administration:
Balance at the beginning of period			$7,784,211						$6,866,737
Net investment appreciation (depreciation) & income			(388,733)						208,953
Net client asset inflows (outflows)			97,415						(26,464)
Balance at the end of period			$7,492,893						$7,049,226

Wealth management AUA amounted to $7.5 billion at March 31, 2022, up by $443.7 million, or 6% from the balance at March 31, 2021, primarily due to net investment appreciation. The average balance of AUA for the three months ended March 31, 2022 increased by approximately 9% from the average balance for the same period in 2021.

Mortgage banking revenues represented 20% of total noninterest income for the three months ended March 31, 2022, compared to 46% for the same period in 2021. 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)												Change
Three months ended March 31,			2022			2021						$			%
Mortgage banking revenues:
Realized gains on loan sales, net (1)			$3,327			$13,745						($10,418)			(76		%)
Changes in fair value, net (2)			(242)			(1,888)						1,646			87
Loan servicing fee income, net (3)			416			70						346			494
Total mortgage banking revenues			$3,501			$11,927						($8,426)			(71		%)
Loans sold to the secondary market (4)			$130,128			$292,019						($161,891)			(55		%)

(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 months ended March 31, 2022, mortgage banking revenues totaled $3.5 million, down by $8.4 million, or 71%, compared to the same period in 2021. These revenues are dependent on mortgage origination volume and are sensitive to interest rates and the condition of housing markets. Included in mortgage banking revenues are changes in the fair value of mortgage loans held for sale and forward loan commitments, which are primarily based on current market prices in the secondary market and correlate to changes in the size of the mortgage pipeline. The decline in mortgage banking revenues was mainly attributable to a decline in sales volume and a reduction in the sales yield from the previously elevated level in the first quarter of 2021. Mortgage loans sold to the secondary market totaled $130.1 million for the three months ended March 31, 2022, compared to $292.0 million for the same period in 2021, reflecting an overall reduction in mortgage origination and sales activity, as well as a larger proportion of loans originated for portfolio in 2022.

Other income for the three months ended March 31, 2022 decreased by $994 thousand from the same period in 2021, due to $1.0 million of income associated with a litigation settlement that was recognized in the first quarter of 2021.

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Management's Discussion and Analysis

Noninterest Expense

The following table presents noninterest expense comparisons:

(Dollars in thousands)															Change
Three months ended March 31,			2022						2021						$						%
Noninterest expense:
Salaries and employee benefits			$21,002						$21,527						($525)						(2		%)
Outsourced services			3,242						3,200						42						1
Net occupancy			2,300						2,128						172						8
Equipment			918						994						(76)						(8)
Legal, audit and professional fees			770						597						173						29
FDIC deposit insurance costs			366						345						21						6
Advertising and promotion			351						222						129						58
Amortization of intangibles			217						226						(9)						(4)
Debt prepayment penalties			—						3,335						(3,335)						(100)
Other			2,053						2,139						(86)						(4)
Total noninterest expense			$31,219						$34,713						($3,494)						(10		%)

Noninterest Expense Analysis

Salaries and employee benefits expense for the three months ended March 31, 2022 decreased by $525 thousand compared to the same period in 2021. This reflected volume-related decreases in mortgage originator compensation expense, partially offset by annual merit increases and staffing increases.

Debt prepayment penalty expense for the three months ended March 31, 2021 totaled $3.3 million, due to the prepayment of higher-yielding FHLB advances. There were no such debt prepayments in the first quarter of 2022.

Income Taxes

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

(Dollars in thousands)
Three months ended March 31,			2022			2021
Income tax expense			$4,448			$5,661
Effective income tax rate			21.3		%	21.7		%

The effective income tax rates for the three months ended March 31, 2022 and 2021 differed from the federal rate of 21%, primarily due to state income tax expense, partially offset by the benefits of tax-exempt income, income from BOLI, federal tax credits and the recognition of excess tax expense or benefits associated with the settlement of share-based awards.

The decrease in the effective tax rate for the three months ended March 31, 2022 compared to the same period in 2021 reflected an increase in benefits from federal tax credits, partially offset by a decrease in benefits from tax-exempt income.

Segment Reporting

The Corporation manages its operations through two reportable business segments, consisting of Commercial Banking and Wealth Management Services. See Note 14 to the Unaudited Consolidated Financial Statements for additional disclosure related to business segments.

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Management's Discussion and Analysis

Commercial Banking

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

(Dollars in thousands)												Change
Three months ended March 31,			2022			2021						$			%
Net interest income			$35,108			$32,885						$2,223			7		%
Provision for credit losses			100			(2,000)						2,100			(105)
Net interest income after provision for credit losses			35,008			34,885						123			—
Noninterest income			6,512			14,990						(8,478)			(57)
Noninterest expense			23,322			27,241						(3,919)			(14)
Income before income taxes			18,198			22,634						(4,436)			(20)
Income tax expense			3,797			4,835						(1,038)			(21)
Net income			$14,401			$17,799						($3,398)			(19		%)

Net interest income for the Commercial Banking segment for the three months ended March 31, 2022, increased by $2.2 million from the same period in 2021. Net interest income largely benefited from lower funding costs, a reduction in average wholesale funding balances and an increase in average interest-earning asset balances.

