What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2021-08-05 compared with 2021-05-06 · 399 added, 170 removed, 1222 unchanged (32% of the section changed)

9 unchanged sentences

31,492 61,614

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;

Available for sale debt securities, at fair value (amortized cost of $ 1,051,661 , net of allowance for credit losses on securities of $ 0 at June 30, 2021;

and amortized cost of $ 881,570 ;

29 unchanged sentences

authorized 60,000,000 shares;

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

17,363,457 shares issued and 17,320,446 shares outstanding at June 30, 2021 and 17,363,457 shares issued and 17,265,337 shares outstanding at December 31, 2020

Paid-in capital 125,442 125,610

2 unchanged sentences

Treasury stock, at cost;

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

43,011 shares at June 30, 2021 and 98,120 shares at December 31, 2020

( 1,470 ) ( 3,355 )

8 unchanged sentences

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

Three months ended March 31, 2021 2020

Three Months Six Months

Periods ended June 30, 2021 2020 2021 2020

Interest income:

2 unchanged sentences

Interest on mortgage loans held for sale

405 440 846 725

Taxable interest on debt securities

3,441 5,477 6,683 11,311

Dividends on Federal Home Loan Bank stock

110 654 243 1,294

Other interest income

2 unchanged sentences

Interest expense:

2,961 7,112 6,624 15,648

Federal Home Loan Bank advances

1,001 4,382 2,381 10,147

Junior subordinated debentures

92 171 186 384

Other interest expense

Total interest expense

4,054 11,667 9,191 26,181

Net interest income 34,754 30,945 67,625 63,547

3 unchanged sentences

Wealth management revenues

10,428 8,605 20,323 17,294

Mortgage banking revenues

5,994 14,851 17,921 20,947

Card interchange fees

1,316 1,031 2,449 1,978

Service charges on deposit accounts

635 517 1,244 1,377

Loan related derivative income

1,175 99 1,642 2,554

Income from bank-owned life insurance

607 791 1,163 1,355

438 426 1,825 742

Total noninterest income

4 unchanged sentences

Outsourced services

3,217 2,784 6,417 5,784

Net occupancy

2,042 1,909 4,170 3,928

975 895 1,969 1,872

Legal, audit and professional fees

678 659 1,275 1,481

FDIC deposit insurance costs

374 674 719 1,096

Advertising and promotion

560 186 782 445

Amortization of intangibles

225 230 451 460

Debt prepayment penalties

895 — 4,230 —

Other expenses

1,964 1,677 4,103 4,933

Total noninterest expense

14 unchanged sentences

(Dollars in thousands)

Three months ended March 31, 2021 2020

Three Months Six Months

Periods ended June 30, 2021 2020 2021 2020

Net income $ 17,460 $ 21,040 $ 37,931 $ 32,941

5 unchanged sentences

Net change in defined benefit plan obligations

Total other comprehensive (loss) income, net of tax

674 409 1,081 819

Total other comprehensive income (loss), net of tax 4,878 ( 1,391 ) ( 7,737 ) 10,775

Total comprehensive income $ 22,338 $ 19,649 $ 30,194 $ 43,716

4 unchanged sentences

(Dollars and shares in thousands)

For the three months ended March 31, 2021 Common

For the three months ended June 30, 2021 Common

Shares Outstanding Common

3 unchanged sentences

Comprehensive

(Loss) Income Treasury Stock Total

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

— — — 17,460 — — 17,460

Total other comprehensive income, net of tax — — — — 4,878 — 4,878

Cash dividends declared ($ 0.52 per share)

— — — ( 9,131 ) — — ( 9,131 )

Share-based compensation — — 964 — — — 964

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

14 — ( 404 ) — — 490 86

Balance at June 30, 2021 17,320 $ 1,085 $ 125,442 $ 437,927 ($ 15,128 ) ($ 1,470 ) $ 547,856

For the six months ended June 30, 2021 Common

Shares Outstanding Common

Stock Paid-in

Capital Retained

Earnings Accumulated

Comprehensive

Loss Treasury Stock Total

7 unchanged sentences

55 — ( 2,050 ) — — 1,885 ( 165 )

Balance at June 30, 2021 17,320 $ 1,085 $ 125,442 $ 437,927 ($ 15,128 ) ($ 1,470 ) $ 547,856

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 June 30, 2020 Common

Shares Outstanding Common

Stock Paid-in

Capital Retained

Earnings Accumulated

Comprehensive

Income (Loss) Treasury Stock Total

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

For the three months ended March 31, 2020 Common

— — — 21,040 — — 21,040

Total other comprehensive loss, net of tax — — — — ( 1,391 ) — ( 1,391 )

Cash dividends declared ($ 0.51 per share)

— — — ( 8,897 ) — — ( 8,897 )

Share-based compensation — — 855 — — — 855

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

8 — ( 338 ) — — 297 ( 41 )

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

For the six months ended June 30, 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 - ASC 326 — — — ( 6,108 ) — — ( 6,108 )

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

— — — 32,941 — — 32,941

6 unchanged sentences

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

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

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

3 unchanged sentences

(Dollars in thousands)

Three months ended March 31, 2021 2020

Six months ended June 30, 2021 2020

Cash flows from operating activities:

16 unchanged sentences

( 492,461 ) ( 451,539 )

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

Decrease in operating lease liabilities ( 744 ) ( 677 )

