What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2021-05-06 compared with 2020-11-04 · 333 added, 863 removed, 1059 unchanged (53% of the section changed)

4 unchanged sentences

(Dollars in thousands, except par value)

September 30,

2021 December 31,

3 unchanged sentences

77,450 61,614

Available for sale debt securities, at fair value (amortized cost $ 899,839 ;

net of allowance for credit losses on securities of $ 0 at September 30, 2020)

Available for sale debt securities, at fair value (amortized cost of $ 952,618 , net of allowance for credit losses on securities of $ 0 at March 31, 2021;

and amortized cost of $ 881,570 ;

net of allowance for credit losses on securities of $ 0 at December 31, 2020)

948,094 894,571

18 unchanged sentences

Federal Home Loan Bank advances 466,912 593,859

Payment Protection Program Lending Facility 105,746 —

Junior subordinated debentures 22,681 22,681

7 unchanged sentences

authorized 60,000,000 shares;

17,363,457 shares issued and 17,260,219 shares outstanding at September 30, 2020 and 17,363,455 shares issued and outstanding at December 31, 2019

17,363,457 shares issued and 17,306,129 shares outstanding at March 31, 2021 and 17,363,457 shares issued and 17,265,337 shares outstanding at December 31, 2020

Paid-in capital 124,882 125,610

Retained earnings 429,598 418,246

Accumulated other comprehensive income (loss) ( 3,403 ) ( 11,237 )

Accumulated other comprehensive loss ( 20,006 ) ( 7,391 )

Treasury stock, at cost;

103,238 shares at September 30, 2020

57,328 shares at March 31, 2021 and 98,120 shares at December 31, 2020

( 1,960 ) ( 3,355 )

Total shareholders’ equity

7 unchanged sentences

(Dollars and shares in thousands, except per share amounts)

Three Months Nine Months

Periods ended September 30, 2020 2019 2020 2019

Three months ended March 31, 2021 2020

Interest income:

2 unchanged sentences

Interest on mortgage loans held for sale

468 410 1,193 878

Taxable interest on debt securities

4,870 6,318 16,181 20,550

Nontaxable interest on debt securities

Dividends on Federal Home Loan Bank stock

532 747 1,826 2,162

Other interest income

39 493 424 1,232

Total interest and dividend income

1 unchanged sentence

Interest expense:

5,532 9,792 21,180 27,957

Federal Home Loan Bank advances

3,354 6,512 13,501 20,153

Junior subordinated debentures

135 245 519 750

Other interest expense

Total interest expense

9,180 16,549 35,361 48,860

Net interest income 32,871 32,602

3 unchanged sentences

Wealth management revenues

8,954 9,153 26,248 27,954

Mortgage banking revenues

12,353 4,840 33,300 11,126

Card interchange fees

1,161 1,099 3,139 3,114

Service charges on deposit accounts

598 939 1,975 2,743

Loan related derivative income

1,264 1,407 3,818 2,877

Income from bank-owned life insurance

567 569 1,922 1,784

Net realized losses on securities

571 335 1,313 944

Total noninterest income

4 unchanged sentences

Outsourced services

3,160 2,722 8,944 7,846

Net occupancy

2,012 1,933 5,940 5,835

934 1,046 2,806 3,085

Legal, audit and professional fees

1,252 645 2,733 1,843

FDIC deposit insurance costs

392 ( 460 ) 1,488 509

Advertising and promotion

384 368 829 1,132

Amortization of intangibles

228 236 688 714

Debt prepayment penalties

Other expenses

2,090 2,048 7,023 6,634

Total noninterest expense

14 unchanged sentences

(Dollars in thousands)

Three Months Nine Months

Periods ended September 30, 2020 2019 2020 2019

Three months ended March 31, 2021 2020

Net income $ 20,471 $ 11,901

5 unchanged sentences

Net change in defined benefit plan obligations

410 227 1,229 680

Total other comprehensive (loss) income, net of tax

6 unchanged sentences

(Dollars and shares in thousands)

For the three months ended September 30, 2020 Common

For the three months ended March 31, 2021 Common

Shares Outstanding Common

4 unchanged sentences

Loss Treasury Stock Total

Balance at June 30, 2020 17,260 $ 1,085 $ 123,684 $ 399,386 ($ 462 ) ($ 3,530 ) $ 520,163

— — — 18,322 — — 18,322

Total other comprehensive loss

— — — — ( 2,941 ) — ( 2,941 )

Cash dividends declared ($ 0.51 per share)

— — — ( 8,935 ) — — ( 8,935 )

Share-based compensation — — 1,083 — — — 1,083

Exercise of stock options, issuance of other compensation-related equity awards, net of awards surrendered

— — 1 — — — 1

Balance at September 30, 2020 17,260 $ 1,085 $ 124,768 $ 408,773 ($ 3,403 ) ($ 3,530 ) $ 527,693

For the nine months ended September 30, 2020 Common

Shares Outstanding Common

Stock Paid-in

Capital Retained

Earnings Accumulated

Comprehensive

(Loss) Income Treasury Stock Total

Balance at December 31, 2020 17,265 $ 1,085 $ 125,610 $ 418,246 ($ 7,391 ) ($ 3,355 ) $ 534,195

Cumulative effect of change in accounting principle - Topic 326 — — — ( 6,108 ) — — ( 6,108 )

— — — 20,471 — — 20,471

Total other comprehensive income

— — — — 7,834 — 7,834

Cash dividends declared ($ 1.53 per share)

— — — ( 26,745 ) — — ( 26,745 )

Share-based compensation — — 2,696 — — — 2,696

Exercise of stock options, issuance of other compensation-related equity awards, net of awards surrendered

22 — ( 1,209 ) — — 792 ( 417 )

Treasury stock purchased under 2019 Stock Repurchase Program ( 125 ) — — — — ( 4,322 ) ( 4,322 )

Balance at September 30, 2020 17,260 $ 1,085 $ 124,768 $ 408,773 ($ 3,403 ) ($ 3,530 ) $ 527,693

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

Washington Trust Bancorp, Inc.

and Subsidiaries

Consolidated Statements of Changes in Shareholders' Equity (unaudited)

(Dollars and shares in thousands)

For the three months ended September 30, 2019 Common

Shares Outstanding Common

Stock Paid-in

Capital Retained

Earnings Accumulated

Comprehensive

(Loss) Income Treasury Stock Total

Balance at June 30, 2019 17,336 $ 1,083 $ 121,115 $ 373,873 ($ 11,866 ) $ — $ 484,205

— — — 18,814 — — 18,814

Total other comprehensive income

— — — — 2,942 — 2,942

Total other comprehensive loss, net of tax — — — — ( 12,615 ) — ( 12,615 )

Cash dividends declared ($ 0.52 per share)

3 unchanged sentences

41 — ( 1,646 ) — — 1,395 ( 251 )

Balance at September 30, 2019 17,338 $ 1,084 $ 121,900 $ 383,765 ($ 8,924 ) $ — $ 497,825

For the nine months ended September 30, 2019 Common

Balance at March 31, 2021 17,306 $ 1,085 $ 124,882 $ 429,598 ($ 20,006 ) ($ 1,960 ) $ 533,599

For the three months ended March 31, 2020 Common

Shares Outstanding Common

5 unchanged sentences

Balance at December 31, 2019 17,363 $ 1,085 $ 123,281 $ 390,363 ($ 11,237 ) $ — $ 503,492

Cumulative effect of change in accounting principle - Topic 842 — — — 722 — — 722

— — — 53,582 — — 53,582

Total other comprehensive income

Cumulative effect of change in accounting principle - ASC 326 — — — ( 6,108 ) — — ( 6,108 )

— — — 11,901 — — 11,901

Total other comprehensive income, net of tax — — — — 12,166 — 12,166

Cash dividends declared ($ 0.51 per share)

3 unchanged sentences

14 — ( 872 ) — — 495 ( 377 )

Balance at September 30, 2019 17,338 $ 1,084 $ 121,900 $ 383,765 ($ 8,924 ) $ — $ 497,825

Treasury stock purchased under the 2019 Stock Repurchase Program ( 125 ) — — — — ( 4,322 ) ( 4,322 )

Balance at March 31, 2020 17,252 $ 1,085 $ 123,167 $ 387,243 $ 929 ($ 3,827 ) $ 508,597

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

3 unchanged sentences

(Dollars in thousands)

Nine months ended September 30, 2020 2019

Three months ended March 31, 2021 2020

Cash flows from operating activities:

2 unchanged sentences

Provision for credit losses

( 2,000 ) 7,036

Depreciation of premises and equipment

2 unchanged sentences

Share-based compensation

Tax (expense) benefit from stock option exercises and other equity awards

Tax benefit (expense) from stock option exercises and other equity awards 9 ( 85 )

Income from bank-owned life insurance

2 unchanged sentences

( 11,858 ) ( 6,013 )

Net realized losses on securities

Proceeds from sales of loans, net

2 unchanged sentences

( 299,051 ) ( 166,408 )

(Increase) decrease in operating lease right-of-use assets

( 3,069 ) 1,422

Increase (decrease) in operating lease liabilities

3,151 ( 1,312 )

Increase in other assets

( 67,262 ) ( 41,239 )

Increase in other liabilities

62,634 42,575

Net cash provided by operating activities

18,178 37,374

Decrease in operating lease right-of-use assets 760 694

Decrease in operating lease liabilities ( 744 ) ( 677 )

Decrease (increase) in other assets 30,504 ( 57,060 )

(Decrease) increase in other liabilities ( 35,544 ) 56,292

Net cash used in operating activities ( 3,366 ) ( 2,826 )

Cash flows from investing activities:

4 unchanged sentences

Other ( 77,528 ) ( 45,000 )

Proceeds from sale of:

Other investment securities available for sale — 9,920

Maturities, calls and principal payments of:

4 unchanged sentences

Net redemption (purchases) of Federal Home Loan Bank stock

Net increase in loans

5,513 ( 2,723 )

Net decrease (increase) in loans 7,570 ( 145,740 )

Purchases of loans

3 unchanged sentences

( 911 ) ( 628 )

Proceeds from surrender of bank-owned life insurance

Equity investment in real estate limited partnership

Net cash used in investing activities

6 unchanged sentences

( 540,947 ) ( 821,930 )

Proceeds from Payment Protection Program Lending Facility

Repayment of Payment Protection Program Lending Facility ( 94,882 ) —

Treasury stock purchased

5 unchanged sentences

34,579 250,920

Net increase in cash and cash equivalents

73,560 52,629

Net (decrease) increase in cash and cash equivalents ( 31,525 ) 46,814

Cash and cash equivalents at beginning of period

2 unchanged sentences

$ 170,743 $ 185,269

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

Washington Trust Bancorp, Inc.

and Subsidiaries

Consolidated Statement of Cash Flows – continued (unaudited)

(Dollars in thousands)

Nine months ended September 30, 2020 2019

Noncash Activities:

Loans charged off $ 64 $ 635

$ 1,072 $ 1,888

Loans transferred to property acquired through foreclosure or repossession — 28

In conjunction with the adoption of ASU 2016-02 as detailed in Note 2 to the Unaudited Consolidated Financial Statements, the following assets and liabilities were recognized:

Operating lease right-of-use assets

Operating lease liabilities

In conjunction with the adoption of ASU 2017-12 as detailed in Note 2 to the Unaudited Consolidated Financial Statements, the following qualifying debt securities classified as held to maturity were transferred to available for sale:

Fair value of debt securities transferred from held to maturity to available for sale

Supplemental Disclosures:

Interest payments $ 6,222 $ 14,479

$ 36,868 $ 47,168

Income tax payments 1,641 1,036

15,039 14,531

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

6 unchanged sentences

The Unaudited Consolidated Financial Statements include the accounts of the Bancorp and its subsidiaries (collectively the “Corporation” or “Washington Trust”).

All intercompany balances and transactions have been eliminated.

All intercompany balances and transactions have been eliminated in consolidation.

The Bancorp also owns the common stock of two capital trusts, which have issued trust preferred securities.

6 unchanged sentences

Actual results could differ from those estimates.

Material estimates that are particularly susceptible to change are the determination of the allowance for credit losses on loans, the valuation of goodwill and identifiable intangible assets and the accounting for defined benefit pension plans.

The Unaudited Consolidated Financial Statements of the Corporation presented herein have been prepared pursuant to the rules of the Securities and Exchange Commission (“SEC”) for quarterly reports on Form 10-Q and do not include all of the information and note disclosures required by GAAP.

2 unchanged sentences

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, 2020.

Risks and Uncertainties

The COVID-19 pandemic has caused an unprecedented disruption to the economy and the communities we serve.

government and regulatory agencies have taken several actions to provide support to the U.S.

Most notably, the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”), a $2 trillion stimulus bill, was signed into law on March 27, 2020.

The goal of the CARES Act was to prevent a severe economic downturn through various measures, including direct financial aid to American families and economic stimulus to significantly impacted industry sectors.

The CARES Act also included extensive emergency funding for hospitals and providers.

In addition to the general impact of the COVID-19 pandemic, certain provisions of the CARES Act, as well as other recent legislative and regulatory relief efforts, could have a material impact on the Corporation’s operations.