For the three months ended March 31, 2022, there was a positive $100 thousand provision for credit losses (or a charge) recognized, compared to a negative $2.0 million provision for credit losses (or a benefit) recognized for the same period in 2021. For the three months ended March 31, 2022, the provision related to an increase in the ACL on unfunded commitments. There was no provision for credit losses on loans recognized for the three months ended March 31, 2022, reflecting continued low loss rates, strong asset and credit quality metrics, as well as our current estimate of forecasted economic conditions. The release of credit loss reserves in 2021 reflected an improvement in forecasted economic conditions following higher credit provisioning in 2020, which was attributable to the emergence of the COVID-19 pandemic.

Noninterest income derived from the Commercial Banking segment for the three months ended March 31, 2022 was down by $8.5 million from the comparable period in 2021, largely due to lower mortgage banking revenues. See additional discussion regarding mortgage banking revenues under the caption “Noninterest Income” above.

Commercial Banking noninterest expenses for the three months ended March 31, 2022 were down by $3.9 million from the same period in 2021, largely reflecting decreases in debt prepayment penalties and salaries and employee benefits expense. See additional discussion under the caption “Noninterest Expense” above.

Wealth Management Services

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

(Dollars in thousands)												Change
Three months ended March 31,			2022			2021						$			%
Net interest expense			($17)			($14)						($3)			21		%
Noninterest income			10,647			10,984						(337)			(3)
Noninterest expense			7,897			7,472						425			6
Income before income taxes			2,733			3,498						(765)			(22)
Income tax expense			651			826						(175)			(21)
Net income			$2,082			$2,672						($590)			(22		%)

For the three months ended March 31, 2022, noninterest income derived from the Wealth Management Services segment decreased by $337 thousand, compared to the same period in 2021. The decrease reflected $1.0 million of income associated with a litigation settlement that was recognized in the first quarter of 2021, partially offset by growth in asset-based revenues. See further discussion under the caption “Noninterest Income” above.

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Management's Discussion and Analysis

For the three months ended March 31, 2022, noninterest expenses for the Wealth Management Services segment increased by $425 thousand from the same period in 2021, reflecting an increase in salaries and employee benefits expenses. See further discussion under the caption “Noninterest Expense” above.

Financial Condition

Summary

The following table presents selected financial condition data:

(Dollars in thousands)															Change
			March 31, 2022						December 31, 2021						$			%
Cash and due from banks			$224,807						$175,259						$49,548			28		%
Total securities			1,008,184						1,042,859						(34,675)			(3)
Total loans			4,283,852						4,272,925						10,927			—
Allowance for credit losses on loans			39,236						39,088						148			—
Total assets			5,847,999						5,851,127						(3,128)			—
Total deposits			5,127,950						4,980,051						147,899			3
FHLB advances			55,000						145,000						(90,000)			(62)
Total shareholders’ equity			513,192						564,808						(51,616)			(9)

Total assets amounted to $5.8 billion at March 31, 2022, down by $3.1 million, or 0.1%, from the end of 2021.

Cash and due from banks balances increased by $49.5 million, or 28%, from the end of 2021, reflecting higher cash balances with the FRBB.

The securities portfolio decreased by $34.7 million, or 3%, reflecting a temporary decline in fair value and pay-downs, partially offset by purchases.

Total loans increased by $10.9 million, or 0.3%, as loan originations were partially offset by payoffs, pay-downs and PPP loans that were forgiven by the SBA.

Total deposits increased by $147.9 million, or 3%, from the end of 2021, with an increase of $261.3 million, or 6%, in in-market deposits partially offset by a decrease of $113.4 million, or 22%, in wholesale brokered time deposits. FHLB advances decreased by $90.0 million, or 62%, from December 31, 2021, as lower levels of wholesale funding were needed given the in-market deposits increase.

Shareholders’ equity decreased by $51.6 million, or 9%, largely reflecting a decline in the AOCL component of shareholders' equity due to a temporary decrease in the fair value of available for sale securities and cash flow hedges.

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 have securities designated as held to maturity and does not maintain a portfolio of trading securities. Securities available for sale may be sold in response to changes in market conditions, prepayment risk, rate fluctuations, liquidity, or capital requirements. Debt

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Management's Discussion and Analysis

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 March 31, 2022 and December 31, 2021, 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 10 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)			March 31, 2022												December 31, 2021
			Amount						%						Amount						%
Available for Sale Debt Securities:
Obligations of U.S. government-sponsored enterprises			$185,432						18		%				$196,454						19		%
Mortgage-backed securities issued by U.S. government agencies and U.S. government-sponsored enterprises			801,570						80						824,962						79
Individual name issuer trust preferred debt securities			9,019						1						9,138						1
Corporate bonds			12,163						1						12,305						1
Total available for sale debt securities			$1,008,184						100		%				$1,042,859						100		%

The securities portfolio amounted to $1.0 billion, or 17% of total assets, as of March 31, 2022 compared to $1.0 billion, or 18% of total assets, as of December 31, 2021. 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 $34.7 million, or 3%, from the end of 2021, reflecting a temporary decline in the fair value of available for sale securities and routine pay-downs on mortgage-backed securities. These decreases were partially offset by purchases of U.S. government agency and U.S. government-sponsored debt securities, including mortgage-backed securities, totaling $75.2 million, with a weighted average yield of 2.41%.

The carrying amount of available for sale debt securities included net unrealized losses of $74.0 million and $8.9 million, respectively, as of March 31, 2022 and December 31, 2021. The decline in fair value of available for sale debt securities from the end of 2021 was primarily concentrated in obligations of U.S. government agencies and U.S. government-sponsored enterprises, including mortgage-backed securities, and attributable to relative changes in interest rates since the time of purchase. See Note 3 to the Unaudited Consolidated Financial Statements for additional information.