Decrease (increase) in operating lease right-of-use assets 1,192 ( 230 )

(Decrease) increase in operating lease liabilities ( 1,159 ) 264

Decrease (increase) in other assets 26,859 ( 67,028 )

(Decrease) increase in other liabilities ( 34,102 ) 59,577

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

Net cash provided by operating activities 59,426 14,920

Cash flows from investing activities:

9 unchanged sentences

Other 20,500 100,500

Net redemption (purchases) of Federal Home Loan Bank stock

5,513 ( 2,723 )

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

Net redemption of Federal Home Loan Bank stock 7,528 836

Net increase in loans ( 56,094 ) ( 336,489 )

Purchases of loans

3 unchanged sentences

( 1,828 ) ( 925 )

Purchases of bank-owned life insurance

Proceeds from surrender of bank-owned life insurance

Net cash used in investing activities

6 unchanged sentences

( 1,194,267 ) ( 1,483,412 )

Proceeds from Payment Protection Program Lending Facility

Treasury stock purchased

21 unchanged sentences

(the “Bancorp”) is a publicly-owned registered bank holding company that has elected to be a financial holding company.

The Bancorp’s subsidiaries include The Washington Trust Company, of Westerly (the “Bank”), a Rhode Island chartered commercial bank founded in 1800, and Weston Securities Corporation (“WSC”).

The Bancorp’s subsidiaries include The Washington Trust Company, of Westerly (the “Bank”), a Rhode Island chartered financial institution founded in 1800, and Weston Securities Corporation (“WSC”).

Through its subsidiaries, the Bancorp offers a complete product line of financial services, including commercial, residential and consumer lending, retail and commercial deposit products, and wealth management services through its offices in Rhode Island, eastern Massachusetts and Connecticut.

4 unchanged sentences

The capital trust’s only assets are junior subordinated debentures issued by the Bancorp, which were acquired by the capital trusts using the proceeds from the issuance of the trust preferred securities and common stock.

The Bancorp’s equity interest in the capital trusts, classified in other assets, and the junior subordinated debentures are included in the Unaudited Consolidated Balance Sheets.

The Bancorp’s equity interest investment in the capital trusts, which is classified in other assets, and the junior subordinated debentures are included in the Unaudited Consolidated Balance Sheets.

Interest expense on the junior subordinated debentures is included in the Unaudited Consolidated Statements of Income.

28 unchanged sentences

Accounting Standards Pending Adoption

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

There were no recently issued accounting pronouncements, applicable to the Corporation, that are pending adoption as of June 30, 2021.

Note 3 - Cash and Due from Banks

2 unchanged sentences

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.

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.

As a result, there were no reserve balances included in cash and due from banks in the Unaudited Consolidated Balance Sheets at June 30, 2021 and December 31, 2020.

Cash and due from banks included interest-bearing deposits in other banks of $ 93.9 million and $ 138.4 million, respectively, at June 30, 2021 and December 31, 2020.

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

3 unchanged sentences

(Dollars in thousands)

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

June 30, 2021 Amortized Cost Unrealized Gains Unrealized Losses Allowance for Credit Losses Fair Value

Available for Sale Debt Securities:

26 unchanged sentences

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

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

Amortized cost of available for sale debt securities excludes accrued interest receivable of $ 2.6 million and $ 2.4 million, respectively, as of June 30, 2021 and December 31, 2020.

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

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.

As of June 30, 2021 and December 31, 2020, debt securities with a fair value of $ 333.5 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.

4 unchanged sentences

(Dollars in thousands)

March 31, 2021 Amortized Cost Fair Value

June 30, 2021 Amortized Cost Fair Value

Due in one year or less $ 182,321 $ 183,170

7 unchanged sentences

$ 1,051,661 $ 1,052,577

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.

Included in the above table are debt securities with an amortized cost balance of $ 209.8 million and a fair value of $ 206.7 million at June 30, 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.

5 unchanged sentences

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.

There were no debt securities on nonaccrual status at June 30, 2021 and 2020 and, therefore there was no accrued interest related to debt securities reversed against interest income for the three and six months ended June 30, 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

March 31, 2021 # Fair

June 30, 2021 # Fair

Value Unrealized

32 unchanged sentences

22 $ 171,139 ($ 672 ) 8 $ 22,597 ($ 1,897 ) 30 $ 193,736 ($ 2,569 )

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

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

Obligations of U.S.

7 unchanged sentences

government-sponsored enterprises.

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

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

1 unchanged sentence

Furthermore, the Corporation does not intend to sell these securities and it is likely that the Corporation will not be required to sell these securities before recovery of their cost basis, which may be maturity.

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

Therefore, no allowance for credits losses on securities was recorded at June 30, 2021.

Individual Name Issuer Trust Preferred Debt Securities

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.

Included in debt securities in an unrealized loss position at June 30, 2021 were four 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 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.

As of June 30, 2021, there were two individual name issuer trust preferred debt securities with an amortized cost of $ 4.0 million and unrealized losses of $ 169 thousand that were rated below investment grade by Standard & Poors, Inc.

We noted no additional downgrades to below investment grade between June 30, 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.

1 unchanged sentence

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

Therefore, no allowance for credit losses on securities was recorded at June 30, 2021.

Corporate Bonds

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

At June 30, 2021, the Corporation had four corporate bond holdings with unrealized losses totaling $ 928 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 March 31, 2021.