Also, the actions of the Board of Governors of the Federal Reserve System (the “FRB”) to combat the economic contraction caused by the COVID-19 pandemic, including the reduction of the target federal funds rate and quantitative easing programs, could, if prolonged, adversely affect the Corporation’s net interest income and margins, and profitability.

Continued uncertainty regarding the severity and duration of the COVID-19 pandemic and related economic effects will continue to affect the accounting for credit losses.

It also is possible that asset quality could worsen, expenses associated with collection efforts could increase and loan charge-offs could increase.

Washington Trust is participating in the Small Business Administration's (“SBA’s”) Paycheck Protection Program (“PPP”), providing loans to small businesses negatively impacted by the COVID-19 pandemic.

PPP loans are fully guaranteed by the U.S.

government, if that should change, Washington Trust could be required to increase its allowance for credit losses through an additional provision for credit losses charged to earnings.

PPP loans amounted to $ 216.8 million as of September 30, 2020.

Condensed Notes to Unaudited Consolidated Financial Statements – (continued)

The extent to which the COVID-19 pandemic will continue to impact the Corporation’s business, results of operations, and financial condition, as well as regulatory capital and liquidity ratios, will depend on future developments, including the scope and duration of the pandemic and actions taken by governmental authorities and other third parties in response to the pandemic, as well as further actions the Corporation may take as may be required by government authorities or that the Corporation determines is in the best interests of its employees and customers.

There is no certainty that such measures will be sufficient to mitigate the risks posed by the pandemic.

Note 2 - Recently Issued Accounting Pronouncements

Accounting Standards Adopted in 2021

Financial Instruments - Credit Losses - Topic 326

Accounting Standards Update No.

2016-13, “Financial Instruments - Credit Losses” (“ASU 2016-13”), was issued in June 2016.

ASU 2016-13 requires the measurement of expected lifetime credit losses for financial assets measured at amortized cost, as well as unfunded commitments that are considered off-balance sheet credit exposures at the reporting date.

The measurement is based on historical experience, current conditions, and reasonable and supportable forecasts and requires enhanced disclosures related to the significant estimates and judgments used in estimating credit losses, as well as the credit quality and underwriting standards of an organization’s portfolio.

In addition, ASU 2016-13 amends the accounting for credit losses on available for sale debt securities and purchased financial assets with credit deterioration.

For available for sale debt securities with unrealized losses, Topic 326 requires credit losses to be recognized as an allowance rather than a reduction in the amortized cost of the securities.

As a result, improvements to estimated credit losses are recognized immediately in earnings rather than as interest income over time.

ASU 2016-13 provides for a modified retrospective transition, resulting in a cumulative-effect adjustment to equity as of the beginning of the period in which the guidance is effective.

This ASU was effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2019.

The Corporation adopted ASU 2016-13, including the subsequent ASUs issued to clarify Topic 326, on January 1, 2020.

The Corporation assembled a cross-functional project team that met regularly to address the additional data requirements, to determine the approach for implementation and to identify new internal controls over enhanced accounting processes for estimating the allowance for credit losses (“ACL”).

This included assessing the adequacy of existing loan and loss data, assessing models for default and loss estimates, conducting limited “trial” runs and analytical reviews through December 31, 2019, and completing independent model validation and documentation of ACL processes and controls in the first quarter of 2020.

In accordance with Topic 326, the Corporation has updated its ACL accounting policies.

Required policy disclosures are provided in Notes 4, 5, 6 and 18.

Upon adoption of Topic 326 on January 1, 2020, the ACL for loans (a contra-asset) increased by $ 6.5 million and the ACL for unfunded commitments (a liability) increased by $ 1.5 million, as compared to December 31, 2019.

The increases in the ACL on loans and unfunded commitments upon adoption resulted in a one-time cumulative-effect adjustment that decreased retained earnings by $ 6.1 million, net of deferred tax balances of $ 1.9 million.

The Corporation elected the five-year phase-in option, provided by regulatory guidance issued by the Federal Deposit Insurance Corporation (“FDIC”) in March 2020, which delays the estimated impact of Topic 326 on regulatory capital for the first two years and then phases it in over a three-year period beginning in 2022.

See Note 8 for additional disclosure on regulatory capital.

Fair Value Measurement - Topic 820

Accounting Standards Update No.

2018-13, “Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement” (“ASU 2018-13”), was issued in August 2018 to modify the disclosure requirements related to fair value.

ASU 2018-13 was effective for fiscal years beginning after December 15, 2019.

Certain provisions under ASU 2018-13 required prospective application, while other provisions required retrospective application to all periods presented in the consolidated financial statements upon adoption.

The Corporation adopted the provisions of ASU 2018-13 effective January 1, 2020 and the adoption did not have a material impact on the Corporation’s consolidated financial statements.

Condensed Notes to Unaudited Consolidated Financial Statements – (continued)

Intangibles - Goodwill and Other - Internal-Use Software - Topic 350

Accounting Standards Update No.

2018-15, “Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract” (“ASU 2018-15”), was issued in August 2018 to align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with those requirements that currently exist in GAAP for capitalizing implementation costs incurred to develop or obtain internal-use software.

Implementation costs would either be capitalized or expensed as incurred depending on the project stage.

All costs in the preliminary and post-implementation project stages are expensed as incurred, while certain costs within the application development stage are capitalized.

ASU 2018-15 was effective for fiscal years beginning after December 15, 2019.

Effective January 1, 2020, the Corporation adopted the provision of ASU 2018-15 prospectively, as permitted, and the adoption did not have a material impact on the Corporation’s consolidated financial statements.

Accounting Standards Pending Adoption

Compensation - Retirement Benefits - Topic 715

Accounting Standards Update No.

2018-14, “Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans” (“ASU 2018-14”), was issued in August 2018 to modify the disclosure requirements associated with defined benefit pension plans and other postretirement plans.

ASU 2018-14 is effective for fiscal years ending after December 15, 2020, with early adoption permitted.

The provisions under ASU 2018-14 are required to be applied retrospectively.

The adoption of ASU 2018-14 is not expected to have a material impact on the Corporation’s consolidated financial statements.

Income Taxes - Topic 745

Income Taxes - ASC 745

Accounting Standards Update No.

2019-12, “Income Taxes (Topic 740) - Simplifying the Accounting for Income Taxes” (“ASU 2019-12”), was issued in December 2019 to simplify the accounting for income taxes.

2019-12, “Income Taxes - Simplifying the Accounting for Income Taxes” (“ASU 2019-12”), was issued in December 2019 to simplify the accounting for income taxes.

ASU 2019-12 is effective for fiscal years beginning after December 15, 2020, with early adoption permitted.

Certain provisions under ASU 2019-12 require prospective application, some require modified retrospective application through a cumulative-effect adjustment to retained earnings as of the beginning of the year of adoption, while other provisions require retrospective application to all periods presented in the consolidated financial statements upon adoption.

The adoption of ASU 2019-12 is not expected to have a material impact on the Corporation’s consolidated financial statements.

Reference Rate Reform - Topic 848

Accounting Standards Update No.

2020-04, “Reference Rate Reform (Topic 848) - Facilitation of the Effects of Reference Rate Reform on Financial Reporting” (“ASU 2020-04”), was issued in March 2020 to ease the potential burden in accounting for recognizing the effects of reference rate reform on financial reporting.

Such challenges include the accounting and operational implications for contract modifications and hedge accounting.

The provisions in ASU 2020-04 provide optional expedients and exceptions for applying GAAP to loan and lease agreements, contracts, hedging relationships, and other transactions affected by reference rate reform.

These provisions apply to contract modifications that reference LIBOR or another reference rate expected to be discounted because of reference rate reform.

Qualifying modifications of loan agreements should be accounted for by prospectively adjusting the effective interest rate and the modification would be considered "minor" so that any existing unamortized deferred loan origination fees and costs would carry forward and continue to be amortized.

Qualifying modifications of lease agreements should be accounted for as a continuation of the existing agreement with no reassessments of the lease classification and the discount rate or remeasurements of lease payments that otherwise would be required for modifications not accounted for as separate contracts.

ASU 2020-04 also provides numerous optional expedients for hedge accounting.

The Corporation has assembled a cross-functional project team that meets periodically to discuss the implementation of ASU 2020-04.

The Corporation has completed an inventory of contracts that reference LIBOR and is currently reviewing underlying documents and contracts, as well as assessing the risks with the transition to a new reference rate.

ASU 2020-04 is effective as of March 12, 2020 through December 31, 2022, with adoption permitted as of any date from the beginning of an interim period that includes or is subsequent to March 12, 2020, or prospectively from a date within an interim period that includes or is subsequent to March 12, 2020, up to the date that the financial statements are available to be issued.

Once elected, the amendments must be applied prospectively for all eligible contract modifications.

The Corporation has not yet adopted ASU 2020-04 and is currently evaluating the effect that this ASU will have on the Corporation’s consolidated financial statements.

Condensed Notes to Unaudited Consolidated Financial Statements – (continued)

Receivables - Topic 310

The Corporation adopted the provisions of ASU 2019-12 effective January 1, 2021 and the adoption did not have a material impact on the Corporation’s consolidated financial statements.

Receivables - ASC 310

Accounting Standards Update No.

3 unchanged sentences

The Corporation early adopted the provisions of ASU 2017-08, effective January 1, 2017.

ASU 2020-08 requires that at each reporting period, to the extent that the amortized cost of an individual callable debt security exceeds the amount repayable by the issuer at the next call date, the excess premium shall be amortized to the next call date.

ASU 2020-08 requires that at each reporting period, to the extent that the amortized cost of an individual callable debt security exceeds the amount

Condensed Notes to Unaudited Consolidated Financial Statements – (continued)

repayable by the issuer at the next call date, the excess premium shall be amortized to the next call date.

ASU 2020-08 is effective for fiscal years ending after December 15, 2020 and early adoption is not permitted.

The provisions under ASU 2020-08 are required to be applied prospectively.

The adoption of ASU 2020-08 is not expected to have a material impact on the Corporation’s consolidated financial statements.

The Corporation adopted the provisions of ASU 2020-08 effective January 1, 2020 and the adoption did not have an impact on the Corporation’s consolidated financial statements.

Accounting Standards Pending Adoption

There were no recently issued accounting pronouncements, applicable to the Corporation, that are pending adoption as of March 31, 2021.

Note 3 - Cash and Due from Banks

The Bank maintains certain average reserve balances to meet the requirements of the FRB.

The Bank maintains certain average reserve balances to meet the requirements of the Federal Reserve Bank of Boston (“FRB”).

Some or all of these reserve requirements may be satisfied with vault cash.

Effective March 26, 2020, the FRB reduced the reserve requirement ratios to zero percent to eliminate the need for depository institutions, such as the Bank, to maintain balances in accounts at the FRB to satisfy reserve requirements.

At December 31, 2019, the reserve balance was $ 27.9 million and was included in cash and due from banks in the Unaudited Consolidated Balance Sheets.

As of September 30, 2020 and December 31, 2019, cash and due from banks includes interest-bearing deposits in other banks of $ 162.8 million and $ 83.4 million, respectively.

As a result, there were no reserve balances included in cash and due from banks in the Unaudited Consolidated Balance Sheets at March 31, 2021 and December 31, 2020.

Cash and due from banks included interest-bearing deposits in other banks of $ 99.3 million and $ 138.4 million, respectively, at March 31, 2021 and December 31, 2020.

See Note 10 for additional disclosure regarding cash collateral pledged to derivative counterparties.

Note 4 - Securities

Adoption of Topic 326

Effective January 1, 2020, the Corporation adopted the provisions of Topic 326 using the modified retrospective method.

Therefore, prior period comparative information has not been adjusted and continues to be reported under GAAP in effect prior to the adoption of Topic 326.

There was no ACL on available for sale debt securities recognized upon the adoption of Topic 326.

Accounting Policy Updates

Effective January 1, 2020, the Corporation has modified its accounting policy for the assessment of available for sale debt securities for impairment.

The updated policy is detailed below.

The Corporation has made an accounting policy election to exclude accrued interest from the amortized cost basis of debt securities and reports accrued interest separately in other assets in the Unaudited Consolidated Balance Sheets.

The Corporation also excludes accrued interest from the estimate of credit losses.

Accrued interest receivable on available for sale debt securities totaled $ 2.5 million and $ 2.9 million, respectively, as of September 30, 2020 and December 31, 2019.

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 and therefore there was no accrued interest related to debt securities reversed against interest income for the three and nine months ended September 30, 2020 and 2019.

For available for sale debt securities in an unrealized loss position, management first assesses whether the Corporation intends to sell, or if it is likely that the Corporation will be required to sell the security before recovery of its amortized cost basis.

If either of the criteria regarding intent or requirement to sell is met, the security’s amortized cost basis is written down to fair value through a provision for credit losses charge to earnings.

For debt securities available for sale that do not meet either of these criteria, management evaluates whether the decline in fair value has resulted from credit losses or other factors.

In making this assessment, management considers both quantitative and qualitative factors.

A substantial portion of available for sale debt securities held by the Corporation are obligations issued by U.S.

government agency and U.S.

government-sponsored enterprises, including mortgage-backed securities.