Loans

Total loans amounted to $4.3 billion at March 31, 2022, up by $10.9 million, or 0.3%, from the end of 2021, reflecting growth in the residential real estate portfolio partially offset by a decline in the commercial loan portfolio.

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Management's Discussion and Analysis

The following is a summary of loans:

(Dollars in thousands)			March 31, 2022												December 31, 2021
			Amount						%						Amount						%
Commercial:
Commercial real estate (1)			$1,628,620						38		%				$1,639,062						38		%
Commercial & industrial (2)			614,892						14						641,555						15
Total commercial			2,243,512						52						2,280,617						53
Residential Real Estate:
Residential real estate (3)			1,777,974						42						1,726,975						40
Consumer:
Home equity			246,097						6						247,697						6
Other (4)			16,269						—						17,636						1
Total consumer			262,366						6						265,333						7
Total loans			$4,283,852						100		%				$4,272,925						100		%

(1)CRE consists of commercial mortgages primarily secured by income-producing property, as well as construction and development loans. Construction and development loans are made to businesses for land development or the on-site construction of industrial, commercial, or residential buildings.

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

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

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

COVID-19 Pandemic Related

The Corporation elected to account for eligible loan modifications under Section 4013 of the CARES Act, as amended by the CRRSA Act. Eligible loan modifications from March 1, 2020 through January 1, 2022 made in response to the COVID-19 pandemic were not required to be classified as TDRs. During this period of time, we processed loan payment deferral modifications, or “deferments”, on 654 loans totaling $727.7 million. The vast majority of the deferments qualified as eligible loan modifications and were not classified as TDRs. As of March 31, 2022, all of these loans have exited their payment deferral period.

Commercial Loans

The commercial loan portfolio represented 52% of total loans at March 31, 2022.

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 $442.7 million and $451.6 million, respectively, at March 31, 2022 and December 31, 2021. 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, commercial real estate and commercial and industrial loans. Commercial real estate loans consist of commercial mortgages secured by 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. Commercial real estate loans also include construction loans made to businesses for land development or the on-site construction of industrial, commercial, or residential buildings. Commercial and industrial loans primarily provide working capital, equipment financing and financing for other business-related purposes. Commercial and industrial loans are frequently collateralized by equipment, inventory, accounts receivable, and/or general business assets.  A portion of the Bank’s commercial and industrial loans is also collateralized by real estate.  Commercial and industrial loans also include PPP loans that are fully guaranteed by the U.S. government, 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.

Commercial Real Estate Loans

CRE loans totaled $1.6 billion at March 31, 2022, down by $10.4 million, or 1%, from the balance at December 31, 2021. Included in CRE loans were construction and development loans with carrying values of $90.0 million and $122.4 million,

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Management's Discussion and Analysis

respectively, as of March 31, 2022 and December 31, 2021. For the three months ended March 31, 2022, CRE payoffs and pay-downs of approximately $100 million were partially offset by loan originations and advances.

Shared national credit balances outstanding included in the CRE loan portfolio totaled $5.0 million at March 31, 2022. The balance was included in the pass-rated category of commercial loan credit quality and current with respect to contractual payment terms at March 31, 2022.

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

(Dollars in thousands)			March 31, 2022									December 31, 2021
			Outstanding Balance			% of Total						Outstanding Balance			% of Total
Connecticut			$618,315			38		%				$643,182			39		%
Rhode Island			394,011			24						408,496			25
Massachusetts			472,902			29						464,018			28
Subtotal			1,485,228			91						1,515,696			92
All other states			143,392			9						123,366			8
Total			$1,628,620			100		%				$1,639,062			100		%

The following table presents a summary of CRE loans by property type segmentation:

(Dollars in thousands)			March 31, 2022												December 31, 2021
			Count			Outstanding Balance			% of Total						Count			Outstanding Balance			% of Total
CRE Portfolio Segmentation:
Multi-family dwelling			125			$443,571			27		%				127			$474,229			29		%
Retail			117			380,588			23						121			389,487			24
Office			59			219,551			13						57			216,602			13
Hospitality			32			193,213			12						31			184,990			11
Industrial and warehouse			36			143,441			9						35			137,254			8
Healthcare			15			134,713			8						13			128,189			8
Commercial mixed use			20			38,731			2						20			38,978			2
Other			36			74,812			6						36			69,333			5
Total CRE loans			440			$1,628,620			100		%				440			$1,639,062			100		%
Average CRE loan size						$3,701												$3,725
Largest individual CRE loan outstanding						$39,883												$39,945

Commercial and Industrial Loans

C&I loans amounted to $614.9 million at March 31, 2022, down by $26.7 million, or 4%, from the balance at December 31, 2021. This included a net reduction in PPP loans of $25.5 million. Excluding PPP loans, C&I loans decreased by approximately $1.2 million, with payoffs and pay-downs of approximately $22 million partially offset by new loan originations.

As of March 31, 2022, the carrying value of PPP loans was $12.5 million and included net unamortized loan origination fee balances of $425 thousand. The carrying value of PPP loans at December 31, 2021 was $38.0 million.

Shared national credit balances outstanding included in the C&I loan portfolio totaled $41.9 million at March 31, 2022. 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 March 31, 2022.