The issuers of these securities continue to make timely principal and interest payments and none of these securities were past due at June 30, 2021.

4 unchanged sentences

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

Therefore, no allowance for credit losses was recorded at June 30, 2021.

Note 5 - Loans

The following is a summary of loans:

(Dollars in thousands) March 31,

(Dollars in thousands) June 30,

2021 December 31, 2020

15 unchanged sentences

(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 $ 228.6 million and $ 199.8 million, respectively, of PPP loans as of March 31, 2021 and December 31, 2020.

C&I also includes $ 147.0 million and $ 199.8 million, respectively, of PPP loans as of June 30, 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 $ 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.

(5) Includes net unamortized loan origination costs of $ 2.1 million and $ 1.5 million, respectively, at June 30, 2021 and December 31, 2020 and net unamortized premiums on purchased loans of $ 558 thousand and $ 787 thousand, respectively, at June 30, 2021 and December 31, 2020.

Loan balances exclude accrued interest receivable of $ 11.5 million and $ 11.3 million, respectively, as of June 30, 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.

As of June 30, 2021 and December 31, 2020, loans amounting to $ 2.0 billion and $ 2.1 billion, respectively, were pledged as collateral to the FHLB under a blanket pledge agreement and to the FRB.

See Note 8 for additional disclosure regarding borrowings.

5 unchanged sentences

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.

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

Washington Trust has processed loan payment deferral modifications, or "deferments", on 654 loans totaling $ 728 million since the beginning of the second quarter of 2020, in response to the COVID-19 pandemic The majority of these deferments qualified as eligible loan modifications under Section 4013 of the CARES Act, as amended.

As of June 30, 2021, we had active deferments on 22 loans totaling $ 93.4 million, or 2 % of total loans excluding Paycheck Protection Program (“PPP”) loans.

Condensed Notes to Unaudited Consolidated Financial Statements – (continued)

7 unchanged sentences

(Dollars in thousands) Days Past Due

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

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

Commercial real estate

24 unchanged sentences

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

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.

Included in past due loans as of June 30, 2021 and December 31, 2020, were nonaccrual loans of $ 5.8 million and $ 8.5 million, respectively.

All loans 90 days or more past due at June 30, 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

Well-secured loans are permitted to remain on accrual status provided that full collection of principal and interest is assured and the loan is in the process of collection.

Loans are also placed on

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.

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.

2 unchanged sentences

The following table presents the carrying value of nonaccrual loans:

(Dollars in thousands) Mar 31,

(Dollars in thousands) Jun 30,

Commercial real estate

3 unchanged sentences

Residential real estate

11,748 11,981

Total consumer 1,016 1,216

1 unchanged sentence

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

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.

Nonaccrual loans of $ 4.7 million at both June 30, 2021 and December 31, 2020 were current as to the payment of principal and interest.

No ACL was deemed necessary on nonaccrual loans with a carrying value of $ 3.7 million and $ 3.0 million, respectively, as of June 30, 2021 and December 31, 2020.

As of June 30, 2021 and December 31, 2020, nonaccrual loans secured by one- to four-family residential property amounting to $ 2.5 million and $ 3.4 million, respectively, were in process of foreclosure.

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

Three months ended March 31, 2021 2020

(Dollars in thousands) Three Months Six Months

Periods ended June 30, 2021 2020 2021 2020

Commercial real estate

$ — $ — $ — $ —

Commercial & industrial

2 unchanged sentences

Residential real estate

72 103 129 271

Total consumer 13 17 36 40

17 unchanged sentences

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) Mar 31,

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

(Dollars in thousands) Jun 30,

Accruing TDRs $ 8,619 $ 13,418

3 unchanged sentences

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

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

The following tables present TDRs occurring during the period indicated and the recorded investment pre- and post- modification:

(Dollars in thousands) Outstanding Recorded Investment

# of Loans Pre-Modifications Post-Modifications

Three months ended June 30, 2021 2020 2021 2020 2021 2020

Commercial real estate

— 1 $ — $ 841 $ — $ 841

Commercial & industrial

— 2 — 460 — 460

Total commercial — 3 — 1,301 — 1,301

Residential Real Estate:

Residential real estate

— 6 — 3,512 — 3,512

— 3 — 802 — 802

Total consumer — 3 $ — $ 802 $ — $ 802

Total — 12 $ — $ 5,615 $ — $ 5,615

(Dollars in thousands) Outstanding Recorded Investment

# of Loans Pre-Modifications Post-Modifications

Six months ended June 30, 2021 2020 2021 2020 2021 2020

Commercial real estate

— 1 $ — $ 841 $ — $ 841

Commercial & industrial

— 2 — 460 — 460

Total commercial — 3 — 1,301 — 1,301

Residential Real Estate:

Residential real estate

— 6 — 3,512 — 3,512

— 3 — 802 — 802

Total consumer — 3 $ — $ 802 $ — $ 802

Total — 12 $ — $ 5,615 $ — $ 5,615

Condensed Notes to Unaudited Consolidated Financial Statements – (continued)

The following table presents TDRs occurring during the period indicated by type of modification:

(Dollars in thousands) Three Months Six Months

Periods ended June 30, 2021 2020 2021 2020

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

Payment deferral — 5,202 — 5,202

Maturity / amortization concession — — — —

Interest only payments — — — —

Combination (1)

Total $ — $ 5,615 $ — $ 5,615

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

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

(Dollars in thousands) # of Loans Recorded Investment

Three months ended March 31, 2021 2020 2021 2020

Three months ended June 30, 2021 2020 2021 2020

TDRs with a Payment Default:

Home equity — 1 $ — $ 47

(Dollars in thousands) # of Loans Recorded Investment

Six months ended June 30, 2021 2020 2021 2020

TDRs with a Payment Default:

Residential real estate 1 — $ 396 $ —

Home equity — 1 — 47

Individually Analyzed Loans

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

As of March 31, 2021, the carrying value of individually analyzed loans amounted to $ 16.8 million, of which $ 6.9 million were considered collateral dependent.