These securities are either explicitly or implicitly guaranteed by the U.S.

government, are highly rated by major credit rating agencies and have a long

Condensed Notes to Unaudited Consolidated Financial Statements – (continued)

history of no credit losses.

For these securities, management takes into consideration the long history of no credit losses and other factors to assess the risk of nonpayment even if the U.S.

government were to default.

As such, the Corporation utilized a zero credit loss estimate for these securities.

For available for sale debt securities that are not guaranteed by U.S.

government agencies and U.S.

government-sponsored enterprises, such as individual name issuer trust preferred debt securities and corporate bonds, management utilizes a third party credit modeling tool based on observable market data, which assists management in identifying any potential credit risk associated with these available for sale debt securities.

This model estimates probability of default, loss given default and exposure at default for each security.

In addition, qualitative factors are also considered, including the extent to which fair value is less than amortized cost, changes to the credit rating of the security by a rating agency, and adverse conditions specifically related to the security, among other factors.

If a credit loss exists based on the results of this assessment, an ACL (contra asset) is recorded, limited by the amount that the fair value is less than the amortized cost basis.

Any impairment that has not been recorded through an ACL is considered market-related and is recognized in other comprehensive income, net of taxes.

Changes in the ACL on available for sale debt securities are recorded as provision for (or reversal of) credit losses.

Losses are charged against the ACL when management believes the uncollectibility of an available for sale debt security is confirmed or when either of the criteria regarding intent or requirement to sell is met.

Available for Sale Debt Securities

The following table presents 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:

The following tables present the amortized cost, gross unrealized holding gains, gross unrealized holding losses, allowance for credit losses (“ACL”) on securities and fair value of securities by major security type and class of security:

(Dollars in thousands)

September 30, 2020 Amortized Cost Unrealized Gains Unrealized Losses Allowance for Credit Losses Fair Value

March 31, 2021 Amortized Cost Unrealized Gains Unrealized Losses Allowance for Credit Losses Fair Value

Available for Sale Debt Securities:

11 unchanged sentences

Total available for sale debt securities $952,618 $ 11,859 ($ 16,383 ) $ — $ 948,094

The following table presents the amortized cost, gross unrealized holding gains, gross unrealized holding losses and fair value of securities by major security type and class of security:

(Dollars in thousands)

December 31, 2019 Amortized Cost Unrealized Gains Unrealized Losses Fair Value

December 31, 2020 Amortized Cost Unrealized Gains Unrealized Losses Allowance for Credit Losses Fair Value

Available for Sale Debt Securities:

11 unchanged sentences

Total available for sale debt securities $881,570 $ 15,570 ($ 2,569 ) $ — $ 894,571

As of September 30, 2020 and December 31, 2019, debt securities with a fair value of $ 312.2 million and $ 431.9 million, respectively, were pledged as collateral for FHLB borrowings, potential borrowings with the FRB’s discount window, certain public deposits and for other purposes.

See Note 7 for additional disclosure on FHLB borrowings.

Amortized cost of available for sale debt securities excludes accrued interest receivable of $ 2.1 million and $ 2.4 million, respectively, as of March 31, 2021 and December 31, 2020.

Accrued interest receivable is included in other assets in the

Condensed Notes to Unaudited Consolidated Financial Statements – (continued)

Unaudited Consolidated Balance Sheets.

As of March 31, 2021 and December 31, 2020, debt securities with a fair value of $ 280.7 million and $ 291.9 million, respectively, were pledged as collateral for Federal Home Loan Bank of Boston (“FHLB”) borrowings, potential borrowings with the FRB’s discount window, certain public deposits and for other purposes.

See Note 8 for additional disclosure on FHLB borrowings.

The schedule of maturities of available for sale debt securities is presented below.

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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) Available for Sale

September 30, 2020 Amortized Cost Fair Value

(Dollars in thousands)

March 31, 2021 Amortized Cost Fair Value

Due in one year or less $ 167,840 $ 168,061

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$ 952,618 $ 948,094

Included in the above table are debt securities with an amortized cost balance of $ 169.0 million and a fair value of $ 167.4 million at September 30, 2020 that are callable at the discretion of the issuers.

Final maturities of the callable securities range from 4 years to 16 years, with call features ranging from 1 month to 2 years.

The following table summarizes amounts relating to sales of securities:

(Dollars in thousands) Three Months Nine Months

For the periods ended September 30, 2020 2019 2020 2019

Proceeds from sales $ — $ — $ — $ 9,920

Gross realized gains $ — $ — $ — $ —

Gross realized losses — — — ( 80 )

Net realized losses on securities $ — $ — $ — ($ 80 )

Included in the above table are debt securities with an amortized cost balance of $ 209.4 million and a fair value of $ 203.8 million at March 31, 2021 that are callable at the discretion of the issuers.

Final maturities of the callable securities range from 3 years to 16 years, with call features ranging from 1 month to 1 year.

Assessment of Available for Sale Debt Securities for Impairment

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Management evaluates both qualitative and quantitative factors to assess whether an impairment exists.

For the accounting policy on the assessment of available for sale debt securities for impairment that was in effect prior to the adoption of Topic 326 on January 1, 2020, see Note 1 to our Annual Report on Form 10-K for the fiscal year ended December 31, 2019.

The following table summarizes available for sale debt securities in an unrealized loss position for which an allowance for credit losses on securities has not been recorded at September 30, 2020, segregated by length of time the securities have been in a continuous unrealized loss position:

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, 2021 and 2020 and, therefore there was no accrued interest related to debt securities reversed against interest income for the three months ended March 31, 2021 and 2020.

The following tables summarize available for sale debt securities in an unrealized loss position, for which an allowance for credit losses 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

September 30, 2020 # Fair

March 31, 2021 # Fair

Value Unrealized

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Condensed Notes to Unaudited Consolidated Financial Statements – (continued)

The following tables summarize temporarily impaired securities, segregated by length of time the securities have been in a continuous unrealized loss position:

(Dollars in thousands) Less than 12 Months 12 Months or Longer Total

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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 September 30, 2020.

The issuers of these securities continue to make timely principal and interest payments and none of these securities were past due at March 31, 2021.

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.

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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 September 30, 2020.

Therefore, no allowance for credits losses on securities was recorded at March 31, 2021.

Individual Name Issuer Trust Preferred Debt Securities

Included in debt securities in an unrealized loss position at September 30, 2020 were five trust preferred securities issued by four individual companies in the banking sector.

Included in debt securities in an unrealized loss position at March 31, 2021 were five trust preferred securities issued by four individual companies in the banking sector.

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 reviewed the collectibility 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 September 30, 2020, there were two individual name issuer trust preferred debt securities with an amortized cost of $ 4.0 million and unrealized losses of $ 358 thousand that were rated below investment grade by Standard & Poors, Inc.

We noted no additional downgrades to below investment grade between September 30, 2020 and the filing date of this report.

Management believes the unrealized losses on these debt securities are primarily attributable to changes in the investment spreads and interest rates and not material changes in the credit quality of the issuers of the debt securities.

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, 2021, there were two individual name issuer trust preferred debt securities with an amortized cost of $ 4.0 million and unrealized losses of $ 202 thousand that were rated below investment grade by Standard & Poors, Inc.

We noted no additional downgrades to below investment grade between March 31, 2021 and the filing date of this report.

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.

Therefore, no allowance for credit losses on securities was recorded at September 30, 2020.

Therefore, no allowance for credit losses on securities was recorded at March 31, 2021.

Corporate Bonds

At September 30, 2020, the Corporation had three corporate bond holdings with unrealized losses totaling $ 1.3 million.

At March 31, 2021, the Corporation had three corporate bond holdings with unrealized losses totaling $ 908 thousand.

These investment grade corporate bonds were issued by large corporations in the financial services industry.

The issuers of these securities continue to make timely principal and interest payments and none of these securities were past due at September 30, 2020.

The issuers of these securities continue to make timely principal and interest payments and none of these securities were past due at March 31, 2021.

Management believes the unrealized losses on these debt securities are primarily attributable to changes in

Condensed Notes to Unaudited Consolidated Financial Statements – (continued)

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.

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.

Therefore, no allowance for credit losses was recorded at September 30, 2020.

Therefore, no allowance for credit losses was recorded at March 31, 2021.

Note 5 - Loans

The following is a summary of loans:

(Dollars in thousands) September 30,

(Dollars in thousands) March 31,

2021 December 31, 2020

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(2) Commercial and industrial (“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 $ 216.8 million of PPP loans as of September 30, 2020.

C&I also includes $ 228.6 million and $ 199.8 million, respectively, of PPP loans as of March 31, 2021 and December 31, 2020.

(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 fees of $ 670 thousand at September 30, 2020 and net unamortized loan origination costs of $ 5.3 million, at December 31, 2019 and net unamortized premiums on purchased loans of $ 919 thousand and $ 995 thousand, respectively, at September 30, 2020 and December 31, 2019.

As of September 30, 2020 and December 31, 2019, loans amounting to $ 2.2 billion and $ 2.1 billion, respectively, were pledged as collateral to the FHLB under a blanket pledge agreement and to the FRB.

(5) Includes net unamortized loan origination fees of $ 223 thousand at March 31, 2021 and net unamortized loan origination costs of $ 1.5 million, at December 31, 2020 and net unamortized premiums on purchased loans of $ 653 thousand and $ 787 thousand, respectively, at March 31, 2021 and December 31, 2020.

Loan balances exclude accrued interest receivable of $ 11.8 million and $ 11.3 million, respectively, as of March 31, 2021 and December 31, 2020.

Accrued interest receivable is included in other assets in the Unaudited Consolidated Balance Sheets.

As of both March 31, 2021 and December 31, 2020, loans amounting to $ 2.1 billion were pledged as collateral to the FHLB under a blanket pledge agreement and to the FRB.

See Note 8 for additional disclosure regarding borrowings.

Loan Modifications Under the CARES Act

The Corporation has elected to account for eligible loan modifications under Section 4013 of the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”), as amended by the Coronavirus Response and Relief Supplemental Appropriations Act (the “CRRSA Act”).

To be eligible, a loan modification must be (1) related to the COVID-19 pandemic;

(2) executed on a loan that was not more than 30 days past due as of December 31, 2019;

and (3) executed between March 1, 2020, and the earlier of (A) 60 days after the date of termination of the national emergency declared by the President on March 13, 2020 concerning the COVID-19 outbreak (the “national emergency”) or (B) January 1, 2022.

Eligible loan modifications are not required to be classified as troubled debt restructurings (“TDRs”) and are not reported as past due provided that they are performing in accordance with the modified terms.

Interest income will continue to be recognized unless the loan is placed on nonaccrual status in accordance with the nonaccrual loans accounting policy.

Since the beginning of the COVID-19 pandemic and through March 31, 2021, Washington Trust has processed loan payment deferral modifications, or "deferments", on 652 loans totaling $ 727 million.

The majority of these deferments qualified as eligible loan modifications under Section 4013 of the CARES Act, as amended.

As of March 31, 2021, we had active deferments on 88 loans totaling $ 191.4 million, or 5 % of total loans excluding Paycheck Protection Program (“PPP”) loans.

Condensed Notes to Unaudited Consolidated Financial Statements – (continued)

Concentrations of Credit Risk

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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.

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 age analysis of past due loans, segregated by class of loans:

The following tables present an age analysis of loans, segregated by class of loans:

(Dollars in thousands) Days Past Due

September 30, 2020 30-59 60-89 Over 90 Total Past Due Current Total Loans

March 31, 2021 30-59 60-89 Over 90 Total Past Due Current Total Loans

Commercial real estate

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Total loans $ 5,649 $ 839 $ 5,904 $ 12,392 $ 4,183,598 $ 4,195,990

Included in past due loans as of September 30, 2020 and December 31, 2019, were nonaccrual loans of $ 8.8 million and $ 11.5 million, respectively.

All loans 90 days or more past due at September 30, 2020 and December 31, 2019 were classified as nonaccrual.

Included in past due loans as of March 31, 2021 and December 31, 2020, were nonaccrual loans of $ 8.4 million and $ 8.5 million, respectively.

All loans 90 days or more past due at March 31, 2021 and December 31, 2020 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.

Well-secured loans are permitted to remain on accrual status provided

Condensed Notes to Unaudited Consolidated Financial Statements – (continued)

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 collectibility 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.

Condensed Notes to Unaudited Consolidated Financial Statements – (continued)

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

(Dollars in thousands) Sep 30,

The following table presents the carrying value of nonaccrual loans:

(Dollars in thousands) Mar 31,

Commercial real estate

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Accruing loans 90 days or more past due $ — $ —

For nonaccrual loans with a carrying value of $ 2.9 million as of September 30, 2020, no ACL was deemed necessary.

As of September 30, 2020 and December 31, 2019, nonaccrual loans secured by one- to four-family residential property amounting to $ 2.9 million and $ 5.8 million, respectively, were in process of foreclosure.

Nonaccrual loans of $ 5.9 million were current as to the payment of principal and interest at both September 30, 2020 and December 31, 2019.