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Management's Discussion and Analysis

The following table presents a summary of C&I loan by industry segmentation:

(Dollars in thousands)			March 31, 2022												December 31, 2021
			Count			Outstanding Balance			% of Total						Count			Outstanding Balance			% of Total
C&I Portfolio Segmentation:
Healthcare and social assistance			72			$175,988			29		%				101			$174,376			27		%
Owner occupied and other real estate			170			67,651			11						185			72,957			11
Manufacturing			52			55,868			9						65			55,341			9
Educational services			22			50,939			8						28			52,211			8
Retail			71			43,436			7						79			47,290			7
Finance and insurance			59			35,477			6						59			31,279			5
Transportation and warehousing			25			34,605			6						31			35,064			5
Entertainment and recreation			28			29,297			5						37			32,087			5
Information			10			23,377			4						14			25,045			4
Accommodation and food services			71			19,589			3						114			28,320			4
Professional, scientific and technical			46			6,781			1						69			8,912			1
Public administration			15			5,340			1						16			5,441			1
Other			202			66,544			10						281			73,232			13
Total C&I loans			843			$614,892			100		%				1,079			$641,555			100		%
Average C&I loan size						$729												$595
Largest individual C&I loan outstanding						$27,661												$18,721

Residential Real Estate Loans

The residential real estate loan portfolio represented 42% of total loans at March 31, 2022.

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)
Three months ended March 31,			2022									2021
			Amount			% of Total						Amount			% of Total
Originations for retention in portfolio (1)			$164,401			61		%				$131,791			30		%
Originations for sale to the secondary market (2)			106,619			39						309,325			70
Total			$271,020			100		%				$441,116			100		%

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

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

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Management's Discussion and Analysis

The table below presents residential real estate loan sales activity:

(Dollars in thousands)
Three months ended March 31,			2022									2021
			Amount			% of Total						Amount			% of Total
Loans sold with servicing rights retained			$14,627			11		%				$226,645			78		%
Loans sold with servicing rights released (1)			115,501			89						65,374			22
Total			$130,128			100		%				$292,019			100		%

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

Residential real estate loan origination, refinancing and sales activity decreased year-over-year in response to increases in market interest rates.

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 $9.4 million and $9.8 million, respectively, as of March 31, 2022 and December 31, 2021. The balance of residential mortgage loans serviced for others, which are not included in the Unaudited Consolidated Balance Sheets, amounted to $1.5 billion as of both March 31, 2022 and December 31, 2021.

Residential real estate loans held in portfolio amounted to $1.8 billion at March 31, 2022, up by $51.0 million, or 3%, from the balance at December 31, 2021, reflecting a higher proportion of loans originated for portfolio.

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

(Dollars in thousands)			March 31, 2022									December 31, 2021
			Amount			% of Total						Amount			% of Total
Massachusetts			$1,250,376			70		%				$1,207,789			70		%
Rhode Island			371,463			21						365,831			21
Connecticut			133,815			8						132,430			8
Subtotal			1,755,654			99						1,706,050			99
All other states			22,320			1						20,925			1
Total (1)			$1,777,974			100		%				$1,726,975			100		%

(1)Includes residential mortgage loans purchased from and serviced by other financial institutions totaling $71.6 million and $78.7 million, respectively, as of March 31, 2022 and December 31, 2021.

Consumer Loans

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 March 31, 2022. Our home equity line and home equity loan origination activities are conducted primarily in southern New England. The Bank estimates that approximately 60% 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 $262.4 million at March 31, 2022, down by $3.0 million, or 1%, from December 31, 2021. Purchased consumer loans, consisting of loans to individuals secured by general aviation aircraft, amounted to $8.5 million and $9.4 million, respectively, at March 31, 2022 and December 31, 2021.

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Management's Discussion and Analysis

Asset Quality

Nonperforming Assets

Nonperforming assets include nonaccrual loans and property acquired through foreclosure or repossession.

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

(Dollars in thousands)			Mar 31, 2022						Dec 31, 2021
Commercial:
Commercial real estate			$—						$—
Commercial & industrial			—						—
Total commercial			—						—
Residential Real Estate:
Residential real estate			11,916						13,576
Consumer:
Home equity			673						627
Other			—						—
Total consumer			673						627
Total nonaccrual loans			12,589						14,203
Property acquired through foreclosure or repossession, net			—						—
Total nonperforming assets			$12,589						$14,203
Nonperforming assets to total assets			0.22		%				0.24		%
Nonperforming loans to total loans			0.29		%				0.33		%
Total past due loans to total loans			0.16		%				0.24		%
Accruing loans 90 days or more past due			$—						$—

Total nonperforming assets decreased by $1.6 million from December 31, 2021, reflecting a decline in nonaccrual loans. At March 31, 2022, there were no properties held in OREO.

Nonaccrual Loans

During the three months ended March 31, 2022, 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 three months ended March 31,			2022						2021
Balance at beginning of period			$14,203						$13,197
Additions to nonaccrual status			427						734
Loans returned to accruing status			(63)						(3)
Loans charged-off			(36)						(64)
Payments, payoffs and other changes			(1,942)						(881)
Balance at end of period			$12,589						$12,983

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Management's Discussion and Analysis

The following table presents additional detail on nonaccrual loans:

(Dollars in thousands)			March 31, 2022																					December 31, 2021
			Days Past Due																					Days Past Due
			Over 90						Under 90						Total			% (1)						Over 90						Under 90						Total			% (1)
Commercial:
Commercial real estate			$—						$—						$—			—		%				$—						$—						$—			—		%
Commercial & industrial			—						—						—			—						—						—						—			—
Total commercial			—						—						—			—						—						—						—			—
Residential Real Estate:
Residential real estate			5,168						6,748						11,916			0.67						4,662						8,914						13,576			0.79
Consumer:
Home equity			178						495						673			0.27						108						519						627			0.25
Other			—						—						—			—						—						—						—			—
Total consumer			178						495						673			0.26						108						519						627			0.24
Total nonaccrual loans			$5,346						$7,243						$12,589			0.29		%				$4,770						$9,433						$14,203			0.33		%

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

There were no significant commitments to lend additional funds to borrowers whose loans were on nonaccrual status at March 31, 2022.