As of June 30, 2021, the carrying value of individually analyzed loans amounted to $ 13.4 million, of which $ 4.3 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.

3 unchanged sentences

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

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

(Dollars in thousands) June 30, 2021 December 31, 2020

Carrying Value Related Allowance Carrying Value Related Allowance

38 unchanged sentences

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.

On a quarterly basis, management reviews a watched asset list, which generally consists of commercial loans that are risk-rated 6 or worse, highly leveraged transaction loans, high-volatility commercial real estate, loans with active deferrals resulting from the COVID-19 pandemic, and other selected loans.

Management’s review focuses on the current status of the loans, the appropriateness of risk ratings and strategies to improve the credit.

8 unchanged sentences

Condensed Notes to Unaudited Consolidated Financial Statements – (continued)

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

The following table summarizes the Corporation’s loan portfolio by credit quality indicator and loan portfolio segment as of June 30, 2021:

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

59 unchanged sentences

Historical credit loss experience provides the basis for the calculation of loss given default and the estimation of expected credit losses.

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.

Qualitative adjustments are made for differences in specific risk characteristics, such as differences in underwriting standards, portfolio mix, delinquency level, or term, as well as for changes in environmental conditions, that may not be reflected in historical loss rates.

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

6 unchanged sentences

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:

The following table presents the activity in the ACL on loans for the three months ended June 30, 2021:

(Dollars in thousands) Commercial Consumer

5 unchanged sentences

Ending Balance $ 21,450 $ 11,717 $ 33,167 $ 6,877 $ 1,340 $ 495 $ 1,835 $ 41,879

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

The following table presents the activity in the ACL on loans for the six months ended June 30, 2021:

(Dollars in thousands) Commercial Consumer

1 unchanged sentence

Beginning Balance $ 22,065 $ 12,228 $ 34,293 $ 8,042 $ 1,300 $ 471 $ 1,771 $ 44,106

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

Charge-offs — ( 306 ) ( 306 ) ( 50 ) — ( 25 ) ( 25 ) ( 381 )

2 unchanged sentences

Ending Balance $ 21,450 $ 11,717 $ 33,167 $ 6,877 $ 1,340 $ 495 $ 1,835 $ 41,879

The following table presents the activity in the allowance for loan losses for the three months ended June 30, 2020:

(Dollars in thousands) Commercial Consumer

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

Beginning Balance $ 19,736 $ 10,331 $ 30,067 $ 7,729 $ 1,435 $ 434 $ 1,869 $ 39,665

Charge-offs ( 19 ) ( 289 ) ( 308 ) — ( 1 ) ( 17 ) ( 18 ) ( 326 )

Recoveries — 5 5 — 6 7 13 18

Provision 566 1,231 1,797 324 ( 46 ) 9 ( 37 ) 2,084

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

Condensed Notes to Unaudited Consolidated Financial Statements – (continued)

The following table presents the activity in the allowance for loan losses for the six months ended June 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 ASC 326 3,405 3,029 6,434 221 ( 106 ) ( 48 ) ( 154 ) 6,501

Charge-offs ( 172 ) ( 583 ) ( 755 ) — ( 174 ) ( 32 ) ( 206 ) ( 961 )

Recoveries — 9 9 — 7 14 21 30

Provision 2,309 4,902 7,211 1,217 277 152 429 8,857

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

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.

Operating lease right-of-use (“ROU”) assets amounted to $ 28.3 million and $ 29.5 million, respectively, as of June 30, 2021 and December 31, 2020.

Operating lease liabilities totaled $ 30.6 million and $ 31.7 million, respectively, as of June 30, 2021 and December 31, 2020.

As of June 30, 2021, there was one operating lease that had not yet commenced.

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

Rental expense for operating leases is recognized on a straight-line bas is over the lease term and amounted to $ 1.0 million and $ 2.0 million respectively, for the three and six months ended June 30, 2021, compared to $ 973 thousand and $ 1.9 million, respectively, for the same periods in 2020.

V ariable 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

Jun 30, 2021 Dec 31, 2020

Weighted average discount rate 3.34 % 3.34 %

Range of lease expiration dates 4 months - 20 years

Range of lease expiration dates 1 year - 20 years

7 months - 20 years

4 unchanged sentences

13.1 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:

The following table presents the undiscounted annual lease payments under the terms of the Corporation’s operating leases at June 30, 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

July 1, 2021 to December 31, 2021 $ 1,972

2026 and thereafter 22,099

4 unchanged sentences

(2) Includes short-term operating lease liabilities of $ 3.0 million.

Condensed Notes to Unaudited Consolidated Financial Statements – (continued)

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

(Dollars in thousands)

Three months ended March 31, 2021 2020

(Dollars in thousands) Three Months Six Months

Periods ended June 30, 2021 2020 2021 2020

Lease Expense:

5 unchanged sentences

Cash paid reducing operating lease liabilities

$ 989 $ 942 $ 1,978 $ 1,875

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

Condensed Notes to Unaudited Consolidated Financial Statements – (continued)

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.