There were no significant commitments to lend additional funds to borrowers whose loans were on nonaccrual status at September 30, 2020.

The following table presents interest income recognized on nonaccrual loans segregated by loan class:

No ACL was deemed necessary on nonaccrual loans with a carrying value of $ 4.3 million and $ 3.0 million, respectively, as of March 31, 2021 and December 31, 2020.

As of March 31, 2021 and December 31, 2020, nonaccrual loans secured by one- to four-family residential property amounting to $ 3.1 million and $ 3.4 million, respectively, were in process of foreclosure.

Nonaccrual loans of $ 4.6 million and $ 4.7 million, respectively, were current as to the payment of principal and interest at March 31, 2021 and December 31, 2020.

There were no significant commitments to lend additional funds to borrowers whose loans were on nonaccrual status at March 31, 2021.

Condensed Notes to Unaudited Consolidated Financial Statements – (continued)

The following table presents interest income recognized on nonaccrual loans:

(Dollars in thousands) Interest Income Recognized

Periods ended September 30, 2020 Three Months Nine Months

Three months ended March 31, 2021 2020

Commercial real estate

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Troubled Debt Restructurings

A loan that has been modified or renewed is considered to be a troubled debt restructuring (“TDR”) when two conditions are met:

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

Condensed Notes to Unaudited Consolidated Financial Statements – (continued)

balance, reduction of the stated interest rate other than normal market rate adjustments, or a combination of these concessions.

These concessions may include modifications of the terms of the debt such as deferral of payments, extension of maturity, reduction of principal balance, 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.

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Reasonably expected TDRs and executed TDRs are evaluated individually to determine the required ACL.

Troubled debt restructurings 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 collectibility of the loan.

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.

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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, at the time of the restructuring.

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.

For the three months ended March 31, 2021 and 2020, there were no loans modified in a TDR.

Condensed Notes to Unaudited Consolidated Financial Statements – (continued)

The following table presents the recorded investment in TDRs and certain other information related to TDRs:

(Dollars in thousands) Sep 30,

(Dollars in thousands) Mar 31,

Accruing TDRs $ 12,443 $ 13,418

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Additional commitments to lend to borrowers with TDRs $ — $ —

The Corporation has elected to account for eligible loan modifications under Section 4013 of the CARES Act.

To be eligible, a loan modification must be (1) related to the COVID-19 pandemic;

(2) executed on a loan that was not more than 30 days past due as of December 31, 2019;

Eligible loan modifications are not required to be classified as TDRs and will not be reported as past due provided that they are performing in accordance with the modified terms.

Interest income will continue to be recognized in accordance with GAAP unless the loan is placed on nonaccrual status in accordance with the nonaccrual loans accounting policy described above.

Through September 30, 2020, we have executed loan payment deferment modifications on 617 loans totaling $ 685.4 million.

The majority of these modifications qualified as eligible loan modifications under Section 4013 of the CARES Act and therefore, were not required to be classified as TDRs and were not reported as past due.

Seventeen of these modifications on loan balances of $ 7.8 million were past due before the COVID-19 pandemic and therefore, were classified as TDRs and were included in past due loans as of September 30, 2020.

Washington Trust has active deferrals on 253 loans totaling $ 418.2 million as of September 30, 2020.

Condensed Notes to Unaudited Consolidated Financial Statements – (continued)

The following tables present loans modified as a TDR:

(Dollars in thousands) Outstanding Recorded Investment

# of Loans Pre-Modifications Post-Modifications

Three months ended September 30, 2020 2019 2020 2019 2020 2019

Commercial real estate

— — $ — $ — $ — $ —

Commercial & industrial

Total commercial — — — — — —

Residential Real Estate:

Residential real estate

4 — 2,092 — 2,092 —

1 — 71 — 71 —

Total consumer 1 — $ 71 $ — $ 71 $ —

Total 5 — $ 2,163 $ — $ 2,163 $ —

(Dollars in thousands) Outstanding Recorded Investment

# of Loans Pre-Modifications Post-Modifications

Nine months ended September 30, 2020 2019 2020 2019 2020 2019

Commercial real estate

1 — $ 841 $ — $ 841 $ —

Commercial & industrial

2 — 460 — 460 —

Total commercial 3 — 1,301 — 1,301 —

Residential Real Estate:

Residential real estate

10 — 5,604 — 5,604 —

4 — 873 — 873 —

Total consumer 4 — $ 873 $ — $ 873 $ —

Total 17 — $ 7,778 $ — $ 7,778 $ —

The following table presents information on how loans were modified as a TDR:

(Dollars in thousands) Three Months Nine Months

Periods ended September 30, 2020 2019 2020 2019

Below-market interest rate concession $ — $ — $ — $ —

Payment deferral 2,163 — 7,365 —

Maturity / amortization concession — — — —

Interest only payments — — — —

Combination (1)

Total $ 2,163 $ — $ 7,778 $ —

(1) Loans included in this classification were modified with a combination of any two of the concessions listed in this table.

Condensed Notes to Unaudited Consolidated Financial Statements – (continued)

The following tables present payment defaults on TDRs modified within the previous 12 months:

(Dollars in thousands) # of Loans Recorded Investment

Three months ended September 30, 2020 2019 2020 2019

Residential real estate:

Residential real estate 1 — $ 903 $ —

Home equity 1 — 47 —

Other — — — —

Totals 2 — $ 950 $ —

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

(Dollars in thousands) # of Loans Recorded Investment

Nine months ended September 30, 2020 2019 2020 2019

Residential real estate:

Three months ended March 31, 2021 2020 2021 2020

TDRs with a Payment Default:

Residential real estate 1 — $ 396 $ —

Home equity 1 — 47 —

Other — — — —

Totals 2 — $ 950 $ —

Individually Analyzed Loans

Effective January 1, 2020, 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 September 30, 2020, the carrying value of individually analyzed loans amounted to $ 15.7 million, of which $ 7.5 million were considered collateral dependent.

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, 2021, the carrying value of individually analyzed loans amounted to $ 16.8 million, of which $ 6.9 million were considered collateral dependent.

As of December 31, 2020, the carrying value of individually analyzed loans amounted to $ 18.3 million, of which $ 8.4 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.

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

(Dollars in thousands)

As of September 30, 2020 Carrying Value Related Allowance

(Dollars in thousands) March 31, 2021 December 31, 2020

Carrying Value Related Allowance Carrying Value Related Allowance

Commercial real estate (1)

$ 958 $ — $ 1,792 $ —

Commercial & industrial (2)

2 unchanged sentences

Residential real estate (3)

5,332 — 5,947 38

Home equity (3)

254 183 254 183

Total consumer 254 183 254 183

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

Condensed Notes to Unaudited Consolidated Financial Statements – (continued)

Prior to January 1, 2020, impaired loans included nonaccrual loans and executed TDRs.

The Corporation identified loss allocations for impaired loans on an individual loan basis.

The following is a summary of impaired loans:

(Dollars in thousands)

As of December 31, 2019 Recorded Investment (1) Unpaid Principal Related Allowance

No Related Allowance Recorded

Commercial real estate

Commercial & industrial

Total commercial — — —

Residential Real Estate:

Residential real estate 13,968 14,803 —

1,471 1,472 —

Total consumer 1,559 1,560 —

Subtotal 15,527 16,363 —

With Related Allowance Recorded

Commercial real estate

$ 603 $ 926 $ —

Commercial & industrial

Total commercial 1,260 1,583 580

Residential Real Estate:

Residential real estate 687 714 95

Total consumer 310 309 293

Subtotal 2,257 2,606 968

Total impaired loans $ 17,784 $ 18,969 $ 968

Commercial $ 1,260 $ 1,583 $ 580

Residential real estate 14,655 15,517 95

Consumer 1,869 1,869 293

Total impaired loans $ 17,784 $ 18,969 $ 968

(1) The recorded investment in impaired loans consists of unpaid principal balance, net of charge-offs, interest payments received applied to principal and unamortized deferred loan origination fees and costs.

For accruing impaired loans (TDRs for which management has concluded that the collectibility of the loan is not in doubt), the recorded investment also includes accrued interest.

Condensed Notes to Unaudited Consolidated Financial Statements – (continued)

The following table presents the average recorded investment balance of impaired loans and interest income recognized on impaired loans segregated by loan class.

(Dollars in thousands) Three Months Nine Months

For the periods ended September 30, 2019 Average Recorded Investment Interest Income Recognized Average Recorded Investment Interest Income Recognized

Commercial real estate

$ 886 $ — $ 929 $ 1

Commercial & industrial

— — 2,835 103

Total commercial 886 — 3,764 104

Residential Real Estate:

Residential real estate

12,017 109 10,972 331

1,414 16 1,409 43

Total consumer 1,522 19 1,464 45

Total $ 14,425 $ 128 $ 16,200 $ 480

Credit Quality Indicators

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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 rating system takes into consideration parameters 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 loan risk rating system takes into consideration parameters 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 credit losses on loans.

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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.

These weaknesses may be mitigated by secondary sources of repayment, including Small Business Administration (“SBA”) guarantees.

Special Mention - Loans with potential weaknesses that deserve management’s close attention.

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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 collectibility.

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.

A loan in the “loss” category is considered generally uncollectible or the timing or amount of payments cannot be

Condensed Notes to Unaudited Consolidated Financial Statements – (continued)

The Corporation’s procedures call for loan ratings and classifications to be revised whenever information becomes available that indicates a change is warranted.

“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 the 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 and strategies to improve the credit.

An annual loan 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.

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.

2 unchanged sentences

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 Fair Isaac Corporation (“FICO”) score and an estimated loan to value (“LTV”) ratio.

LTV is estimated based on such factors as the location, the original LTV ratio, and the date of origination of the loan and do not reflect actual appraisal amounts.

The results of these analyses and other loan review procedures, including selected targeted internal reviews, are taken into consideration in the determination of qualitative loss factors for residential real estate and home equity consumer credits.

Among these techniques is the periodic tracking of loans with an updated Fair Isaac Corporation (“FICO”) score and an updated estimated loan to value (“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 consideration in the determination of qualitative loss factors for residential real estate and home equity consumer credits.

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:

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

(Dollars in thousands) Term Loans Amortized Cost by Origination Year

As of September 30, 2020 2020 2019 2018 2017 2016 Prior Revolving Loans Amortized Cost Revolving Loans Converted to Term Loans Total

2021 2020 2019 2018 2017 Prior Revolving Loans Amortized Cost Revolving Loans Converted to Term Loans Total

$ 54,899 $ 284,731 $ 340,081 $ 223,920 $ 218,914 $ 374,800 $ 7,767 $ 2,360 $ 1,507,472

22 unchanged sentences

Total Loans $ 279,628 $ 973,956 $ 701,571 $ 497,658 $ 431,071 $ 967,209 $ 328,623 $ 14,950 $ 4,194,666

Consistent with industry practice, Washington Trust may renew commercial loans at or immediately prior to their maturity.

In the table above, renewals subject to full credit evaluation before being granted are reported as originations in the period renewed.

The following table presents the commercial loan portfolio, segregated by category of credit quality indicator:

(Dollars in thousands)

As of December 31, 2019 Pass Special Mention Classified

Commercial real estate

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, 2020:

(Dollars in thousands) Term Loans Amortized Cost by Origination Year

2020 2019 2018 2017 2016 Prior Revolving Loans Amortized Cost Revolving Loans Converted to Term Loans Total

$ 283,341 $ 353,875 $ 260,917 $ 236,310 $ 136,490 $ 249,359 $ 10,333 $ 2,386 $ 1,533,011

Commercial & industrial

Special Mention

756 20,235 39,387 16,222 11,318 10,367 771 — 99,056

Total commercial $ 2,095,555 $ 25,791 $ 11,515

Condensed Notes to Unaudited Consolidated Financial Statements – (continued)

The following table presents the residential and consumer loan portfolios, segregated by category of credit quality indicator:

(Dollars in thousands)

As of December 31, 2019 Current Past Due

957 — — — — — — — 957

285,054 374,110 300,304 252,532 147,808 259,726 11,104 2,386 1,633,024

293,493 95,775 98,146 56,792 44,445 91,128 95,817 1,296 776,892

Special Mention

1,123 722 3,210 6,839 3,141 14,853 3,806 56 33,750

403 — — — — 6,363 — — 6,766

295,019 96,497 101,356 63,631 47,586 112,344 99,623 1,352 817,408

Residential Real Estate:

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463,477 253,228 146,839 155,976 128,139 309,314 — — 1,456,973

Total consumer $ 308,222 $ 2,826

238 1,698 1,310 886 110 6,097 — — 10,339

Total residential real estate

463,715 254,926 148,149 156,862 128,249 315,411 — — 1,467,312

9,838 6,771 3,898 1,474 1,217 3,955 219,085 11,280 257,518

— 35 24 — — 186 310 1,112 1,667

Total home equity

9,838 6,806 3,922 1,474 1,217 4,141 219,395 12,392 259,185

5,214 2,241 1,237 1,544 548 7,850 308 1 18,943

19 1 — — 88 7 3 — 118

5,233 2,242 1,237 1,544 636 7,857 311 1 19,061

Total Loans $ 1,058,859 $ 734,581 $ 554,968 $ 476,043 $ 325,496 $ 699,479 $ 330,433 $ 16,131 $ 4,195,990

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.