As of both March 31, 2022 and December 31, 2021, the composition of nonaccrual loans was 100% residential and consumer.

Nonaccrual residential real estate mortgage loans amounted to $11.9 million at March 31, 2022, down by $1.7 million from the end of 2021. As of March 31, 2022, the balance of nonaccrual residential mortgage loans was predominately secured by properties in Massachusetts, Connecticut and Rhode Island. Included in total nonaccrual residential real estate loans at March 31, 2022 were four loans purchased for portfolio and serviced by others amounting to $1.2 million.  Management monitors the collection efforts of its third party servicers as part of its assessment of the collectability of nonperforming loans.

Troubled Debt Restructurings

In the course of resolving problem loans, the Corporation may choose to restructure the contractual terms of certain loans. A loan that has been modified or renewed is considered to be a TDR when two conditions are met: (1) the borrower is experiencing financial difficulty and (2) concessions are made for the borrower’s benefit that would not otherwise be considered for a borrower or a transaction with similar credit risk characteristics. The decision to restructure a loan, versus aggressively enforcing the collection of the loan, may benefit the Corporation by increasing the ultimate probability of collection.

TDRs are classified as accruing or non-accruing based on management’s assessment of the collectability of the loan.  Loans that are already on nonaccrual status at the time of the restructuring generally remain on nonaccrual status for approximately six months before management considers such loans for return to accruing status.  Accruing restructured loans are placed into nonaccrual status if and when the borrower fails to comply with the restructured terms and management deems it unlikely that the borrower will return to a status of compliance in the near term and full collection of principal and interest is in doubt.

TDRs are reported as such for at least one year from the date of the restructuring.  In years after the restructuring, a TDR is removed from this classification if the restructuring did not involve a below-market rate concession and the loan is performing in accordance with its modified contractual terms for a reasonable period of time.

As of March 31, 2022, there were no significant commitments to lend additional funds to borrowers whose loans had been restructured in a TDR.

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Management's Discussion and Analysis

See Note 4 for disclosure regarding the Corporation’s election to account for eligible loan modifications under Section 4013 of the CARES Act, as amended by the CRRSA Act. Loan modifications that did not qualify for the TDR accounting relief provided under the CARES Act were classified as TDRs.

The following table sets forth information on TDRs as of the dates indicated. The amounts below consist of unpaid principal balance, net of charge-offs and unamortized deferred loan origination fees and costs. Accrued interest is not included in the carrying amounts set forth below.

(Dollars in thousands)			Mar 31, 2022						Dec 31, 2021
Accruing TDRs
Commercial:
Commercial real estate			$10,593						$10,603
Commercial & industrial			2,792						2,792
Total commercial			13,385						13,395
Residential Real Estate:
Residential real estate			2,358						2,372
Consumer:
Home equity			560						561
Other			—						—
Total consumer			560						561
Accruing TDRs			16,303						16,328
Nonaccrual TDRs
Commercial:
Commercial real estate			—						—
Commercial & industrial			—						—
Total commercial			—						—
Residential Real Estate:
Residential real estate			2,718						2,748
Consumer:
Home equity			71						71
Other			—						—
Total consumer			71						71
Nonaccrual TDRs			2,789						2,819
Total TDRs			$19,092						$19,147

As of both March 31, 2022 and December 31, 2021, the composition of TDRs was 70% commercial and 30% residential and consumer. TDRs amounted to $19.1 million at March 31, 2022, down by $55 thousand from the end of 2021.

The ACL included specific reserves for TDRs of $146 thousand at March 31, 2022, compared to $148 thousand at December 31, 2021.

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Management's Discussion and Analysis

Past Due Loans

The following table presents past due loans by category:

(Dollars in thousands)			March 31, 2022												December 31, 2021
			Amount						% (1)						Amount						% (1)
Commercial:
Commercial real estate			$—						—		%				$—						—		%
Commercial & industrial			108						0.02						3						—
Total commercial			108						—						3						—
Residential Real Estate:
Residential real estate			6,467						0.36						9,622						0.56
Consumer:
Home equity			431						0.18						765						0.31
Other			30						0.18						21						0.12
Total consumer			461						0.18						786						0.30
Total past due loans			$7,036						0.16		%				$10,411						0.24		%

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

As of March 31, 2022, the composition of past due loans (loans past due 30 days or more) was 98% residential and consumer and 2% commercial, compared to 100% and 0%, respectively, at December 31, 2021. Total past due loans decreased by $3.4 million from the end of 2021.

Total past due loans included $5.7 million of nonaccrual loans as of March 31, 2022, compared to $9.4 million as of December 31, 2021. All loans 90 days or more past due at March 31, 2022 and December 31, 2021 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 March 31, 2022 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 or TDRs presented above.  They 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 restructured, or require an increased allowance coverage and provision for credit losses on loans.

Management has identified two loans associated with one C&I relationship with carrying values totaling $759 thousand as potential problem loans at March 31, 2022. There were no potential problem loans identified at December 31, 2021.