Advances payable to the FHLB amounted to $ 408.6 million and $ 593.9 million, respectively, at June 30, 2021 and December 31, 2020.

As of June 30, 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 $ 1.2 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 March 31, 2021:

The following table presents maturities and weighted average interest rates on FHLB advances outstanding as of June 30, 2021:

(Dollars in thousands) Scheduled

Maturity Weighted

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

2022 471 4.96

2023 495 4.96

July 1, 2021 to December 31, 2021 $ 328,450 0.39 %

2023 35,000 0.45

1 unchanged sentence

2026 and thereafter 10,142 3.06

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

Balance at June 30, 2021 $ 408,592 0.64 %

Note 9 - Shareholders' Equity

4 unchanged sentences

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.

As of June 30, 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 March 31, 2021 exceeded the regulatory minimum levels to be considered “well capitalized.”

Capital levels at June 30, 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

March 31, 2021

June 30, 2021

Total Capital (to Risk-Weighted Assets):

25 unchanged sentences

In addition to the minimum regulatory capital required for capital adequacy purposes outlined in the table above, the Corporation is required to maintain a minimum capital conservation buffer, in the form of common equity, of 2.50% in order to avoid restrictions on capital distributions and discretionary bonuses.

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

The Corporation’s capital levels exceeded the minimum regulatory capital requirements plus the capital conservation buffer at June 30, 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 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.

At both June 30, 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

As a result, capital ratios and amounts as of June 30, 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)

14 unchanged sentences

Cash Flow Hedging Instruments

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 June 30, 2021 and December 31, 2020, the Corporation had 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 on borrowings mature in December of 2021 and December of 2023.

As of June 30, 2021, the Corporation has an interest rate swap with a total notional amount of $ 300.0 million that was designated as a cash flow hedge to hedge the interest rate risk associated with a pool of variable rate commercial loans.

The interest rate swap on loans was executed in the second quarter of 2021 and matures in May of 2026.

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.

6 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 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.

As of June 30, 2021 and December 31, 2020, Washington Trust had interest rate swap contracts with commercial loan borrowers with notional amounts of $ 993.0 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.

5 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 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)

As of June 30, 2021, the notional amounts of risk participation-out agreements and risk participation-in agreements were $ 67.6 million and $ 147.7 million, respectively, compared to $ 61.6 million and $ 92.7 million, respectively, as of December 31, 2020.

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 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.

As of June 30, 2021, the notional amounts of interest rate lock commitments and forward sale commitments were $ 82.1 million and $ 155.9 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 Mar 31, 2021 Dec 31, 2020 Balance Sheet Location Mar 31, 2021 Dec 31, 2020

Balance Sheet Location Jun 30, 2021 Dec 31, 2020 Balance Sheet Location Jun 30, 2021 Dec 31, 2020

Derivatives Designated as Cash Flow Hedging Instruments:

25 unchanged sentences

Washington Trust may need to post additional collateral in the future in proportion to potential increases in unrealized loss positions.

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

Condensed Notes to Unaudited Consolidated Financial Statements – (continued)

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

(Dollars in thousands) Gain (Loss) Recognized in

Other Comprehensive Income, Net of Tax

Three months ended March 31, 2021 2020

Three Months Six Months

Periods ended June 30, 2021 2020 2021 2020

Derivatives Designated as Cash Flow Hedging Instruments:

Interest rate risk management contracts:

Interest rate caps

Interest rate swaps

$ 70 $ 1 $ 367 ($ 1,323 )

Interest rate caps

Interest rate floors

— ( 17 ) — 235

Total $ 70 $ 8 $ 367 ($ 1,042 )

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.

Interest rate cap and interest rate floor contracts designated as cash flow hedges matured in 2020.

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.

The following table presents the effect of derivative instruments in the Corporation’s Unaudited Consolidated Statements of Income:

(Dollars in thousands) Amount of Gain (Loss)

Recognized in Income on Derivatives

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

Three Months Six Months

Periods ended June 30, Statement of Income Location 2021 2020 2021 2020

Derivatives not Designated as Hedging Instruments:

12 unchanged sentences

Total ($ 1,068 ) $ 1,291 $ 2,155 $ 3,848

Condensed Notes to Unaudited Consolidated Financial Statements – (continued)

Note 11 - Fair Value Measurements

1 unchanged sentence

Items recorded at fair value on a recurring basis include securities available for sale, mortgage loans held for sale and derivatives.

Additionally, from time to time, we may be required to record at fair value other assets on a nonrecurring basis, such as collateral dependent individually analyzed / impaired loans, property acquired through foreclosure or repossession and mortgage servicing rights.

Additionally, from time to time, we may be required to record at fair value other assets on a nonrecurring basis, such as collateral dependent individually analyzed loans, property acquired through foreclosure or repossession and mortgage servicing rights.

These nonrecurring fair value adjustments typically involve the application of lower of cost or market accounting or write-downs of individual assets.

13 unchanged sentences

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

(Dollars in thousands) March 31,

(Dollars in thousands) June 30,

2021 December 31,

3 unchanged sentences

Difference between fair value and principal balance $ 869 $ 2,301

Condensed Notes to Unaudited Consolidated Financial Statements – (continued)

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.