Condensed Notes to Unaudited Consolidated Financial Statements – (continued)

Note 6 - Allowance for Credit Losses on Loans

Adoption of Topic 326

Effective January 1, 2020, the Corporation adopted the provisions of Topic 326 using the modified retrospective method.

Therefore, prior period comparative information has not been adjusted and continues to be reported under GAAP in effect prior to the adoption of Topic 326.

As a result of adopting Topic 326, the Corporation increased the ACL on loans by $ 6.5 million on January 1, 2020.

Accounting Policy Updates

Effective January 1, 2020, the Corporation has modified its accounting policy for the ACL on loans.

The updated policy is detailed below.

The Corporation has made an accounting policy election to exclude accrued interest from the amortized cost basis of loans and reports accrued interest separately in other assets in the Unaudited Consolidated Balance Sheets.

The Corporation also excludes accrued interest from the estimate of credit losses.

Accrued interest receivable on loans totaled $ 10.9 million and $ 11.0 million, respectively, as of September 30, 2020 and December 31, 2019.

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

The ACL on loans is increased through a provision for credit losses recognized in the Unaudited Consolidated Statements of Income and by recoveries of amounts previously charged-off.

The ACL on loans is reduced by charge-offs on loans.

Loan charge-offs are recognized when management believes the collectibility of the principal balance outstanding is unlikely.

Full or partial charge-offs on collateral dependent individually analyzed loans are generally recognized when the collateral is deemed to be insufficient to support the carrying value of the loan.

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.

As discussed further below, adjustments to historical information 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.

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.

Pooled loan portfolio segments include commercial real estate (including commercial construction loans), commercial and industrial (including PPP loans), residential real estate (including homeowner construction), home equity and other consumer loans.

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

For loans that are individually analyzed, the ACL is measured using a discounted cash flow method based upon the loan’s contractual effective interest rate, or at the loan’s observable market price, or, if the loan is collateral dependent, at the fair value of the collateral.

Factors management considers when measuring the extent of expected credit loss include payment

Condensed Notes to Unaudited Consolidated Financial Statements – (continued)

status, collateral value, borrower financial condition, guarantor support and the probability of collecting scheduled principal and interest payments when due.

For collateral dependent loans for which repayment is to be provided substantially through the sale of the collateral, management adjusts the fair value for estimated costs to sell.

For collateral dependent loans for which repayment is to be provided substantially through the operation of the collateral, such as accruing TDRs, estimated costs to sell are not incorporated into the measurement.

Management may also adjust appraised values to reflect estimated market value declines or apply other discounts to appraised values for unobservable factors resulting from its knowledge of circumstances associated with the collateral.

For pooled loans, the Corporation utilizes a discounted cash flow (“DCF”) methodology to estimate credit losses over the expected life of the loan.

The life of the loan excludes expected extensions, renewal and modifications, unless 1) the extension or renewal options are included in the original or modified contract terms and not unconditionally cancellable by the Corporation, or 2) management reasonably expects at the reporting date that a TDR will be executed with an individual borrower.

The methodology incorporates the probability of default and loss given default, which are identified by default triggers such as past due by 90 or more days, whether a charge-off has occurred, the loan has been placed on nonaccrual status, the loan has been modified in a TDR or the loan is risk-rated as special mention or classified.

The probability of default for the life of the loan is determined by the use of an econometric factor.

Management utilizes the national unemployment rate as an econometric factor with a one-year forecast period and one-year straight-line reversion period to the historical mean of its macroeconomic assumption in order to estimate the probability of default for each loan portfolio segment.

Utilizing a third party regression model, the forecasted national unemployment rate is correlated with the probability of default for each loan portfolio segment.

The DCF methodology combines the probability of default, the loss given default, maturity date and prepayment speeds 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 are also supplemented by certain qualitative risk factors reflecting management’s view of how losses may vary from those represented by quantitative loss rates.

These qualitative risk factors include:

1) changes in lending policies and procedures, including changes in underwriting standards and collection, charge-off, and recovery practices not considered elsewhere in estimating credit losses;

2) changes in international, national, regional, and local economic and business conditions and developments that affect the collectibility of the portfolio, including the condition of various market segments;

3) changes in the nature and volume of the portfolio and in the terms of loans;

4) changes in the experience, ability, and depth of lending management and other relevant staff;

5) changes in the volume and severity of past due loans, the volume of nonaccrual loans, and the volume and severity of adversely classified or rated loans;

6) changes in the quality of the institution’s loan review system;

7) changes in the value of underlying collateral for collateral dependent loans;

8) the existence and effect of any concentrations of credit, and changes in the level of such concentrations;

and 9) the effect of other external factors such as legal and regulatory requirements on the level of estimated credit losses in the institution’s existing portfolio.

Qualitative loss factors are applied to each portfolio segment with the amounts determined by historical loan charge-offs of a peer group of similar-sized regional banks.

Because the methodology is based upon historical experience and trends, current economic data, reasonable and supportable forecasts, as well as management’s judgment, factors may arise that result in different estimations.

While significant deterioration in the economic forecast due to the COVID-19 pandemic was estimated in the ACL on loans, continued uncertainty regarding the severity and duration of the pandemic and related economic effects will continue to affect the ACL.

Deteriorating conditions or assumptions could lead to further increases in the ACL on loans.

In addition, various regulatory agencies periodically review the ACL on loans.

Such agencies may require additions to the allowance based on their judgments about information available to them at the time of their examination.

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

Condensed Notes to Unaudited Consolidated Financial Statements – (continued)

The following table presents the activity in the ACL on loans for the three months ended September 30, 2020:

(Dollars in thousands) Commercial Consumer

CRE C&I Total Commercial Residential Real Estate Home Equity Other Total Consumer Total

Beginning Balance $ 20,283 $ 11,278 $ 31,561 $ 8,053 $ 1,394 $ 433 $ 1,827 $ 41,441

Charge-offs — ( 2 ) ( 2 ) ( 99 ) — ( 10 ) ( 10 ) ( 111 )

Recoveries — 2 2 — 4 9 13 15

Provision 1,474 ( 93 ) 1,381 ( 35 ) ( 51 ) 5 ( 46 ) 1,300

Ending Balance $ 21,757 $ 11,185 $ 32,942 $ 7,919 $ 1,347 $ 437 $ 1,784 $ 42,645

The following table presents the activity in the ACL on loans for the nine months ended September 30, 2020:

(Dollars in thousands) Commercial Consumer

CRE C&I Total Commercial Residential Real Estate Home Equity Other Total Consumer Total

Beginning Balance $ 14,741 $ 3,921 $ 18,662 $ 6,615 $ 1,390 $ 347 $ 1,737 $ 27,014

Adoption of Topic 326 (1)

3,405 3,029 6,434 221 ( 106 ) ( 48 ) ( 154 ) 6,501

Charge-offs ( 172 ) ( 585 ) ( 757 ) ( 99 ) ( 174 ) ( 42 ) ( 216 ) ( 1,072 )

Recoveries — 11 11 — 11 23 34 45

Provision 3,783 4,809 8,592 1,182 226 157 383 10,157

Ending Balance $ 21,757 $ 11,185 $ 32,942 $ 7,919 $ 1,347 $ 437 $ 1,784 $ 42,645

(1) Adoption of the CECL accounting standard effective January 1, 2020.

For the accounting policy on the allowance for loan losses that was in effect prior to the adoption of Topic 326, see Note 1 to our Annual Report on Form 10-K for the fiscal year ended December 31, 2019.

The following table presents the activity in the allowance for loan losses for the three months ended September 30, 2019:

Adjustments to historical information 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.

In accordance with the ACL policy, the methodology is reviewed no less than annually.

In the first quarter of 2021, management updated its ACL methodology for pooled loans to incorporate additional econometric factors in the determination of the probability of default for each loan portfolio segment.

Econometric factors are selected based on the correlation of the factor to credit losses for each loan portfolio segment.

Effective January 1, 2021, the following econometric factors are utilized in the determination of the probability of default for each loan portfolio segment;

the national unemployment rate (“NUR”) and gross domestic product (“GDP”) econometric factors are utilized for the commercial real estate and other consumer loan portfolio segments;

the NUR and national home price index (“HPI”) econometric factors are utilized for the residential real estate and home equity portfolio segments;

and the NUR econometric factor is utilized for the commercial & industrial loan portfolio segment.

Prior to January 1, 2021, solely the NUR was used in the determination of the probability of default for each loan portfolio segment.

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

(Dollars in thousands) Commercial Consumer

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Ending Balance $ 21,297 $ 12,389 $ 33,686 $ 6,469 $ 1,431 $ 551 $ 1,982 $ 42,137

The following table presents the activity in the allowance for loan losses for the nine months ended September 30, 2019:

The following table presents the activity in the allowance for loan losses for the three months ended March 31, 2020:

(Dollars in thousands) Commercial Consumer

1 unchanged sentence

Beginning Balance $ 14,741 $ 3,921 $ 18,662 $ 6,615 $ 1,390 $ 347 $ 1,737 $ 27,014

Adoption of ASC 326 3,405 3,029 6,434 221 ( 106 ) ( 48 ) ( 154 ) 6,501

Charge-offs ( 153 ) ( 294 ) ( 447 ) — ( 173 ) ( 15 ) ( 188 ) ( 635 )

3 unchanged sentences

Condensed Notes to Unaudited Consolidated Financial Statements – (continued)

The following table presents the Corporation’s loan portfolio and associated allowance for loan losses by portfolio segment and by impairment methodology as of December 31, 2019:

(Dollars in thousands) Loans Related Allowance

Loans Individually Analyzed for Credit Losses

Commercial real estate $ 603 $ —

Commercial & industrial 657 580

Total commercial 1,260 580

Residential Real Estate:

Residential real estate 14,654 95

Home equity 1,763 291

Total consumer 1,869 293

Subtotal 17,783 968

Loans Collectively Evaluated for Credit Losses

Commercial real estate 1,546,969 14,741

Commercial & industrial 584,632 3,341

Total commercial 2,131,601 18,082

Residential Real Estate:

Residential real estate 1,434,436 6,520

Home equity 289,111 1,099

Other 20,068 345

Total consumer 309,179 1,444

Subtotal 3,875,216 26,046

Total $ 3,892,999 $ 27,014

Note 7 - Leases

The Corporation has committed to rent premises used in business operations under non-cancelable operating leases and determines if an arrangement meets the definition of a lease upon inception.

Operating lease right-of-use (“ROU”) assets amounted to $ 28.8 million and $ 29.5 million, respectively, as of March 31, 2021 and December 31, 2020.

Operating lease liabilities totaled $ 31.0 million and $ 31.7 million, respectively, as of March 31, 2021 and December 31, 2020.

As of March 31, 2021 and December 31, 2020, there were no operating leases that had not yet commenced.

Rental expense for operating leases is recognized on a straight-line basis over the lease term and amounted to $ 1.0 million and $ 964 thousand, respectively, for the three months ended March 31, 2021 and 2020.

Variable lease components, such as consumer price index adjustments, are expensed as incurred and not included in ROU assets and operating lease liabilities.

The following table presents information regarding the Corporation’s operating leases:

Mar 31, 2021 Dec 31, 2020

Weighted average discount rate 3.35 % 3.34 %

Range of lease expiration dates 4 months - 20 years

7 months - 20 years

Range of lease renewal options

1 year - 5 years

Weighted average remaining lease term

13.2 years 13.4 years

The following table presents the undiscounted annual lease payments under the terms of the Corporation’s operating leases at March 31, 2021, including a reconciliation to the present value of operating lease liabilities recognized in the Unaudited Consolidated Balance Sheets:

(Dollars in thousands)

April 1, 2021 to December 31, 2021 $ 2,932

2026 and thereafter 22,046

Total operating lease payments (1)

interest 8,217

Present value of operating lease liabilities (2)

(1) Includes $ 2.1 million related to options to extend lease terms that are reasonably certain of being exercised.

(2) Includes short-term operating lease liabilities of $ 2.9 million.

The following table presents the components of total lease expense and operating cash flows:

(Dollars in thousands)

Three months ended March 31, 2021 2020

Lease Expense:

Operating lease expense

$ 1,005 $ 951

Variable lease expense

Total lease expense (1)

$ 1,020 $ 964

Cash paid reducing operating lease liabilities

(1) Included in net occupancy expenses in the Unaudited Consolidated Income Statement.

Condensed Notes to Unaudited Consolidated Financial Statements – (continued)

Note 7 - Borrowings

Advances payable to the FHLB amounted to $ 713.9 million and $ 1.1 billion, respectively, at September 30, 2020 and December 31, 2019.

As of September 30, 2020 and December 31, 2019, the Bank had access to a $ 40.0 million unused line of credit and also had remaining available borrowing capacity of $ 828.4 million and $ 535.0 million, respectively, with the FHLB.

Note 8 - Federal Home Loan Bank Advances

Advances payable to the FHLB amounted to $ 466.9 million and $ 593.9 million, respectively, at March 31, 2021 and December 31, 2020.