Allowance for Credit Losses on Loans

The ACL on loans is management’s estimate, at the reporting date, of expected credit losses over the expected life of the loans.  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.

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Management's Discussion and Analysis

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 TDRs or 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)			March 31, 2022												December 31, 2021
			Loans			Related Allowance			Allowance / Loans						Loans			Related Allowance			Allowance / Loans
Individually analyzed loans			$21,021			$677			3.22		%				$21,080			$682			3.24		%
Pooled (collectively evaluated) loans			4,262,831			38,559			0.90						4,251,845			38,406			0.90
Total			$4,283,852			$39,236			0.92		%				$4,272,925			$39,088			0.91		%

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 $39.2 million at March 31, 2022, up by $148 thousand from the balance at December 31, 2021. There was no provision for credit losses on loans recognized in the first quarter of 2022, reflecting continued low loss rates, strong asset and credit quality metrics, as well as our current estimate of forecasted economic conditions. Net recoveries totaled $148 thousand for the three months ended March 31, 2022,

The ACL on loans as a percentage of total loans, also known as the reserve coverage ratio, was 0.92% at March 31, 2022, compared to 0.91% at December 31, 2021. 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.

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Management's Discussion and Analysis

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

(Dollars in thousands)			March 31, 2022																		December 31, 2021
			Allocated ACL						ACL to Loans						Loans to Total Portfolio (1)						Allocated ACL						ACL to Loans						Loans to Total Portfolio (1)
Commercial:
Commercial real estate			$18,460						1.13		%				38		%				$18,933						1.16		%				38		%
Commercial & industrial			11,222						1.83						14						10,832						1.69						15
Total commercial			29,682						1.32						52						29,765						1.31						53
Residential Real Estate:
Residential real estate			8,066						0.45						42						7,860						0.46						40
Consumer:
Home equity			1,098						0.45						6						1,069						0.43						6
Other			390						2.40						—						394						2.23						1
Total consumer			1,488						0.57						6						1,463						0.55						7
Total allowance for credit losses on loans at end of period			$39,236						0.92		%				100		%				$39,088						0.91		%				100		%

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

Sources of Funds

Our sources of funds include deposits, brokered time 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 out-of-market wholesale brokered deposits.

The following table presents a summary of deposits:

(Dollars in thousands)															Change
			March 31, 2022						December 31, 2021						$			%
Noninterest-bearing demand deposits			$911,990						$945,229						($33,239)			(4		%)
Interest-bearing demand deposits			248,914						251,032						(2,118)			(1)
NOW accounts			893,603						867,138						26,465			3
Money market accounts			1,295,339						1,072,864						222,475			21
Savings accounts			566,461						555,177						11,284			2
Time deposits (in-market)			809,858						773,383						36,475			5
Total in-market deposits			4,726,165						4,464,823						261,342			6
Wholesale brokered time deposits			401,785						515,228						(113,443)			(22)
Total deposits			$5,127,950						$4,980,051						$147,899			3		%

Total deposits amounted to $5.1 billion at March 31, 2022, up by $147.9 million, or 3%, from December 31, 2021.

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Management's Discussion and Analysis

Out-of-market wholesale brokered time deposits amounted to $401.8 million at March 31, 2022, down by $113.4 million, or 22%, from December 31, 2021.

Excluding out-of-market wholesale brokered time deposits, in-market deposits were up by $261.3 million, or 6%, from the balance at December 31, 2021, with growth concentrated in money market accounts.

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 $55.0 million at March 31, 2022, down by $90.0 million, or 62%, from the balance at the end of 2021, as lower levels of wholesale funding were needed given the in-market deposits increase.

For additional information regarding FHLB advances see Note 7 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 78% of total average assets in the three months ended March 31, 2022.  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 time deposits), cash flows from the investment securities portfolios 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 unused funding capacity by source as of the dates indicated:

(Dollars in thousands)			March 31, 2022						December 31, 2021
Additional Funding Capacity:
Federal Home Loan Bank of Boston (1)			$1,559,046						$1,642,377
Federal Reserve Bank of Boston (2)			18,001						16,919
Unencumbered investment securities			698,847						702,963
Total			$2,275,894						$2,362,259

(1)As of March 31, 2022 and December 31, 2021, loans with a carrying value of $2.2 billion and $2.2 billion, respectively, and securities available for sale with carrying values of $126.8 million and $163.2 million, respectively, were pledged to the FHLB resulting in this additional borrowing capacity.

(2)As of March 31, 2022 and December 31, 2021, loans with a carrying value of $8.7 million and $8.2 million, respectively, and securities available for sale with a carrying value of $13.3 million and $13.5 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, as well as a $102.0 million standby letter of credit with the FHLB.

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Management's Discussion and Analysis

The ALCO establishes and monitors internal liquidity measures to manage liquidity exposure. Liquidity remained within target ranges established by the ALCO during the three months ended March 31, 2022.  Based on its assessment of the liquidity considerations described above, management believes the Corporation’s sources of funding meet anticipated funding needs.

Net cash provided by operating activities amounted to $38.6 million for the three months ended March 31, 2022 reflecting net income of $16.5 million and mortgage banking related adjustments to reconcile net income to net cash provided by operating activities. Net cash used in investing activities totaled $37.4 million for the three months ended March 31, 2022, reflecting outflows to fund purchases of debt securities and an increase in loans. These outflows were partially offset by net inflows from maturities, calls and principal payments of debt securities. For the three months ended March 31, 2022, net cash provided by financing activities amounted to $48.5 million, with growth in deposits, partially offset by a net decrease in FHLB advances and the payment of dividends to shareholders. See the Unaudited Consolidated Statements of Cash Flows for further information about sources and uses of cash.