Fair value option adjustments amounted to an increase of $ 38 thousand for the three months ended June 30, 2021 and a decrease of $ 1.4 million for the six months ended June 30, 2021, compared to increases of $ 149 thousand and $ 1.0 million, respectively, in the three and six months ended June 30, 2020.

There were no mortgage loans held for sale 90 days or more past due as of June 30, 2021 and December 31, 2020.

Valuation Techniques

3 unchanged sentences

such items are classified as Level 1.

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

There were no Level 1 debt securities held at June 30, 2021 and December 31, 2020.

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

2 unchanged sentences

government-sponsored enterprises, including mortgage-backed securities, individual name issuer trust preferred debt securities and corporate bonds.

Condensed Notes to Unaudited Consolidated Financial Statements – (continued)

Debt securities not actively traded whose fair value is determined through the use of cash flows utilizing inputs that are unobservable are classified as Level 3.

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

There were no Level 3 debt securities held at June 30, 2021 and December 31, 2020.

Mortgage Loans Held for Sale

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

Collateral Dependent Individually Analyzed / Impaired Loans

The fair value of collateral dependent loans that are individually analyzed or were previously deemed impaired is determined based upon the appraised fair value of the underlying collateral.

Collateral Dependent Individually Analyzed Loans

The fair value of collateral dependent individually analyzed loans is determined based upon the appraised fair value of the underlying collateral.

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

2 unchanged sentences

Internal valuations may be utilized to determine the fair value of other business assets.

Collateral dependent individually analyzed / impaired loans are categorized as Level 3.

Collateral dependent individually analyzed loans are categorized as Level 3.

Loan Servicing Rights

7 unchanged sentences

Loan servicing rights are categorized as Level 3.

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.

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

Fair value measurements are determined using independent valuation software, which considers the present value of future cash flows discounted using market observable inputs such as forward rate assumptions.

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

3 unchanged sentences

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 of June 30, 2021 and December 31, 2020, the Corporation has assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and has determined that the credit valuation adjustments are not significant to the overall valuation of its derivatives.

As a result, the Corporation has classified its derivative valuations in their entirety as Level 2.

4 unchanged sentences

As a result, the Corporation has classified its interest rate lock commitments as Level 2.

Condensed Notes to Unaudited Consolidated Financial Statements – (continued)

Items Recorded at Fair Value on a Recurring Basis

3 unchanged sentences

(Level 2) Significant Unobservable Inputs

March 31, 2021

June 30, 2021

Available for sale debt securities:

15 unchanged sentences

Total liabilities at fair value on a recurring basis $ 51,871 $ — $ 51,871 $ —

Condensed Notes to Unaudited Consolidated Financial Statements – (continued)

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

20 unchanged sentences

Items Recorded at Fair Value on a Nonrecurring Basis

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:

The following table presents the carrying value of assets held at June 30, 2021, which were written down to fair value during the six months ended June 30, 2021:

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

3 unchanged sentences

Total assets at fair value on a nonrecurring basis $ 887 $ — $ — $ 887

Condensed Notes to Unaudited Consolidated Financial Statements – (continued)

The following table presents the carrying value of assets held at December 31, 2020, which were written down to fair value during the year ended December 31, 2020:

8 unchanged sentences

(Weighted Average)

March 31, 2021

June 30, 2021

Collateral dependent individually analyzed loans $ 887 Appraisals of collateral Discount for costs to sell 10 %

Appraisal adjustments 0 %

Condensed Notes to Unaudited Consolidated Financial Statements – (continued)

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

10 unchanged sentences

(Dollars in thousands)

March 31, 2021 Carrying Amount Total

June 30, 2021 Carrying Amount Total

Fair Value Quoted Prices in Active Markets for Identical Assets

7 unchanged sentences

Junior subordinated debentures 22,681 20,116 — 20,116 —

Condensed Notes to Unaudited Consolidated Financial Statements – (continued)

(Dollars in thousands)

9 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

1 unchanged sentence

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

For the three months ended June 30, 2021 2020

(Dollars in thousands) Revenue (1)

16 unchanged sentences

Loan related derivative income

Income from bank-owned life insurance

438 279 426 288

Total noninterest income 20,593 12,658 26,320 10,441

Total revenues $ 55,347 $ 12,658 $ 57,265 $ 10,441

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

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

Condensed Notes to Unaudited Consolidated Financial Statements – (continued)

For the six months ended June 30, 2021 2020

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

Revenue (1) ASC 606 Revenue (2)

Net interest income $ 67,625 $ — $ 63,547 $ —

Noninterest income:

Asset-based wealth management revenues

19,574 19,574 16,511 16,511

Transaction-based wealth management revenues

749 749 783 783

Total wealth management revenues

20,323 20,323 17,294 17,294

Mortgage banking revenues

17,921 — 20,947 —

Card interchange fees

2,449 2,449 1,978 1,978

Service charges on deposit accounts

1,244 1,244 1,377 1,377

Loan related derivative income

1,642 — 2,554 —

Income from bank-owned life insurance

1,163 — 1,355 —

1,825 1,524 742 535

Total noninterest income 46,567 25,540 46,247 21,184

11 unchanged sentences

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 ended March 31, 2021 2020

(Dollars in thousands) Three Months Six Months

Periods ended June 30, 2021 2020 2021 2020

Revenue recognized at a point in time:

4 unchanged sentences

Wealth management revenues

10,428 8,605 20,323 17,294

Service charges on deposit accounts

131 143 259 336

Total revenues from contracts in scope of Topic 606 $ 12,658 $ 10,441 $ 25,540 $ 21,184

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 $ 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.