As of March 31, 2021 and December 31, 2020, the Bank had access to a $ 40.0 million unused line of credit and also had remaining available borrowing capacity of $ 1.0 billion and $ 969.7 million, respectively, with the FHLB.

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 September 30, 2020:

The following table presents maturities and weighted average interest rates on FHLB advances outstanding as of March 31, 2021:

(Dollars in thousands) Scheduled

Maturity Weighted

October 1, 2020 to December 31, 2020 $ 365,437 1.33 %

April 1, 2021 to December 31, 2021 $ 416,787 0.41 %

2022 471 4.96

3 unchanged sentences

2026 and thereafter 11,291 3.25

Balance at September 30, 2020 $ 713,868 1.44 %

In the second quarter of 2020, Washington Trust began participating in the FRB’s Paycheck Protection Program Liquidity Facility ("PPPLF").

PPPLF extends credit to depository institutions at a fixed interest rate of 0.35 %.

Only PPP loans can be pledged as collateral to access the facility.

The maturity date of the PPPLF borrowings matches the maturity date of the pledged PPP loans.

As of September 30, 2020, PPPLF borrowings amounted to $ 105.7 million and have scheduled maturities in the second quarter of 2022.

PPP loans totaling $ 105.7 million were pledged as collateral to the FRB as of September 30, 2020.

Balance at March 31, 2021 $ 466,912 0.67 %

Note 9 - Shareholders' Equity

Stock Repurchase Program

The Corporation’s 2019 Stock Repurchase Program authorizes the repurchase of up to 850,000 shares, or approximately 5 %, of the Corporation’s outstanding common stock.

The Corporation’s Stock Repurchase Program adopted on December 1, 2020 (the “2020 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 2019 Stock Repurchase Program expired October 31, 2020.

As of September 30, 2020, 124,863 shares had been repurchased under the 2019 Stock Repurchase Program, totaling $ 4.3 million, at an average price of $ 34.61 .

All of the shares were repurchased prior to the suspension of the 2019 Stock Repurchase Program effective March 25, 2020.

The 2020 Repurchase Program expires on October 31, 2021 and may be modified, suspended, or discontinued at any time.

As of March 31, 2021, no shares have been repurchased under the 2020 Repurchase Program.

Condensed Notes to Unaudited Consolidated Financial Statements – (continued)

Regulatory Capital Requirements

Capital levels at September 30, 2020 exceeded the regulatory minimum levels to be considered “well capitalized.”

Capital levels at March 31, 2021 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:

1 unchanged sentence

Amount Ratio Amount Ratio Amount Ratio

September 30, 2020

March 31, 2021

Total Capital (to Risk-Weighted Assets):

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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 September 30, 2020 and December 31, 2019.

The Corporation’s capital levels exceeded the minimum regulatory capital requirements plus the capital conservation buffer at March 31, 2021 and December 31, 2020.

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 September 30, 2020 and December 31, 2019, $ 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 FRB’s capital adequacy guidelines.

In response to the recent disruptions in economic conditions caused by the COVID-19 pandemic and the uncertainty of its overall effects on the economy, the FDIC issued an interim final rule (“IFR”) on March 27, 2020 that delays the estimated impact on regulatory capital stemming from the adoption of Topic 326, often referred to as CECL.

The amount of capital relief provided in the CECL IFR is an estimate of the approximate difference in ACL under the CECL accounting methodology relative to the previously used incurred loss accounting methodology for the first two years of the five-year

At both March 31, 2021 and December 31, 2020, $ 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 FRB’s capital adequacy guidelines.

In accordance with regulatory capital rules, the Corporation has elected the option to delay the estimated impact of Accounting Standards Codification (“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 and amounts as of March 31, 2021 and December 31, 2020 exclude the impact of the increased ACL on loans and unfunded loan commitments attributed to the adoption of ASC 326, which was effective January 1, 2020, adjusted for an approximation of the after-tax provision for credit losses

Condensed Notes to Unaudited Consolidated Financial Statements – (continued)

transition period.

The cumulative difference at the end of the second year of the transition period will then be phased-in to regulatory capital over a three-year transition period beginning in 2022.

As discussed in Note 2, the Corporation has elected this five-year phase-in option.

attributable to ASC 326 relative to the incurred loss methodology during the deferral period.

The cumulative difference at the end of the deferral period will then be phased-in to regulatory capital over a three-year transition period beginning in 2022.

Note 10 - Derivative Financial Instruments

11 unchanged sentences

Cash Flow Hedging Instruments

As of September 30, 2020 and December 31, 2019, the Corporation had two interest rate caps with a total notional amount of $ 22.7 million that were designated as cash flow hedges to hedge the interest rate risk associated with our variable rate junior subordinated debentures.

For both interest rate caps, the Corporation obtained the right to receive the difference between 3-month LIBOR and a 4.5 % strike.

The caps mature in November and December of 2020.

As of September 30, 2020 and December 31, 2019, the Corporation had two interest rate swap contracts with a total notional amount of $ 60.0 million that were designated as cash flow hedges to hedge the interest rate risk associated with short-term variable rate FHLB advances.

As of March 31, 2021 and December 31, 2020, the Corporation had two interest rate swap contracts with a total notional amount of $ 60.0 million that were designated as cash flow hedges to hedge the interest rate risk associated with short-term variable rate FHLB advances.

The interest rate swaps mature in 2021 and 2023.

As of September 30, 2020, the Corporation had no interest rate floor contracts.

As of December 31, 2019, the Corporation had three interest rate floor contracts with a total notional amount of $ 300.0 million.

These contracts were designated as cash flow hedges to hedge the interest rate risk associated with a pool of variable rate commercial loans.

The Corporation obtained the right to receive the difference between 1-month LIBOR and a 1.0 % strike for each of the interest rate floors.

During the nine months ended September 30, 2020, the three interest rate floor contracts matured.

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

1 unchanged sentence

Interest Rate Swap Contracts with Customers

The Corporation has entered into interest rate swap contracts to help commercial loan borrowers manage their interest rate risk.

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.

2 unchanged sentences

The Corporation retains the risk that is associated with the potential failure of counterparties and the risk inherent in originating loans.

As of September 30, 2020 and December 31, 2019, Washington Trust had interest rate swap contracts with commercial loan borrowers with notional amounts of $ 995.7 million and $ 813.5 million, respectively, and equal amounts of “mirror” swap contracts with third party financial institutions.

As of March 31, 2021 and December 31, 2020, Washington Trust had interest rate swap contracts with commercial loan borrowers with notional amounts of $ 983.6 million and $ 991.0 million, 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.

Condensed Notes to Unaudited Consolidated Financial Statements – (continued)

Risk Participation Agreements

4 unchanged sentences

Under a risk participation-in agreement, a derivative liability, the Corporation assumes, or participates in, a portion of the credit risk associated with the interest rate swap position with the commercial borrower for a fee received from the other bank.

As of September 30, 2020, the notional amounts of risk participation-out agreements and risk participation-in agreements were $ 60.4 million and $ 92.9 million, respectively, compared to $ 61.2 million and $ 72.9 million, respectively, as of December 31, 2019.

As of March 31, 2021, the notional amounts of risk participation-out agreements and risk participation-in agreements were $ 62.0 million and $ 107.5 million, respectively, compared to $ 61.6 million and $ 92.7 million, respectively, as of December 31, 2020.

Condensed Notes to Unaudited Consolidated Financial Statements – (continued)

Mortgage Loan Commitments

3 unchanged sentences

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 September 30, 2020, the notional amounts of interest rate lock commitments and forward sale commitments were $ 180.1 million and $ 312.1 million, respectively, compared to $ 51.4 million and $ 94.8 million, respectively, as of December 31, 2019.

Condensed Notes to Unaudited Consolidated Financial Statements – (continued)

As of March 31, 2021, the notional amounts of interest rate lock commitments and forward sale commitments were $ 155.8 million and $ 291.0 million, respectively, compared to $ 167.7 million and $ 279.7 million, respectively, as of December 31, 2020.

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

1 unchanged sentence

Fair Value Fair Value

Balance Sheet Location Sep 30, 2020 Dec 31, 2019 Balance Sheet Location Sep 30, 2020 Dec 31, 2019

Balance Sheet Location Mar 31, 2021 Dec 31, 2020 Balance Sheet Location Mar 31, 2021 Dec 31, 2020

Derivatives Designated as Cash Flow Hedging Instruments:

Interest rate risk management contracts:

Interest rate caps

Other assets $ — $ — Other liabilities $ — $ —

Interest rate swaps

Other assets — — Other liabilities 2,224 730

Interest rate floors

Other assets — 3 Other liabilities — —

Interest rate swaps Other assets $ — $ — Other liabilities $ 1,569 $ 1,958

Derivatives not Designated as Hedging Instruments:

13 unchanged sentences

54,200 83,095 50,830 81,190

Less amounts offset in Consolidated Balance Sheets (1)

Net amounts presented in Consolidated Balance Sheets

amounts offset (1)

3,495 67 3,495 67

Less collateral pledged (2)

Derivative balances, net of offset 50,705 83,028 47,335 81,123

collateral pledged (2)

— — 39,945 74,698

6 unchanged sentences

Other Comprehensive Income, Net of Tax

Three Months Nine Months

Periods ended September 30, 2020 2019 2020 2019

Three months ended March 31, 2021 2020

Derivatives Designated as Cash Flow Hedging Instruments:

1 unchanged sentence

Interest rate caps

$ 25 $ 18 $ 71 $ 32

Interest rate swaps

1 unchanged sentence

Interest rate floors

( 85 ) 22 150 175

Total $ 297 ($ 1,050 )

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

Condensed Notes to Unaudited Consolidated Financial Statements – (continued)

The Corporation previously had interest rate cap and interest rate floor contracts designated as cash flow hedges.

During 2020, the interest rate caps and interest rate floors matured.

For derivatives designated as cash flow hedging instruments, see Note 16 for additional disclosure pertaining to the amounts and location of reclassifications from accumulated other comprehensive income into earnings.

(Dollars in thousands) Amount of Gain (Loss)

Recognized in Income on Derivatives

Three Months Nine Months

Periods ended September 30, Statement of Income Location 2020 2019 2020 2019

Three months ended March 31, Statement of Income Location 2021 2020

Derivatives not Designated as Hedging Instruments:

6 unchanged sentences

Loan related derivative income 15 114

Foreign exchange contracts

Loan related derivative income — 18 — 54

Mortgage loan commitments:

23 unchanged sentences

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

(Dollars in thousands) September 30,

(Dollars in thousands) March 31,

2021 December 31,

3 unchanged sentences

Difference between fair value and principal balance $ 831 $ 2,301

Changes in fair value of mortgage loans held for sale accounted for under the fair value option election amounted to increases of $ 1.1 million and $ 2.2 million, respectively, in the three and nine months ended September 30, 2020, compared to increases

Condensed Notes to Unaudited Consolidated Financial Statements – (continued)

of $ 82 thousand and $ 462 thousand, respectively, in the three and nine months ended September 30, 2019.

These amounts were partially offset in earnings by the changes in fair value of forward sale commitments used to economically hedge them.

The changes in fair value are reported as a component of mortgage banking revenues in the Unaudited Consolidated Statements of Income.

There were no mortgage loans held for sale 90 days or more past due as of September 30, 2020 and December 31, 2019.

Changes in fair value of mortgage loans held for sale accounted for under the fair value option election (“fair value option adjustments”) are included in mortgage banking revenues in the Unaudited Consolidated Statements of Income.

Fair value option adjustments amounted to a decrease of $ 1.5 million three months ended March 31, 2021, compared to an increase of $ 887 thousand in the three months ended March 31, 2020.

There were no mortgage loans held for sale 90 days or more past due as of March 31, 2021 and December 31, 2020.

Valuation Techniques

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such items are classified as Level 1.

There were no Level 1 debt securities held at September 30, 2020 and December 31, 2019.

There were no Level 1 debt securities held at March 31, 2021 and December 31, 2020.

Level 2 debt securities are traded less frequently than exchange-traded instruments.

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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 September 30, 2020 and December 31, 2019.

There were no Level 3 debt securities held at March 31, 2021 and December 31, 2020.

Mortgage Loans Held for Sale

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Such collateral primarily consists of real estate and, to a lesser extent, other business assets.

For collateral dependent loans for which repayment is to be provided substantially through the sale of the collateral, management adjusts the fair value for estimated costs to sell.

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.

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Loans sold with the retention of servicing result in the recognition of loan servicing rights.

Loan servicing rights are included in other assets in the Consolidated Balance Sheets and are amortized as an offset to mortgage banking revenues over the estimated period of servicing.

Loan servicing rights are included in other assets in the Unaudited Consolidated Balance Sheets and are amortized as an offset to mortgage banking revenues over the estimated period of servicing.

Loan servicing rights are evaluated quarterly for impairment based on their fair value.

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Loan servicing rights are categorized as Level 3.

Property Acquired Through Foreclosure or Repossession

Property acquired through foreclosure or repossession included in other assets in the Unaudited Consolidated Balance Sheets is adjusted to fair value less costs to sell upon transfer out of loans through a charge to allowance for credit losses on loans.