Capital Resources

Total shareholders’ equity amounted to $513.2 million at March 31, 2022, down by $51.6 million from December 31, 2021. The decline reflected a decrease of $59.5 million in the AOCL component of shareholders' equity, due to a temporary decrease in the fair value of available for sale debt securities and cash flow hedges reflecting relative changes in market interest rates, as well as $9.5 million in dividend declarations. These decreases were partially offset by net income of $16.5 million.

The Corporation declared a quarterly dividend of 54 cents per share for the three months ended March 31, 2022, compared to 52 cents per share declared for the same period in 2021.

The ratio of total equity to total assets was 8.78% at March 31, 2022, compared to a ratio of 9.65% at December 31, 2021.  Book value per share at March 31, 2022 and December 31, 2021 was $29.61 and $32.59, respectively.

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 14.15% at March 31, 2022, compared to 14.01% at December 31, 2021. See Note 8 to the Unaudited Consolidated Financial Statements for additional discussion of regulatory capital requirements and the election of the ASC 326 phase-in option provided by regulatory guidance, which phases in the impact of ASC 326 on regulatory capital over a three-year period that commenced January 1, 2022.

Off-Balance Sheet Arrangements

In the normal 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.  Such transactions are used to meet the financing needs of its customers and to manage the exposure to fluctuations in interest rates.  These financial transactions include commitments to extend credit, standby letters of credit, forward loan commitments, loan related derivative contracts and interest rate risk management contracts.  These transactions involve, to varying degrees, elements of credit, interest rate and liquidity risk.  The Corporation’s credit policies with respect to interest rate swap agreements with commercial borrowers, commitments to extend credit, and standby letters of credit are similar to those used for loans. Interest rate risk management contracts with other counterparties are generally subject to bilateral collateralization terms.

For additional information on derivative financial instruments and financial instruments with off-balance sheet risk see Notes 9 and 17 to the Unaudited Consolidated Financial Statements.

Asset/Liability Management and Interest Rate Risk

Interest rate risk is the risk of loss to future earnings due to changes in interest rates.  The ALCO is responsible for establishing policy guidelines on liquidity and acceptable exposure to interest rate risk.  Periodically, the ALCO reports on the status of liquidity and interest rate risk matters to the Bank’s Board of Directors. 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.

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Management's Discussion and Analysis

The Corporation utilizes the size and duration of the investment securities portfolio, the size and duration of the wholesale funding portfolio, off-balance sheet interest rate contracts and the pricing and structure of loans and deposits, to manage interest rate risk. The off-balance sheet interest rate contracts may include interest rate swaps, caps and floors.  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 Notes 9 and 17 to the Unaudited Consolidated Financial Statements for additional information.

The ALCO uses income simulation to measure interest rate risk inherent in the Corporation’s on-balance sheet and off-balance sheet 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, a 13- to 24-month horizon and a 60-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 core 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.  The characteristics of financial instrument classes are reviewed periodically by the ALCO to ensure their accuracy and consistency.

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 March 31, 2022 and December 31, 2021, 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 for a 60-month period.  In addition to measuring the change in net interest income as compared to an unchanged rate scenario, the ALCO also measures the trend of both net interest income and NIM over a 60-month horizon to ensure the stability and adequacy of this source of earnings in different interest rate scenarios.

The ALCO regularly reviews a wide variety of interest rate shift scenario results to evaluate interest rate risk exposure, including scenarios showing the effect of steepening or flattening changes in the yield curve of up to 500 basis points, as well as parallel changes in interest rates of up to 400 basis points.  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.

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 March 31, 2022 and December 31, 2021.  Interest rates are assumed to shift by a parallel 100, 200 or 300 basis points upward or 100 basis points downward over a 12-month period, except for core savings deposits, which are assumed to shift by lesser amounts due to their relative historical insensitivity to market interest rate movements.  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.

			March 31, 2022									December 31, 2021
			Months 1 - 12			Months 13 - 24						Months 1 - 12			Months 13 - 24
100 basis point rate decrease			(2.57)		%	(5.17)		%				(1.32)		%	(5.42)		%
100 basis point rate increase			2.57			1.96						3.34			3.91
200 basis point rate increase			5.93			4.97						6.87			8.18
300 basis point rate increase			9.27			7.48						10.32			11.72

The ALCO estimates that the negative exposure of net interest income to falling rates as compared to an unchanged rate scenario results from a more rapid decline in earning asset yields compared to rates paid on deposits.  If market interest rates were to fall and remain lower for a sustained period, certain core savings and time deposit rates could decline more slowly and by a lesser amount than other market interest rates.  Asset yields would likely decline more rapidly than deposit costs as current asset holdings mature or reprice, since cash flow from mortgage-related prepayments and redemption of callable securities would increase as market interest rates fall.

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Management's Discussion and Analysis

The overall positive exposure of net interest income to rising rates as compared to an unchanged rate scenario results from a more rapid projected relative rate of increase in asset yields than funding costs over the near term.  For simulation purposes, deposit rate changes are anticipated to lag behind other market interest rates in both timing and magnitude.  The ALCO’s estimate of interest rate risk exposure to rising rate environments, including those involving changes to the shape of the yield curve, incorporates certain assumptions regarding the shift in deposit balances from low-cost core savings categories to higher-cost deposit categories, which has characterized a shift in funding mix during the past rising interest rate cycles.

The relative change in interest rate sensitivity to rising rates from December 31, 2021 as shown in the above table was largely attributable to a higher level of longer-term fixed rate assets at March 31, 2022, as compared to December 31, 2021. Fixed rate assets would not reprice upward in a rising rate environment.

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.  Simulation modeling assumes a static balance sheet, with the exception of certain modeled deposit mix shifts from low-cost core savings deposits to higher-cost time deposits in rising rate scenarios as noted above.

As market interest rates declined, the banking industry attracted low-cost core savings deposits. The ALCO recognizes that a portion of these increased levels of low-cost balances could shift into higher yielding alternatives in the future, particularly as interest rates rise and as confidence in financial markets strengthens, and has modeled deposit shifts out of these low-cost categories into higher-cost alternatives in the rising rate simulation scenarios presented above.  Deposit balances may also be subject to possible outflow to non-bank alternatives in a rising rate environment, which may cause interest rate sensitivity to differ from the results as presented. Another significant simulation assumption is the sensitivity of core savings deposits to fluctuations in interest rates. Income simulation results assume that changes in both core savings deposit rates and balances are related to changes in short-term interest rates. The relationship between short-term interest rate changes and core deposit rate and balance changes may differ from the ALCO’s estimates used in income simulation.

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.

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 Corporation also 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.

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Management's Discussion and Analysis

The following table summarizes the potential change in market value of the Corporation’s available for sale debt securities as of March 31, 2022 and December 31, 2021 resulting from immediate parallel rate shifts:

(Dollars in thousands)
Security Type			Down 100 Basis Points						Up 200 Basis Points
U.S. government-sponsored enterprise securities (callable)			$2,584						($25,828)
Mortgage-backed securities issued by U.S. government agencies and U.S. government-sponsored enterprises			53,340						(114,010)
Trust preferred debt and other corporate debt securities			2						(20)
Total change in market value as of March 31, 2022			$55,926						($139,858)
Total change in market value as of December 31, 2021			$10,166						($119,505)

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 significant 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, 2021.

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.

Item 3.  Quantitative and Qualitative Disclosures About Market Risk

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 the section labeled “Risk Factors” in Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, as updated by our Quarterly Reports on Form 10-Q and other filings submitted to the SEC.

Item 4.  Controls and Procedures

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 March 31, 2022.  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 March 31, 2022 that has materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II.  Other Information

Item 1.  Legal Proceedings

The Corporation is involved in various claims and legal proceedings arising out of the ordinary course of business.  Management is of the opinion, based on its review with counsel of the development of such matters to date, that the ultimate disposition of such matters will not materially affect the consolidated financial position or results of operations of the Corporation.

Item 1A.  Risk Factors

There have been no material changes in the risk factors described in Item IA to Part I of Washington Trust’s Annual Report on Form 10-K for the year ended December 31, 2021.

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 6.  Exhibits

(a) Exhibits.  The following exhibits are included as part of this Form 10-Q:

Exhibit Number
10.1			Washington Trust Bancorp, Inc. 2022 Long Term Incentive Plan - Filed as Exhibit 10.1 to the Registrant’s Registration Statement on Form S-8 (File No. 333-264484) filed with the Securities and Exchange Commission on April 26, 2022. (1) (2)
10.2			Form of Restricted Stock Unit Award Agreement for Non-Employee Directors under the Washington Trust Bancorp, Inc. 2022 Long Term Incentive Plan - Filed as Exhibit 10.2 to the Registrant’s Registration Statement on Form S-8 (File No. 333-264484) filed with the Securities and Exchange Commission on April 26, 2022. (1) (2)
31.1			Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 - Filed herewith.
31.2			Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 - Filed herewith.
32.1			Certifications of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 - Furnished herewith. (1)
101			The following materials from Washington Trust Bancorp, Inc.’s Quarterly Report on Form 10-Q for the period ended March 31, 2022 formatted in Inline XBRL: (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Income, (iii) the Consolidated Statements of Comprehensive Income (Loss), (iv) the Consolidated Statements of Changes in Shareholders’ Equity, (v) the Consolidated Statements of Cash Flows, and (vi) related Notes to these consolidated financial statements.
104			The cover page from the Corporation’s Quarterly Report on Form 10-Q for the period ended March 31, 2022 has been formatted in Inline XBRL and contained in Exhibit 101.

(1)Not filed herewith.  In accordance with Rule 12b-32 promulgated pursuant to the Exchange Act, reference is made to the documents previously filed with the SEC, which are incorporated by reference herein.

(2)Management contract or compensatory plan or arrangement.

(3)These certifications are not “filed” for purposes of Section 18 of the Exchange Act or incorporated by reference into any filing under the Securities Act or the Securities Exchange Act.

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Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

WASHINGTON TRUST BANCORP, INC.

(Registrant)

Date:

May 5, 2022

By:

/s/ Edward O. Handy III

Edward O. Handy III

Chairman and Chief Executive Officer

(principal executive officer)

Date:

May 5, 2022

By:

/s/ Ronald S. Ohsberg

Ronald S. Ohsberg

Senior Executive Vice President, Chief Financial Officer and Treasurer

(principal financial officer)

Date:

May 5, 2022

By:

/s/ Maria N. Janes

Maria N. Janes

Executive Vice President, Chief Accounting Officer and Controller

(principal accounting officer)

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