Receivables amounted to

Condensed Notes to Unaudited Consolidated Financial Statements – (continued)

$ 5.2 million at June 30, 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 March 31, 2021 and March 31, 2020 and were included in other liabilities in the Unaudited Consolidated Balance Sheets.

The balances of contract liabilities were insignificant at both June 30, 2021 and June 30, 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 $ 1.4 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)

The carrying value of contract cost assets amounted to $ 1.5 million at both June 30, 2021 and December 31, 2020 and were included in other assets in the Unaudited Consolidated Balance Sheets.

The amortization of contract cost assets is recorded within salaries and employee benefits expense in the Unaudited Consolidated Statements of Income.

Note 13 - Defined Benefit Pension Plans

5 unchanged sentences

Pension Plan Non-Qualified Retirement Plans

Three months ended March 31, 2021 2020 2021 2020

Three Months Six Months Three Months Six Months

Periods ended June 30, 2021 2020 2021 2020 2021 2020 2021 2020

Net Periodic Benefit Cost:

12 unchanged sentences

Qualified Pension Plan Non-Qualified Retirement Plans

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

For the six months ended June 30, 2021 2020 2021 2020

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

9 unchanged sentences

3.75 3.75 3.75 3.75

Condensed Notes to Unaudited Consolidated Financial Statements – (continued)

Note 14 - Share-Based Compensation Arrangements

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

During the six months ended June 30, 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.

2 unchanged sentences

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 Corporation granted to certain key employees and non-executive directors 8,360 nonvested share units with 3 -year cliff vesting.

The weighted average grant date fair value of the nonvested share units was $ 50.81 .

Condensed Notes to Unaudited Consolidated Financial Statements – (continued)

Note 15 - Business Segments

Washington Trust segregates financial information in assessing its results among its Commercial Banking and Wealth Management Services operating segments.

The amounts in the Corporate unit include activity not related to the segments.

The Corporate unit includes activity not allocated to the operating segments.

Management uses certain methodologies to allocate income and expenses to the business lines.

7 unchanged sentences

Commercial Banking

The Commercial Banking segment includes commercial, residential and consumer lending activities;

The Commercial Banking operating segment includes commercial, residential and consumer lending activities;

mortgage banking activities;

3 unchanged sentences

Wealth Management Services

Wealth Management Services includes investment management;

The Wealth Management Services operating segment includes investment management;

holistic financial planning services;

4 unchanged sentences

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 March 31, 2021 2020 2021 2020 2021 2020 2021 2020

Three months ended June 30, 2021 2020 2021 2020 2021 2020 2021 2020

Net interest income (expense) $ 35,326 $ 32,580 ($ 24 ) ($ 26 ) ($ 548 ) ($ 1,609 ) $ 34,754 $ 30,945

16 unchanged sentences

882 261 16 13 19 23 917 297

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

Six months ended June 30, 2021 2020 2021 2020 2021 2020 2021 2020

Net interest income (expense) $ 69,847 $ 61,590 ($ 47 ) ($ 93 ) ($ 2,175 ) $ 2,050 $ 67,625 $ 63,547

Provision for credit losses ( 2,000 ) 9,236 — — — — ( 2,000 ) 9,236

Net interest income (expense) after provision for loan losses

71,847 52,354 ( 47 ) ( 93 ) ( 2,175 ) 2,050 69,625 54,311

Noninterest income 24,070 27,575 21,323 17,294 1,174 1,378 46,567 46,247

Noninterest expenses:

Depreciation and amortization expense

1,322 1,231 703 708 93 78 2,118 2,017

Other noninterest expenses

39,985 36,298 13,404 13,230 12,218 7,386 65,607 56,914

Total noninterest expenses

41,307 37,529 14,107 13,938 12,311 7,464 67,725 58,931

Income (loss) before income taxes

54,610 42,400 7,169 3,263 ( 13,312 ) ( 4,036 ) 48,467 41,627

Income tax expense (benefit) 11,881 8,941 1,702 813 ( 3,047 ) ( 1,068 ) 10,536 8,686

Net income (loss) $ 42,729 $ 33,459 $ 5,467 $ 2,450 ($ 10,265 ) ($ 2,968 ) $ 37,931 $ 32,941

Total assets at period end $ 4,520,417 $ 4,579,720 $ 75,232 $ 74,803 $ 1,256,331 $ 1,222,437 $ 5,851,980 $ 5,876,960

Expenditures for long-lived assets

1,717 787 74 66 37 72 1,828 925

Condensed Notes to Unaudited Consolidated Financial Statements – (continued)

1 unchanged sentence

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

Three months ended March 31, 2021 2020

Three months ended June 30, 2021 2020

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

5 unchanged sentences

158 38 120 ( 293 ) ( 69 ) ( 224 )

Net cash flow hedge (losses) gains reclassified into earnings (1) (2)

( 65 ) ( 15 ) ( 50 ) 305 73 232

Net change in fair value of cash flow hedges 93 23 70 12 4 8

Defined benefit plan obligations:

Amortization of net actuarial losses (3)

877 203 674 535 126 409

Total other comprehensive income (loss) $ 6,410 $ 1,532 $ 4,878 ($ 1,817 ) ($ 426 ) ($ 1,391 )

(1) The pre-tax amounts for the three months ended June 30, 2021 are included in interest expense on FHLB advances and interest and fees on loans in the Unaudited Consolidated Statements of Income.

(2) The pre-tax amounts for the three months ended June 30, 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.

Six months ended June 30, 2021 2020

(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

($ 12,085 ) ($ 2,900 ) ($ 9,185 ) $ 14,376 $ 3,378 $ 10,998

Cash flow hedges:

Change in fair value of cash flow hedges

267 64 203 ( 1,848 ) ( 434 ) ( 1,414 )

Net cash flow hedge gains reclassified into earnings (1) (2)

5 unchanged sentences

Total other comprehensive (loss) income ($ 10,180 ) ($ 2,443 ) ($ 7,737 ) $ 14,084 $ 3,309 $ 10,775

(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.

(1) The pre-tax amounts for the six months ended June 30, 2021 are included in interest expense on FHLB advances and interest and fees on loans in the Unaudited Consolidated Statements of Income.

(2) The pre-tax amounts for the six months ended June 30, 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.

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

(Dollars in thousands) Net Unrealized (Losses) 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 June 30, 2021

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

Other comprehensive income before reclassifications 4,134 120 — 4,254

Amounts reclassified from accumulated other comprehensive income

— ( 50 ) 674 624

Net other comprehensive income 4,134 70 674 4,878

Balance at June 30, 2021 $ 696 ($ 1,080 ) ($ 14,744 ) ($ 15,128 )

Condensed Notes to Unaudited Consolidated Financial Statements – (continued)

(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 March 31, 2021

For the six months ended June 30, 2021

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

3 unchanged sentences

Net other comprehensive (loss) income ( 9,185 ) 367 1,081 ( 7,737 )

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

Balance at June 30, 2021 $ 696 ($ 1,080 ) ($ 14,744 ) ($ 15,128 )

(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 June 30, 2020

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

Other comprehensive loss before reclassifications ( 1,808 ) ( 224 ) — ( 2,032 )

Amounts reclassified from accumulated other comprehensive income

— 232 409 641

Net other comprehensive (loss) income ( 1,808 ) 8 409 ( 1,391 )

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

(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 March 31, 2020

For the six months ended June 30, 2020

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

2 unchanged sentences

Amounts reclassified from accumulated other comprehensive income

— 372 819 1,191

Net other comprehensive income (loss)

10,998 ( 1,042 ) 819 10,775

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

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

Condensed Notes to Unaudited Consolidated Financial Statements – (continued)

2 unchanged sentences

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

Three months ended March 31, 2021 2020

Three Months Six Months

Periods ended June 30, 2021 2020 2021 2020

Earnings per common share - basic:

14 unchanged sentences

Dilutive effect of common stock equivalents

122 35 150 76

Weighted average diluted common shares

1 unchanged sentence

Earnings per common share - diluted $ 1.00 $ 1.21 $ 2.17 $ 1.89

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.

Weighted average common stock equivalents, not included in common stock equivalents above because they were anti-dilutive, totaled 87,924 and 149,650 , respectively, for the three and six months ended June 30, 2021, compared to 256,721 and 220,305 , respectively, for the same periods in 2020.

Note 18 - Commitments and Contingencies

17 unchanged sentences

Most standby letters of credit extend for one year.

The maximum potential amount of undiscounted future payments, not reduced by amounts that may be recovered, totaled $ 11.6 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.

The maximum potential amount of undiscounted future payments, not reduced by amounts that may be recovered, totaled $ 11.9 million and $ 11.7 million, respectively, as of June 30, 2021 and December 31, 2020.

At June 30, 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 and six months ended June 30, 2021 and 2020.

Condensed Notes to Unaudited Consolidated Financial Statements – (continued)

11 unchanged sentences

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

(Dollars in thousands) Mar 31,

(Dollars in thousands) Jun 30,

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

32 unchanged sentences

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:

The activity in the ACL on unfunded commitments for the three months ended June 30, 2021 is presented below:

(Dollars in thousands) Commercial Consumer

3 unchanged sentences

Ending Balance $ 1,214 $ 1,045 $ 2,259 $ 56 $ — $ 18 $ 18 $ 2,333

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

The activity in the ACL on unfunded commitments for the six months ended June 30, 2021 is presented below:

(Dollars in thousands) Commercial Consumer

1 unchanged sentence

Beginning Balance $ 907 $ 1,402 $ 2,309 $ 54 $ — $ 19 $ 19 $ 2,382

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

Provision 307 ( 357 ) ( 50 ) 2 — ( 1 ) ( 1 ) ( 49 )

Ending Balance $ 1,214 $ 1,045 $ 2,259 $ 56 $ — $ 18 $ 18 $ 2,333

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

(Dollars in thousands) Commercial Consumer

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

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

Provision ( 245 ) 360 115 — — 1 1 116

Ending Balance $ 887 $ 1,207 $ 2,094 $ 42 $ — $ 19 $ 19 $ 2,155

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

(Dollars in thousands) Commercial Consumer

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

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

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

Provision ( 66 ) 437 371 2 — 6 6 379

Ending Balance $ 887 $ 1,207 $ 2,094 $ 42 $ — $ 19 $ 19 $ 2,155

Other Contingencies

3 unchanged sentences

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