Subsequently, it is carried at the lower of carrying value or fair value less costs to sell.

Such subsequent valuation charges are charged through earnings.

Fair value is generally based upon appraised values of the collateral.

Management may adjust appraised values to reflect estimated market value declines or apply other discounts to appraised values for unobservable factors resulting from its knowledge of the property, and such property is categorized as Level 3.

Condensed Notes to Unaudited Consolidated Financial Statements – (continued)

Interest rate cap, swap and floor contracts are traded in over-the-counter markets where quoted market prices are not readily available.

Interest rate caps, swaps and floors are traded in over-the-counter markets where quoted market prices are not readily available.

Fair value measurements are determined using independent pricing models that utilize primarily market observable inputs, such as swap rates of different maturities and LIBOR rates.

The Corporation also evaluates the credit risk of its counterparties, as well as that of the Corporation.

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.

Although the Corporation has determined that the majority of the inputs used to value its interest rate swap, cap and floor contracts fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with interest rate contracts and risk participation agreements utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by the Corporation and its counterparties.

However, as of September 30, 2020 and December 31, 2019, 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.

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, 2021 and December 31, 2020, the

Condensed Notes to Unaudited Consolidated Financial Statements – (continued)

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.

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(Level 2) Significant Unobservable Inputs

September 30, 2020

March 31, 2021

Available for sale debt securities:

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Items Recorded at Fair Value on a Nonrecurring Basis

The following table presents the carrying value of assets held at September 30, 2020, which were written down to fair value during the nine months ended September 30, 2020:

The following table presents the carrying value of assets held at March 31, 2021, which were written down to fair value during the three months ended March 31, 2021:

(Dollars in thousands) Total Quoted Prices in Active Markets for Identical Assets

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(Level 2) Significant Unobservable Inputs

Collateral dependent individually analyzed CRE loan $ 285 $ — $ — $ 285

Loan servicing rights 6,584 — — 6,584

Collateral dependent individually analyzed loans $ 944 $ — $ — $ 944

Total assets at fair value on a nonrecurring basis $ 944 $ — $ — $ 944

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(Level 2) Significant Unobservable Inputs

Collateral dependent impaired loans $ 1,448 $ — $ — $ 1,448

Property acquired through foreclosure or repossession 1,109 — — 1,109

Collateral dependent individually analyzed loans $ 1,720 $ — $ — $ 1,720

Loan servicing rights 7,434 — — 7,434

Total assets at fair value on a nonrecurring basis $ 9,154 $ — $ — $ 9,154

Condensed Notes to Unaudited Consolidated Financial Statements – (continued)

The following tables present 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:

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(Weighted Average)

September 30, 2020

Collateral dependent individually analyzed CRE loan

$ 285 Appraisals of collateral Discount for costs to sell 0 % - 25 % ( 14 %)

March 31, 2021

Collateral dependent individually analyzed loans $ 944 Appraisals of collateral Discount for costs to sell 10 %

Appraisal adjustments 0 %

Loan servicing rights

$ 6,584 Discounted Cash Flow Discount rates 10 % - 14 % ( 10 %)

Prepayment rates 18 % - 39 % ( 20 %)

(1) Management may adjust appraisal values to reflect market value declines or other discounts resulting from its knowledge of the property.

Condensed Notes to Unaudited Consolidated Financial Statements – (continued)

(Dollars in thousands) Fair Value Valuation Technique Unobservable Input Range of Inputs Utilized

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December 31, 2020

Collateral dependent impaired loans

$ 1,448 Appraisals of collateral Discount for costs to sell 0 % - 20 % ( 5 %)

Appraisal adjustments (1) 0 % - 100 % ( 67 %)

Property acquired through foreclosure or repossession

$ 1,109 Appraisals of collateral Discount for costs to sell 12 %

Collateral dependent individually analyzed loans $ 1,720 Appraisals of collateral Discount for costs to sell 0 % - 25 % ( 11 %)

Appraisal adjustments 0 % - 100 % ( 15 %)

(1) Management may adjust appraisal values to reflect market value declines or other discounts resulting from its knowledge of the property.

Loan servicing rights

7,434 Discounted cash flow Discount rates 10 % - 14 % ( 10 %)

Prepayment rates 18 % - 42 % ( 21 %)

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, PPPLF borrowings and accrued interest payable.

(Dollars in thousands)

September 30, 2020 Carrying Amount Total

March 31, 2021 Carrying Amount Total

Fair Value Quoted Prices in Active Markets for Identical Assets

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Junior subordinated debentures 22,681 19,805 — 19,805 —

Condensed Notes to Unaudited Consolidated Financial Statements – (continued)

(Dollars in thousands)

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Financial Assets:

Loans, net of allowance for loan losses $ 3,865,985 $ 3,869,192 $ — $ — $ 3,869,192

Loans, net of allowance for credit losses on loans $ 4,151,884 $ 4,114,628 $ — $ — $ 4,114,628

Financial Liabilities:

2 unchanged sentences

Junior subordinated debentures 22,681 19,422 — 19,422 —

Condensed Notes to Unaudited Consolidated Financial Statements – (continued)

Note 12 - 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 Topic 606.

As shown below, a substantial portion of our revenues are specifically excluded from the scope of Topic 606.

For the three months ended September 30, 2020 2019

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, 2021 2020

(Dollars in thousands) Revenue (1)

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Income from bank-owned life insurance

Net realized losses on securities

1,387 1,245 316 247

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

Condensed Notes to Unaudited Consolidated Financial Statements – (continued)

For the nine months ended September 30, 2020 2019

(Dollars in thousands) Revenue (1) ASC 606 Revenue (2) Revenue (1) ASC 606 Revenue (2)

Net interest income $ 95,201 $ — $ 101,420 $ —

Noninterest income:

Asset-based wealth management revenues

25,297 25,297 27,075 27,075

Transaction-based wealth management revenues

951 951 879 879

Total wealth management revenues

26,248 26,248 27,954 27,954

Mortgage banking revenues

33,300 — 11,126 —

Card interchange fees

3,139 3,139 3,114 3,114

Service charges on deposit accounts

1,975 1,975 2,743 2,743

Loan related derivative income

3,818 — 2,877 —

Income from bank-owned life insurance

1,922 — 1,784 —

Net realized losses on securities

1,313 1,026 944 917

Total noninterest income 71,715 32,388 50,462 34,728

Total revenues $ 166,916 $ 32,388 $ 151,882 $ 34,728

(1) As reported in the 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.

Revenue that is recognized at a point in time includes card interchange fees (fee income related to debit card transactions), automated teller machine (“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.

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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 financial planning fees, tax preparation fees, commissions and other service fees.

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.

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 Nine Months

Periods ended September 30, 2020 2019 2020 2019

(Dollars in thousands)

Three months ended March 31, 2021 2020

Revenue recognized at a point in time:

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Wealth management revenues

8,954 9,153 26,248 27,954

Service charges on deposit accounts

151 211 487 634

50 55 131 146

Total revenues from contracts in scope of Topic 606 $ 12,882 $ 10,743

Condensed Notes to Unaudited Consolidated Financial Statements – (continued)

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 $ 4.3 million at September 30, 2020, compared to $ 4.5 million at December 31, 2019 and were included in other assets in the Unaudited Consolidated Balance Sheets.

Deferred revenues, which are considered contract liabilities under Topic 606, represent advance consideration received from customers for which the Corporation has a remaining performance obligation to fulfill.

Receivables amounted to $ 5.2 million at March 31, 2021, compared to $ 4.8 million at December 31, 2020 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 September 30, 2020 and December 31, 2019 and were included in other liabilities in the Unaudited Consolidated Balance Sheets.

For commissions and incentives that are in-scope of Topic 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 balances of contract liabilities were insignificant at both March 31, 2021 and March 31, 2020 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 $ 1.2 million at September 30, 2020, compared to $ 905 thousand at December 31, 2019 and were included in other assets in the Unaudited Consolidated Balance Sheets.

The carrying value of contract cost assets amounted to $ 1.4 million at March 31, 2021, compared to $ 1.5 million at December 31, 2020 and were included in other assets in the Unaudited Consolidated Balance Sheets.

Condensed Notes to Unaudited Consolidated Financial Statements – (continued)

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The defined benefit pension plans were previously amended to freeze benefit accruals after a 10 -year transition period ending in December 2023.

The qualified pension plan is funded on a current basis, in compliance with the requirements of ERISA.

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

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Pension Plan Non-Qualified Retirement Plans

Three Months Nine Months Three Months Nine Months

Periods ended September 30, 2020 2019 2020 2019 2020 2019 2020 2019

Three months ended March 31, 2021 2020 2021 2020

Net Periodic Benefit Cost:

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( 1,204 ) ( 1,135 ) — —

Amortization of prior service credit (2)

— ( 4 ) — ( 12 ) — — — —

Recognized net actuarial loss (2)

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Qualified Pension Plan Non-Qualified Retirement Plans

For the nine months ended September 30, 2020 2019 2020 2019

For the three months ended March 31, 2021 2020 2021 2020

Measurement date Dec 31, 2020 Dec 31, 2019 Dec 31, 2020 Dec 31, 2019

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Note 14 - Share-Based Compensation Arrangements

During the nine months ended September 30, 2020, the Corporation granted performance share unit awards and nonvested share unit awards.

Performance share awards were granted to certain key employees of the Corporation to provide them with the opportunity to earn shares of common stock of the Corporation.

The performance share awards were valued at fair market value as determined by the closing price of the Corporation’s common stock on the award date.

The weighted average fair value of the performance share awards was $ 34.22 .

During the three months ended March 31, 2021, the Corporation granted performance share unit awards and nonvested share unit awards.

The Corporation granted performance share unit awards to certain key employees providing the opportunity to earn shares of common stock over a 3 -year performance period.

The weighted average fair value of the performance share unit awards was $ 46.15 .

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 award agreements.

The performance share awards will be earned over a 3 -year performance period and the current performance assumption estimates that 65,632 shares will be earned.

The Corporation granted to certain key employees and non-executive directors 11,765 nonvested share units, with 3 -year cliff vesting.

Based on the most recent performance assumption available, it is estimated that 51,156 shares will be earned.

The Corporation granted to certain key employees 1,760 nonvested share units with 3 -year cliff vesting.

The weighted average grant date fair value of the nonvested share units was $ 46.15 .

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cash management activities;

and direct banking activities, which include the operation of automated teller machines (“ATMs”), telephone and internet banking services and customer support and sales.

and direct banking activities, which include the operation of ATMs, telephone banking, internet banking and mobile banking services and customer support and sales.

Wealth Management Services

Wealth Management Services includes investment management;

financial planning;

holistic financial planning services;

personal trust and estate services, including services as trustee, personal representative, custodian and guardian;

and settlement of decedents’ estates.

Institutional trust services are also provided, including fiduciary services.

settlement of decedents’ estates;

and institutional trust services, including custody and fiduciary services.

Corporate includes the Treasury Unit, which is responsible for managing the wholesale investment portfolio and wholesale funding needs.

It also includes income from bank-owned life insurance (“BOLI”), as well as administrative and executive expenses not allocated to the operating segments and the residual impact of methodology allocations such as FTP offsets.

Condensed Notes to Unaudited Consolidated Financial Statements – (continued)

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 Corporate Consolidated Total

Three months ended September 30, 2020 2019 2020 2019 2020 2019 2020 2019

Three months ended March 31, 2021 2020 2021 2020 2021 2020 2021 2020

Net interest income (expense) $ 34,520 $ 29,009 ($ 23 ) ($ 67 ) ($ 1,626 ) $ 3,660 $ 32,871 $ 32,602

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835 526 58 53 18 49 911 628

(Dollars in thousands) Commercial Banking Wealth Management Services Corporate Consolidated Total

Nine months ended September 30, 2020 2019 2020 2019 2020 2019 2020 2019

Net interest income (expense) $ 94,692 $ 83,684 ($ 117 ) ($ 361 ) $ 626 $ 18,097 $ 95,201 $ 101,420

Provision for credit losses 10,561 1,575 — — — — 10,561 1,575

Net interest income (expense) after provision for loan losses

84,131 82,109 ( 117 ) ( 361 ) 626 18,097 84,640 99,845

Noninterest income 43,515 20,753 26,248 27,961 1,952 1,748 71,715 50,462

Noninterest expenses:

Depreciation and amortization expense

1,832 1,985 1,058 1,089 116 118 3,006 3,192

Other noninterest expenses

56,571 48,676 20,408 19,631 11,290 10,486 88,269 78,793

Total noninterest expenses

58,403 50,661 21,466 20,720 11,406 10,604 91,275 81,985

Income (loss) before income taxes

69,243 52,201 4,665 6,880 ( 8,828 ) 9,241 65,080 68,322

Income tax expense (benefit) 14,769 11,371 1,216 1,845 ( 2,168 ) 1,524 13,817 14,740

Net income (loss) $ 54,474 $ 40,830 $ 3,449 $ 5,035 ($ 6,660 ) $ 7,717 $ 51,263 $ 53,582

Total assets at period end $ 4,588,419 $ 3,994,458 $ 74,942 $ 78,812 $ 1,186,431 $ 1,125,608 $ 5,849,792 $ 5,198,878

Expenditures for long-lived assets

1,147 2,259 86 379 98 130 1,331 2,768

Condensed Notes to Unaudited Consolidated Financial Statements – (continued)

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

Three months ended September 30, 2020 2019

Three months ended March 31, 2021 2020

(Dollars in thousands) Pre-tax Amounts Income Taxes Net of Tax Pre-tax Amounts Income Taxes Net of Tax

2 unchanged sentences

($ 17,525 ) ($ 4,206 ) ($ 13,319 ) $ 16,740 $ 3,934 $ 12,806

Net losses on debt securities reclassified into earnings (1)

Net change in fair value of available for sale debt securities ( 4,582 ) ( 1,077 ) ( 3,505 ) 3,772 886 2,886

Cash flow hedges:

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545 138 407 536 126 410

Amortization of net prior service credits (3)

— — — ( 4 ) ( 1 ) ( 3 )

Net change in defined benefit plan obligations 535 125 410 296 69 227

Total other comprehensive (loss) income ($ 16,590 ) ($ 3,975 ) ($ 12,615 ) $ 15,903 $ 3,737 $ 12,166

(1) The pre-tax amount is reported in net realized losses on securities in the Unaudited Consolidated Statements of Income.

(2) The pre-tax amounts are included in interest expense on FHLB advances, interest expense on junior subordinated debentures and interest and fees on loans in the Unaudited Consolidated Statements of Income.

(1) The pre-tax amounts for the three months ended March 31, 2021 are included in interest expense on FHLB advances.

(2) The pre-tax amounts for the three months ended March 31, 2020 are included in interest expense on FHLB advances, interest expense on junior subordinated debentures and interest and fees on loans in the Unaudited Consolidated Statements of Income.

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

Nine months ended September 30, 2020 2019

(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

$ 9,794 $ 2,301 $ 7,493 $ 25,985 $ 6,106 $ 19,879

Net losses on debt securities reclassified into earnings (1)

— — — 80 19 61

Net change in fair value of available for sale debt securities 9,794 2,301 7,493 26,065 6,125 19,940

Cash flow hedges:

Change in fair value of cash flow hedges

( 1,994 ) ( 473 ) ( 1,521 ) ( 1,653 ) ( 388 ) ( 1,265 )

Net cash flow hedge gains (losses) reclassified into earnings (2)

829 196 633 39 9 30

Net change in fair value of cash flow hedges ( 1,165 ) ( 277 ) ( 888 ) ( 1,614 ) ( 379 ) ( 1,235 )

Defined benefit plan obligations:

Amortization of net actuarial losses (3)

1,606 377 1,229 900 211 689

Amortization of net prior service credits (3)

— — — ( 12 ) ( 3 ) ( 9 )

Net change in defined benefit plan obligations 1,606 377 1,229 888 208 680

Total other comprehensive income $ 10,235 $ 2,401 $ 7,834 $ 25,339 $ 5,954 $ 19,385

(1) The pre-tax amount is reported in net realized losses on securities in the Unaudited Consolidated Statements of Income.

(3) The pre-tax amounts are included in other expenses in the Unaudited Consolidated Statements of Inc ome.

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 Gains (Losses) on Available For Sale Debt Securities Net Unrealized (Losses) Gains on Cash Flow Hedges Defined Benefit Pension Plan Adjustment Total

For the three months ended September 30, 2020

Balance at June 30, 2020 $ 14,224 ($ 1,835 ) ($ 12,851 ) ($ 462 )

Other comprehensive loss before reclassifications

( 3,505 ) ( 107 ) — ( 3,612 )

Amounts reclassified from accumulated other comprehensive income

— 261 410 671

Net other comprehensive (loss) income

( 3,505 ) 154 410 ( 2,941 )

Balance at September 30, 2020 $ 10,719 ($ 1,681 ) ($ 12,441 ) ($ 3,403 )

(Dollars in thousands) Net Unrealized Gains on Available For Sale Debt Securities Net Unrealized (Losses) Gains on Cash Flow Hedges Defined Benefit Pension Plan Adjustment Total

For the nine months ended September 30, 2020

For the three months ended March 31, 2021

Balance at December 31, 2020 $ 9,881 ($ 1,447 ) ($ 15,825 ) ($ 7,391 )

Other comprehensive income (loss) before reclassifications

7,493 ( 1,521 ) — 5,972

Other comprehensive (loss) income before reclassifications ( 13,319 ) 83 — ( 13,236 )

Amounts reclassified from accumulated other comprehensive income

— 214 407 621

Net other comprehensive income (loss)

Net other comprehensive (loss) income

( 13,319 ) 297 407 ( 12,615 )

Balance at September 30, 2020 $ 10,719 ($ 1,681 ) ($ 12,441 ) ($ 3,403 )

Balance at March 31, 2021 ($ 3,438 ) ($ 1,150 ) ($ 15,418 ) ($ 20,006 )

(Dollars in thousands) Net Unrealized Gains on Available For Sale Debt Securities Net Unrealized (Losses) Gains on Cash Flow Hedges Defined Benefit Pension Plan Adjustment Total

For the three months ended September 30, 2019

Balance at June 30, 2019 $ 292 ($ 873 ) ($ 11,285 ) ($ 11,866 )

Other comprehensive income (loss) before reclassifications

2,886 ( 217 ) — 2,669

Amounts reclassified from accumulated other comprehensive income

Net other comprehensive income (loss)

2,886 ( 171 ) 227 2,942

Balance at September 30, 2019 $ 3,178 ($ 1,044 ) ($ 11,058 ) ($ 8,924 )

(Dollars in thousands) Net Unrealized (Losses) Gains on Available For Sale Debt Securities Net Unrealized Gains (Losses) on Cash Flow Hedges Defined Benefit Pension Plan Adjustment Total

For the nine months ended September 30, 2019

For the three months ended March 31, 2020

Balance at December 31, 2019 $ 3,226 ($ 793 ) ($ 13,670 ) ($ 11,237 )

2 unchanged sentences

Amounts reclassified from accumulated other comprehensive income

61 30 680 771

Net other comprehensive income (loss)

12,806 ( 1,050 ) 410 12,166

Balance at September 30, 2019 $ 3,178 ($ 1,044 ) ($ 11,058 ) ($ 8,924 )

Balance at March 31, 2020 $ 16,032 ($ 1,843 ) ($ 13,260 ) $ 929

Condensed Notes to Unaudited Consolidated Financial Statements – (continued)

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(Dollars and shares in thousands, except per share amounts)

Three Months Nine Months

Periods ended September 30, 2020 2019 2020 2019

Three months ended March 31, 2021 2020

Earnings per common share - basic:

Net income $ 20,471 $ 11,901

Less dividends and undistributed earnings allocated to participating securities

( 37 ) ( 36 ) ( 109 ) ( 105 )

dividends and undistributed earnings allocated to participating securities ( 56 ) ( 32 )

Net income available to common shareholders

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Net income $ 20,471 $ 11,901

Less dividends and undistributed earnings allocated to participating securities

( 37 ) ( 36 ) ( 109 ) ( 105 )

dividends and undistributed earnings allocated to participating securities ( 56 ) ( 32 )

Net income available to common shareholders

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Earnings per common share - diluted $ 1.17 $ 0.68

Weighted average common stock equivalents, not included in common stock equivalents above because they were anti-dilutive, totaled 223,210 and 221,047 , respectively for the three and nine months ended September 30, 2020, compared to 93,075 and 87,775 , respectively, for the same periods in 2019.

Condensed Notes to Unaudited Consolidated Financial Statements – (continued)

Note 17 - Leases

The Corporation has committed to rent premises used in business operations under non-cancelable operating leases and determines if an arrangement meets the definition of a lease upon inception.

As of September 30, 2020, there were no operating leases that had not yet commenced, compared to one operating lease that had not yet commenced as of December 31, 2019.

Rental expense for operating leases is recognized on a straight-line basis over the lease term and amounted to $ 1.0 million and $ 3.0 million respectively, for the three and nine months ended September 30, 2020, compared to $ 944 thousand and $ 2.8 million, respectively, for the same periods in 2019.

Variable lease components, such as consumer price index adjustments, are expensed as incurred and not included in ROU assets and operating lease liabilities.

The following table presents information regarding Corporation’s operating leases:

Sep 30, 2020 Dec 31, 2019

Weighted average discount rate 3.36 % 3.67 %

Range of lease expiration dates 10 months - 20 years

4 months - 21 years

Range of lease renewal options

1 year - 5 years

Weighted average remaining lease term

13.6 years 14.0 years

The following table presents the undiscounted annual lease payments under the terms of the Corporation’s operating leases at September 30, 2020, including a reconciliation to the present value of operating lease liabilities recognized in the Unaudited Consolidated Balance Sheets:

(Dollars in thousands)

October 1, 2020 to December 31, 2020 $ 3,905

2025 and thereafter 22,566

Total operating lease payments (1)

Less interest 8,721

Present value of operating lease liabilities (2)

(1) Includes $ 2.6 million related to options to extend lease terms that are reasonably certain of being exercised.

(2) Includes short-term operating lease liabilities of $ 2.9 million.

The following table presents the components of total lease expense and operating cash flows:

(Dollars in thousands)

Three Months Nine Months

Periods ended September 30, 2020 2019 2020 2019

Lease Expense:

Operating lease expense

$ 1,005 $ 931 $ 2,915 $ 2,787

Variable lease expense

Total lease expense (1)

$ 1,019 $ 944 $ 2,956 $ 2,823

Cash paid reducing operating lease liabilities

$ 956 $ 926 $ 2,831 $ 2,677

(1) Included in net occupancy expenses in the Unaudited Consolidated Income Statement.

Condensed Notes to Unaudited Consolidated Financial Statements – (continued)

Weighted average common stock equivalents, not included in common stock equivalents above because they were anti-dilutive, totaled 149,575 and 152,010 , respectively, for the three months ended March 31, 2021 and 2020.

Note 18 - Commitments and Contingencies

Adoption of Topic 326

As disclosed in Note 2, Topic 326 requires the measurement of expected lifetime credit losses for unfunded commitments that are considered off-balance sheet credit exposures.

The Corporation adopted the provisions of Topic 326 effective January 1, 2020 using the modified retrospective method.

Therefore, the prior period comparative information has not been adjusted and continues to be reported under GAAP in effect prior to the adoption of Topic 326.

As a result of adopting Topic 326, the Corporation recognized an increase in the ACL on unfunded commitments of $ 1.5 million on January 1, 2020.

Accounting Policy Updates

Effective January 1, 2020, the Corporation has modified its accounting policy for the ACL on unfunded commitments.

The updated policy is detailed below.

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.

Financial Instruments with Off-Balance Sheet Risk

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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 $ 10.3 million and $ 13.7 million, respectively, as of September 30, 2020 and December 31, 2019.

At September 30, 2020 and December 31, 2019, there were no liabilities to beneficiaries resulting from standby letters of credit.

Fee income on standby letters of credit was insignificant for the three and nine months ended September 30, 2020 and 2019.

The maximum potential amount of undiscounted future payments, not reduced by amounts that may be recovered, totaled $ 11.6 million and $ 11.7 million, respectively, as of March 31, 2021 and December 31, 2020.

At March 31, 2021 and December 31, 2020, 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, 2021 and 2020.

Condensed Notes to Unaudited Consolidated Financial Statements – (continued)

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

(Dollars in thousands) Sep 30,

(Dollars in thousands) Mar 31,

Financial instruments whose contract amounts represent credit risk (unfunded commitments):

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See Note 10 for additional disclosure pertaining to derivative financial instruments.

The ACL on unfunded commitments amounted to $ 2.2 million at September 30, 2020, compared to $ 293 thousand at December 31, 2019.

The activity in the ACL on unfunded commitments for the three months ended September 30, 2020 is presented below:

ACL on Unfunded Commitments

For each portfolio, estimated loss rates and funding factors are applied to the corresponding balance of unfunded commitments.

Condensed Notes to Unaudited Consolidated Financial Statements – (continued)

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, 2021 is presented below:

(Dollars in thousands) Commercial Consumer

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Ending Balance $ 953 $ 1,314 $ 2,267 $ 46 $ — $ 20 $ 20 $ 2,333

Condensed Notes to Unaudited Consolidated Financial Statements – (continued)

The activity in the ACL on unfunded commitments for the nine months ended September 30, 2020 is presented below:

The activity in the ACL on unfunded commitments for the three months ended March 31, 2020 is presented below:

(Dollars in thousands) Commercial Consumer

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Beginning Balance $ 136 $ 144 $ 280 $ 6 $ — $ 7 $ 7 $ 293

Adoption of Topic 326 (1)

817 626 1,443 34 — 6 6 1,483

Adoption of ASC 326 817 626 1,443 34 — 6 6 1,483

Provision 179 77 256 2 — 5 5 263

Ending Balance $ 1,132 $ 847 $ 1,979 $ 42 $ — $ 18 $ 18 $ 2,039

(1) Adoption of the CECL accounting standard effective January 1, 2020.

Other Contingencies

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements