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Published: 2023-05-04 00:00:00 ET

wash-20230331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

(Mark One)


☒	Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended
	March 31, 2023	or


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

Commission file number: 001-32991

WASHINGTON TRUST BANCORP, INC.

(Exact name of registrant as specified in its charter)


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


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

(401) 348-1200

(Registrant’s telephone number, including area code)


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

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

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

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

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

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

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

☐ Yes ☒ No

The number of shares of common stock of the registrant outstanding as of April 30, 2023 was 17,019,236.


FORM 10-Q
WASHINGTON TRUST BANCORP, INC. AND SUBSIDIARIES
For the Quarter Ended March 31, 2023

TABLE OF CONTENTS
			Page Number

Glossary of Acronyms and Terms			3
PART I. Financial Information
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets as of March 31, 2023 and December 31, 2022			4
Consolidated Statements of Income for the three months ended March 31, 2023 and 2022			5
Consolidated Statements of Comprehensive Income (Loss) for the three months ended March 31, 2023 and 2022			6
Consolidated Statements of Changes in Shareholders’ Equity for the three months ended March 31, 2023 and 2022			7
Consolidated Statements of Cash Flows for the three months ended March 31, 2023 and 2022			8
Condensed Notes to Unaudited Consolidated Financial Statements:			9
Note 1 - Basis of Presentation			9
Note 2 - Recently Issued Accounting Pronouncements			9
Note 3 - Securities			10
Note 4 - Loans			13
Note 5 - Allowance for Credit Losses on Loans			20
Note 6 - Derivative Financial Instruments			20
Note 7 - Fair Value Measurements			23
Note 8 - Deposits			27
Note 9 - Borrowings			28
Note 10 - Shareholders’ Equity			28
Note 11 - Revenue from Contracts with Customers			30
Note 12 - Defined Benefit Pension Plans			31
Note 13 - Business Segments			32
Note 14 - Other Comprehensive Income (Loss)			33
Note 15 - Earnings Per Common Share			34
Note 16 - Commitments and Contingencies			34

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations			37
Item 3. Quantitative and Qualitative Disclosures About Market Risk			66
Item 4. Controls and Procedures			66
PART II. Other Information
Item 1. Legal Proceedings			66
Item 1A. Risk Factors			66
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			67
Item 6. Exhibits			67
Signatures			68

-2-

Glossary of Acronyms and Terms

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

2023 Repurchase Program

Washington Trust Bancorp, Inc.'s Stock Repurchase Program commencing January 1, 2023

ACL

Allowance for credit losses

ALCO

Asset/Liability Committee

AOCL

Accumulated other comprehensive loss

ASC

Accounting Standards Codification

ASU

Accounting Standards Update

ATM

Automated teller machine

AUA

Assets under administration

Bancorp

Washington Trust Bancorp, Inc.

Bank

The Washington Trust Company, of Westerly

BOLI

Bank-owned life insurance

C&I

Commercial and industrial

CDARS

Certificate of Deposit Account Registry Service

Corporation

The Bancorp and its subsidiaries

CRE

Commercial real estate

DCF

Discounted cash flow

DDM

Demand Deposit Marketplace

EPS

Earnings per common share

ERM

Enterprise risk management

Exchange Act

Securities Exchange Act of 1934, as amended

FDIC

Federal Deposit Insurance Corporation

Federal Reserve

Board of Governors of the Federal Reserve System

FHLB

Federal Home Loan Bank of Boston

FRBB

Federal Reserve Bank of Boston

FTE

Fully taxable equivalent

GAAP

Accounting principles generally accepted in the United States of America

ICS

Insured Cash Sweep

LTV

Loan to value

NIM

Net interest margin

OREO

Property acquired through foreclosure or repossession

PPP

Paycheck Protection Program

S&P

Standard and Poors, Inc.

SBA

Small Business Administration

SEC

U.S. Securities and Exchange Commission

TDR

Troubled debt restructuring

TLM

Troubled loan modification

Washington Trust

The Bancorp and its subsidiaries

-3-

PART I. Financial Information

Item 1. Financial Statements


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


	March 31, 2023	December 31, 2022
Assets:
Cash and due from banks	$134,989	$115,492
Short-term investments	3,291	2,930
Mortgage loans held for sale, at fair value	7,445	8,987

Available for sale debt securities, at fair value (amortized cost of $1,209,794, net of allowance for credit losses on securities of $0 at March 31, 2023; and amortized cost of $1,166,340; net of allowance for credit losses on securities of $0 at December 31, 2022)	1,054,747	993,928


Federal Home Loan Bank stock, at cost	42,501	43,463
Loans:
Total loans	5,227,969	5,110,139
Less: allowance for credit losses on loans	38,780	38,027
Net loans	5,189,189	5,072,112
Premises and equipment, net	31,719	31,550
Operating lease right-of-use assets	26,170	27,156
Investment in bank-owned life insurance	101,782	102,182
Goodwill	63,909	63,909
Identifiable intangible assets, net	4,342	4,554
Other assets	199,098	193,788
Total assets	$6,859,182	$6,660,051
Liabilities:
Deposits:
Noninterest-bearing deposits	$829,763	$858,953
Interest-bearing deposits	4,438,751	4,160,009
Total deposits	5,268,514	5,018,962
Federal Home Loan Bank advances	925,000	980,000

Junior subordinated debentures	22,681	22,681
Operating lease liabilities	28,622	29,558
Other liabilities	149,382	155,181
Total liabilities	6,394,199	6,206,382
Commitments and contingencies (Note 16)
Shareholders’ Equity:
Common stock of $.0625 par value; authorized 60,000,000 shares; 17,363,457 shares issued and 16,985,872 shares outstanding at March 31, 2023 and 17,363,457 shares issued and 17,182,753 shares outstanding at December 31, 2022	1,085	1,085
Paid-in capital	127,734	127,056
Retained earnings	495,231	492,043
Accumulated other comprehensive loss	(141,760)	(157,800)
Treasury stock, at cost; 377,585 shares at March 31, 2023 and 180,704 shares at December 31, 2022	(17,307)	(8,715)
Total shareholders’ equity	464,983	453,669
Total liabilities and shareholders’ equity	$6,859,182	$6,660,051

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

-4-


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




Three months ended March 31,		2023	2022
Interest income:
Interest and fees on loans		$59,749	$33,930
Interest on mortgage loans held for sale		152	232
Taxable interest on debt securities		7,194	4,230

Dividends on Federal Home Loan Bank stock		597	67
Other interest income		1,070	78
Total interest and dividend income		68,762	38,537
Interest expense:
Deposits		19,589	3,103
Federal Home Loan Bank advances		11,626	244
Junior subordinated debentures		354	99

Total interest expense		31,569	3,446
Net interest income		37,193	35,091
Provision for credit losses		800	100
Net interest income after provision for credit losses		36,393	34,991
Noninterest income:
Wealth management revenues		8,663	10,531
Mortgage banking revenues		1,245	3,501
Card interchange fees		1,132	1,164
Service charges on deposit accounts		777	668
Loan related derivative income		(51)	301
Income from bank-owned life insurance		1,165	601



Other income		352	393
Total noninterest income		13,283	17,159
Noninterest expense:
Salaries and employee benefits		21,784	21,002
Outsourced services		3,496	3,242
Net occupancy		2,437	2,300
Equipment		1,028	918
Legal, audit and professional fees		896	770
FDIC deposit insurance costs		872	366
Advertising and promotion		408	351
Amortization of intangibles		212	217




Other expenses		2,431	2,053
Total noninterest expense		33,564	31,219
Income before income taxes		16,112	20,931
Income tax expense		3,300	4,448
Net income		$12,812	$16,483

Net income available to common shareholders		$12,783	$16,429
Weighted average common shares outstanding - basic		17,074	17,331
Weighted average common shares outstanding - diluted		17,170	17,482
Per share information:	Basic earnings per common share	$0.75	$0.95
	Diluted earnings per common share	$0.74	$0.94

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

-5-


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



Three months ended March 31,	2023	2022
Net income	$12,812	$16,483
Other comprehensive income (loss), net of tax:
Net change in fair value of available for sale debt securities	13,198	(49,460)
Net change in fair value of cash flow hedges	2,797	(10,335)
Net change in defined benefit plan obligations	45	325
Total other comprehensive income (loss), net of tax	16,040	(59,470)
Total comprehensive income (loss)	$28,852	($42,987)

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

-6-


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


For the three months ended March 31, 2023	Common Shares Outstanding	Common Stock	Paid-in Capital	Retained Earnings	Accumulated Other Comprehensive (Loss) Income	Treasury Stock	Total
Balance at December 31, 2022	17,183	$1,085	$127,056	$492,043	($157,800)	($8,715)	$453,669
Net income	—	—	—	12,812	—	—	12,812
Total other comprehensive income, net of tax	—	—	—	—	16,040	—	16,040
Cash dividends declared ($0.56 per share)	—	—	—	(9,624)	—	—	(9,624)
Share-based compensation	—	—	858	—	—	—	858

Exercise of stock options, issuance of other compensation-related equity awards, net of awards surrendered	3	—	(180)	—	—	149	(31)
Treasury stock purchased under 2023 Repurchase Program	(200)	—	—	—	—	(8,741)	(8,741)
Balance at March 31, 2023	16,986	$1,085	$127,734	$495,231	($141,760)	($17,307)	$464,983


For the three months ended March 31, 2022	Common Shares Outstanding	Common Stock	Paid-in Capital	Retained Earnings	Accumulated Other Comprehensive Loss	Treasury Stock	Total
Balance at December 31, 2021	17,331	$1,085	$126,511	$458,310	($19,981)	($1,117)	$564,808

Net income	—	—	—	16,483	—	—	16,483
Total other comprehensive loss, net of tax	—	—	—	—	(59,470)	—	(59,470)
Cash dividends declared ($0.54 per share)	—	—	—	(9,498)	—	—	(9,498)
Share-based compensation	—	—	888	—	—	—	888


Exercise of stock options, issuance of other compensation-related equity awards, net of awards surrendered	1	—	(44)	—	—	25	(19)

Balance at March 31, 2022	17,332	$1,085	$127,355	$465,295	($79,451)	($1,092)	$513,192

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

-7-


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


Three months ended March 31,		2023	2022
Cash flows from operating activities:
Net income		$12,812	$16,483
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for credit losses		800	100
Depreciation of premises and equipment		975	838


Net amortization of premiums and discounts on debt securities and loans		324	966
Amortization of intangibles		212	217

Share-based compensation		858	888
Tax (expense) benefit from stock option exercises and other equity awards		(1)	10

Income from bank-owned life insurance		(1,165)	(601)

Net gains on loan sales, including changes in fair value		(662)	(3,085)





Proceeds from sales of loans, net		25,378	122,165
Loans originated for sale		(23,394)	(95,644)

Decrease (increase) in operating lease right-of-use assets		986	(2,124)
(Decrease) increase in operating lease liabilities		(936)	2,160
(Increase) decrease in other assets		(4,917)	21,289
Decrease in other liabilities		(176)	(25,100)
Net cash provided by operating activities		11,094	38,562
Cash flows from investing activities:
Purchases of:	Available for sale debt securities: Mortgage-backed	(39,966)	(74,919)
	Available for sale debt securities: Other	(20,221)	(250)



Maturities, calls and principal payments of:	Available for sale debt securities: Mortgage-backed	16,136	43,334
	Available for sale debt securities: Other	250	—

Net redemptions of Federal Home Loan Bank stock		962	4,579
Purchases of other equity investments, net		—	(188)


Net increase in loans		(116,609)	(8,700)

Purchases of loans		(1,709)	(465)

Purchases of premises and equipment		(1,144)	(834)


Proceeds from bank-owned life insurance		1,566	—
Equity investments in real estate limited partnerships		(6,632)	—

Net cash used in investing activities		(167,367)	(37,443)
Cash flows from financing activities:
Net increase in deposits		249,552	147,899

Proceeds from Federal Home Loan Bank advances		1,005,000	197,000
Repayments of Federal Home Loan Bank advances		(1,060,000)	(287,000)


Purchases of treasury stock		(8,741)	—


Net proceeds from stock option exercises and issuance of other equity awards, net of awards surrendered		(31)	(19)
Cash dividends paid		(9,649)	(9,396)

Net cash provided by financing activities		176,131	48,484
Net increase in cash and cash equivalents		19,858	49,603
Cash and cash equivalents at beginning of period		118,422	178,493
Cash and cash equivalents at end of period		$138,280	$228,096

Noncash Activities:
Loans charged-off		$61	$36
Loans transferred to property acquired through foreclosure or repossession		683	—
Commitment for equity investments in real estate limited partnerships		1,728	—
Supplemental Disclosures:
Interest payments		$27,585	$3,458
Income tax payments		936	931

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

-8-

Condensed Notes to Unaudited Consolidated Financial Statements

Note 1 - Basis of Presentation

Nature of Operations

The Bancorp is a publicly-owned registered bank holding company that has elected to be a financial holding company. The Bancorp’s principal subsidiary is the Bank, a Rhode Island chartered financial institution founded in 1800. The Bank is the oldest community bank in the nation and the largest state-chartered bank headquartered in Rhode Island.

Washington Trust offers a full range of financial services, including commercial, residential and consumer lending, retail and commercial deposit products, and wealth management and trust services through its offices in Rhode Island, Massachusetts and Connecticut.

Basis of Presentation

The accounting and reporting policies of the Washington Trust conform to GAAP and to general practices of the banking industry. The Unaudited Consolidated Financial Statements of the Corporation presented herein have been prepared pursuant to the rules of the SEC for quarterly reports on Form 10-Q and do not include all of the information and note disclosures required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) and disclosures considered necessary for the fair presentation of the accompanying Unaudited Consolidated Financial Statements have been included. Interim results are not necessarily indicative of the results of the entire year. The accompanying Unaudited Consolidated Financial Statements should be read in conjunction with the Audited Consolidated Financial Statements and notes thereto included in the Annual Report on Form 10-K for the fiscal year ended December 31, 2022.

The Unaudited Consolidated Financial Statements include the accounts of the Bancorp and its wholly-owned subsidiaries, except subsidiaries that are not deemed necessary to be consolidated. Intercompany balances and transactions have been eliminated in consolidation.

The Bancorp owns the common stock of two capital trusts, which have issued trust preferred securities. These capital trusts are variable interest entities in which the Bancorp is not the primary beneficiary and, therefore, are not consolidated. The capital trusts’ 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, 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.

Use of Estimates

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

Note 2 - Recently Issued Accounting Pronouncements

Accounting Standards Adopted in 2023

Financial Instruments - Credit Losses - ASC 326

ASU No. 2022-02, “Troubled Debt Restructurings and Vintage Disclosures” (“ASU 2022-02”), was issued in March 2022 to provide updates on the accounting treatment for TDRs and related disclosures requirements, as well as modifying the disclosure requirement associated with the existing credit quality indicators “vintage” disclosure. With respect to TDRs, ASU 2022-02 eliminates the recognition and measurement guidance for TDRs under current GAAP and instead requires that the Corporation evaluate whether the modification represents a new loan or a continuation of an existing loan, consistent with the current GAAP treatment for other loan modifications. In addition, ASU 2022-02 eliminates existing disclosure requirements on TDRs and replaces with enhanced disclosure requirements related to certain loan modifications made to borrowers experiencing financial difficulty. ASU 2022-02 also provides an update to the existing credit quality indicators “vintage” tabular disclosure requiring current period gross write-offs to be disclosed by year of origination for each loan segment. The provisions of ASU 2022-02 were effective January 1, 2023 and the Corporation adopted the provisions on a prospective basis. Historical disclosures on TDRs were removed from this report in accordance with the provisions of this ASU. The adoption of this ASU did not have a material impact on the consolidated financial statements.

-9-

Condensed Notes to Unaudited Consolidated Financial Statements – (continued)

Business Combinations - ASC 805

ASU No. 2021-08, “Accounting for Contract Assets and Contract Liabilities from Contracts with Customers” (“ASU 2021-08”), was issued in October 2021 to clarify the accounting for contract cost assets and contract liabilities acquired in a business combination. Under current GAAP, an acquirer generally recognizes assets acquired and liabilities assumed in a business combination at fair value on the acquisition date. The provisions of ASU 2021-08 clarify that contract cost assets and contract liabilities acquired in a business combination should be accounted for in accordance with ASC 606, as if the acquirer had originated the contracts. The provisions of ASU 2021-08 were effective January 1, 2023 and the Corporation adopted the provisions on a prospective basis. The adoption of ASU 2021-08 did not have a material impact on the Corporation’s consolidated financial statements.

Accounting Standards Pending Adoption

There were no new accounting standards issued in 2023 that are applicable to the Corporation and pending adoption.

Note 3 - Securities

Available for Sale Debt Securities

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


(Dollars in thousands)
March 31, 2023	Amortized Cost	Unrealized Gains	Unrealized Losses	ACL	Fair Value
Available for Sale Debt Securities:
Obligations of U.S. government-sponsored enterprises	$250,952	$—	($28,288)	$—	$222,664
Mortgage-backed securities issued by U.S. government agencies and U.S. government-sponsored enterprises	936,280	352	(124,762)	—	811,870


Individual name issuer trust preferred debt securities	9,390	—	(690)	—	8,700

Corporate bonds	13,172	—	(1,659)	—	11,513
Total available for sale debt securities	$1,209,794	$352	($155,399)	$—	$1,054,747


(Dollars in thousands)
December 31, 2022	Amortized Cost	Unrealized Gains	Unrealized Losses	ACL	Fair Value
Available for Sale Debt Securities:
Obligations of U.S. government-sponsored enterprises	$231,203	$1	($31,622)	$—	$199,582
Mortgage-backed securities issued by U.S. government agencies and U.S. government-sponsored enterprises	912,581	269	(138,748)	—	774,102

Individual name issuer trust preferred debt securities	9,387	—	(627)	—	8,760

Corporate bonds	13,169	—	(1,685)	—	11,484
Total available for sale debt securities	$1,166,340	$270	($172,682)	$—	$993,928

Accrued interest receivable on available for sale debt securities totaled $3.1 million as of both March 31, 2023 and December 31, 2022.

As of March 31, 2023 and December 31, 2022, securities with a fair value of $306.6 million and $294.8 million, respectively, were pledged as collateral for FHLB borrowings, potential borrowings with the FRBB, certain public deposits and for other purposes. See Note 9 for additional disclosure on FHLB borrowings.

The schedule of maturities of available for sale debt securities is presented below. Mortgage-backed securities are included based on weighted average maturities, adjusted for anticipated prepayments. All other debt securities are included based on contractual maturities. Actual maturities may differ from amounts presented because certain issuers have the right to call or

-10-

Condensed Notes to Unaudited Consolidated Financial Statements – (continued)

prepay obligations with or without call or prepayment penalties.


(Dollars in thousands)
March 31, 2023	Amortized Cost	Fair Value
Due in one year or less	$106,939	$92,740
Due after one year to five years	464,167	405,495
Due after five years to ten years	381,590	333,522
Due after ten years	257,098	222,990
Total debt securities	$1,209,794	$1,054,747

Included in the above table are debt securities with an amortized cost balance of $273.0 million and a fair value of $242.4 million at March 31, 2023 that are callable at the discretion of the issuers. Final maturities of the callable securities range from 1 year to 14 years, with call features ranging from 1 month to 16 months.

Assessment of Available for Sale Debt Securities for Impairment

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

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


(Dollars in thousands)	Less than 12 Months			12 Months or Longer			Total
March 31, 2023	#	Fair Value	Unrealized Losses	#	Fair Value	Unrealized Losses	#	Fair Value	Unrealized Losses
Obligations of U.S. government-sponsored enterprises	4	$49,449	($551)	19	$173,215	($27,737)	23	$222,664	($28,288)
Mortgage-backed securities issued by U.S. government agencies and U.S. government-sponsored enterprises	44	180,541	(5,539)	121	618,269	(119,223)	165	798,810	(124,762)
Individual name issuer trust preferred debt securities	—	—	—	3	8,700	(690)	3	8,700	(690)
Corporate bonds	—	—	—	4	11,513	(1,659)	4	11,513	(1,659)
Total	48	$229,990	($6,090)	147	$811,697	($149,309)	195	$1,041,687	($155,399)


(Dollars in thousands)	Less than 12 Months			12 Months or Longer			Total
December 31, 2022	#	Fair Value	Unrealized Losses	#	Fair Value	Unrealized Losses	#	Fair Value	Unrealized Losses
Obligations of U.S. government-sponsored enterprises	4	$20,115	($638)	18	$169,466	($30,984)	22	$189,581	($31,622)
Mortgage-backed securities issued by U.S. government agencies and U.S. government-sponsored enterprises	95	288,777	(24,960)	66	471,355	(113,788)	161	760,132	(138,748)
Individual name issuer trust preferred debt securities	—	—	—	3	8,760	(627)	3	8,760	(627)
Corporate bonds	—	—	—	4	11,484	(1,685)	4	11,484	(1,685)
Total	99	$308,892	($25,598)	91	$661,065	($147,084)	190	$969,957	($172,682)

There were no debt securities on nonaccrual status at March 31, 2023 and 2022 and, therefore there was no accrued interest related to debt securities reversed against interest income for the three months ended March 31, 2023 and 2022.

-11-

Condensed Notes to Unaudited Consolidated Financial Statements – (continued)

As of March 31, 2023, the Corporation does not intend to sell these debt securities and has determined that it is more-likely-than-not that the Corporation would not be required to sell each security before the recovery of its amortized cost basis. In addition, management does not believe that any of these debt securities are impaired due to reasons of credit quality. As further described below, management believes the unrealized losses on these debt securities are primarily attributable to changes in the investment spreads and interest rates. As a result, there was no ACL recorded at both March 31, 2023 and December 31, 2022.

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

The contractual cash flows for 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 history of no credit losses. The issuers of these securities continue to make timely principal and interest payments and none of these securities were past due at March 31, 2023. Additionally, the Corporation utilizes a zero credit loss estimate for these securities.

Individual Name Issuer Trust Preferred Debt Securities

These securities in an unrealized loss position at March 31, 2023 included three trust preferred securities issued by three individual companies in the banking sector. Management reviewed the collectability of these securities taking into consideration such factors as the financial condition of the issuers, reported regulatory capital ratios of the issuers, credit ratings, including ratings in effect as of the reporting period date, as well as credit rating changes between the reporting period date and the filing date of this report, and other information. As of March 31, 2023, there was one individual name issuer trust preferred debt security with an amortized cost of $2.0 million and unrealized losses of $135 thousand that was rated below investment grade by S&P. We noted no downgrades to below investment grade between March 31, 2023 and the filing date of this report. Based on the information available through the filing date of this report, all individual name issuer trust preferred debt securities continue to accrue interest and make payments as expected with no payment deferrals or defaults on the part of the issuers.

Corporate Bonds

These securities in an unrealized loss position at March 31, 2023 included four corporate bond holdings issued by three individual companies in the financial services industry. 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, 2023, there was one corporate bond debt security with an amortized cost of $2.0 million and unrealized losses of $160 thousand that was rated below investment grade by S&P. We noted no downgrades to below investment grade between March 31, 2023 and the filing date of this report. Based on the information available through the filing date of this report, all corporate bond debt securities continue to accrue interest and make payments as expected with no payment deferrals or defaults on the part of the issuers.

-12-

Condensed Notes to Unaudited Consolidated Financial Statements – (continued)

Note 4 - Loans

The following table presents a summary of loans:


(Dollars in thousands)	March 31, 2023	December 31, 2022
Commercial:


Commercial real estate (1)	$1,909,136	$1,829,304
Commercial & industrial (2)	609,720	656,397
Total commercial	2,518,856	2,485,701
Residential Real Estate:


Residential real estate (3)	2,403,255	2,323,002
Consumer:


Home equity	288,878	285,715
Other (4)	16,980	15,721
Total consumer	305,858	301,436
Total loans (5)	$5,227,969	$5,110,139

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

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

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

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

(5)Includes net unamortized loan origination costs of $11.9 million and $11.6 million, respectively, at March 31, 2023 and December 31, 2022 and net unamortized premiums on loans purchased from and serviced by other financial institutions of $310 thousand and $318 thousand, respectively, at March 31, 2023 and December 31, 2022.

Loan balances exclude accrued interest receivable of $19.0 million and $17.6 million, respectively, as of March 31, 2023 and December 31, 2022.

As of March 31, 2023 and December 31, 2022, loans amounting to $2.6 billion and $2.4 billion, respectively, were pledged as collateral to the FHLB under a blanket pledge agreement and to the FRBB for the discount window. See Note 9 for additional disclosure regarding borrowings.

Concentrations of Credit Risk

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

-13-

Condensed Notes to Unaudited Consolidated Financial Statements – (continued)

Past Due Loans

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


(Dollars in thousands)	Days Past Due
March 31, 2023	30-59	60-89	Over 90	Total Past Due	Current	Total Loans
Commercial:
Commercial real estate	$1,188	$—	$—	$1,188	$1,907,948	$1,909,136
Commercial & industrial	5	—	224	229	609,491	609,720
Total commercial	1,193	—	224	1,417	2,517,439	2,518,856
Residential Real Estate:
Residential real estate	2,581	643	2,506	5,730	2,397,525	2,403,255
Consumer:
Home equity	770	63	—	833	288,045	288,878
Other	15	—	—	15	16,965	16,980
Total consumer	785	63	—	848	305,010	305,858
Total loans	$4,559	$706	$2,730	$7,995	$5,219,974	$5,227,969


(Dollars in thousands)	Days Past Due
December 31, 2022	30-59	60-89	Over 90	Total Past Due	Current	Total Loans
Commercial:
Commercial real estate	$1,187	$—	$—	$1,187	$1,828,117	$1,829,304
Commercial & industrial	265	—	—	265	656,132	656,397
Total commercial	1,452	—	—	1,452	2,484,249	2,485,701
Residential Real Estate:
Residential real estate	4,793	303	3,779	8,875	2,314,127	2,323,002
Consumer:
Home equity	1,103	132	—	1,235	284,480	285,715
Other	16	—	—	16	15,705	15,721
Total consumer	1,119	132	—	1,251	300,185	301,436
Total loans	$7,364	$435	$3,779	$11,578	$5,098,561	$5,110,139

Included in past due loans as of March 31, 2023 and December 31, 2022, were nonaccrual loans of $5.6 million and $7.2 million, respectively. In addition, all loans 90 days or more past due at March 31, 2023 and December 31, 2022 were classified as nonaccrual.

Nonaccrual Loans

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

-14-

Condensed Notes to Unaudited Consolidated Financial Statements – (continued)

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


(Dollars in thousands)	Mar 31, 2023	Dec 31, 2022
Commercial:
Commercial real estate	$1,601	$—
Commercial & industrial	920	—
Total commercial	2,521	—
Residential Real Estate:
Residential real estate	10,470	11,894
Consumer:
Home equity	989	952
Other	—	—
Total consumer	989	952
Total nonaccrual loans	$13,980	$12,846
Accruing loans 90 days or more past due	$—	$—

No ACL was deemed necessary on nonaccrual loans with carrying values of $7.1 million and $6.5 million, respectively, as of March 31, 2023 and December 31, 2022.

Nonaccrual loans of $8.3 million and $5.7 million, respectively, at March 31, 2023 and December 31, 2022 were current as to the payment of principal and interest.

As of March 31, 2023 and December 31, 2022, nonaccrual loans secured by one- to four-family residential property amounting to $763 thousand and $2.9 million, respectively, were in process of foreclosure.

There were no significant commitments to lend additional funds to borrowers whose loans were on nonaccrual status at March 31, 2023.

The following table presents interest income recognized on nonaccrual loans:



(Dollars in thousands)
Three months ended March 31,	2023	2022
Commercial:
Commercial real estate	$27	$—
Commercial & industrial	13	—
Total commercial	40	—
Residential Real Estate:
Residential real estate	173	101
Consumer:
Home equity	22	7
Other	1	—
Total consumer	23	7
Total	$236	$108

Troubled Loan Modifications

As disclosed in Note 2, the Corporation adopted ASU 2022-02, which eliminated the accounting guidance for TDRs and added enhanced disclosures with respect to certain modifications for borrowers experiencing financial difficulty. Effective January 1, 2023, a loan that has been modified is considered a troubled loan modification, or TLM, when the following conditions are met: (1) the modification is considered a continuation of an existing loan and not a new loan in accordance

-15-

Condensed Notes to Unaudited Consolidated Financial Statements – (continued)

with GAAP, (2) the modification is made to a borrower experiencing financial difficulty and (3) the modification has a direct impact to the contractual cash flows. Modifications with direct impact to contractual cash flows are defined as: principal forgiveness, interest rate reductions, maturity extensions, other-than-insignificant payment delays, or any combination thereof. If each of the aforementioned criteria are met, then the modification is considered a TLM and subject to the enhanced disclosure requirements. During the three months ended March 31, 2023, there were no TLMs.

Individually Analyzed Loans

Individually analyzed loans include nonaccrual commercial loans, as well as certain other loans based on the underlying risk characteristics and the discretion of management to individually analyze such loans. Prior to January 1, 2023, individually analyzed loans also included TDRs.

As of March 31, 2023, individually analyzed loans amounted to $8.2 million, all of which were considered collateral dependent. As of December 31, 2022, individually analyzed loans amounted to $10.0 million, of which $8.5 million were considered collateral dependent.

For collateral dependent loans where management has determined that foreclosure of the collateral is probable, or where the borrower is experiencing financial difficulty and repayment of the loan is to be provided substantially through the operation or sale of the collateral, the ACL is measured based on the difference between the fair value of the collateral and the amortized cost basis of the loan as of the measurement date. See Note 7 for additional disclosure regarding fair value of individually analyzed collateral dependent loans.

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


(Dollars in thousands)	March 31, 2023		December 31, 2022
	Carrying Value	Related Allowance	Carrying Value	Related Allowance
Commercial:
Commercial real estate (1)	$2,096	$308	$2,103	$—
Commercial & industrial (2)	920	224	—	—
Total commercial	3,016	532	2,103	—
Residential Real Estate:
Residential real estate (3)	4,614	—	5,760	—
Consumer:
Home equity (3)	592	—	592	—
Other	—	—	—	—
Total consumer	592	—	592	—
Total	$8,222	$532	$8,455	$—

(1) Secured by income-producing property.

(2) Secured by business assets.

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

Credit Quality Indicators

Commercial

The Corporation utilizes an internal rating system to assign a risk to each of its commercial loans. Loans are rated on a scale of 1 to 10. This scale can be assigned to three broad categories including “pass” for ratings 1 through 6, “special mention” for 7-rated loans, and “classified” for loans rated 8, 9 or 10. The loan risk rating system takes into consideration parameters 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 ACL on loans. See Note 5 for additional information.

A description of the commercial loan categories is as follows:

Pass - Loans with acceptable credit quality, defined as ranging from superior or very strong to a status of lesser stature.

-16-

Condensed Notes to Unaudited Consolidated Financial Statements – (continued)

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

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

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

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

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

Residential and Consumer

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

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

-17-

Condensed Notes to Unaudited Consolidated Financial Statements – (continued)

The following table includes information on credit quality indicators and gross charge-offs for the Corporation’s loan portfolio, segregated by class of loans as of March 31, 2023:


(Dollars in thousands)	Term Loans Amortized Cost by Origination Year
	2023	2022	2021	2020	2019	Prior	Revolving Loans Amortized Cost	Revolving Loans Converted to Term Loans	Total
Commercial:
CRE:
Pass	$74,365	$556,396	$394,005	$179,602	$168,940	$413,854	$8,931	$1,154	$1,797,247
Special Mention	20,487	—	22,302	668	27,761	38,968	102	—	110,288
Classified	—	—	—	—	—	1,601	—	—	1,601
Total CRE	94,852	556,396	416,307	180,270	196,701	454,423	9,033	1,154	1,909,136
CRE gross charge-offs	—	—	—	—	—	—	—	—	—

C&I:
Pass	4,116	120,221	59,156	67,621	82,807	167,451	91,060	979	593,411
Special Mention	11,529	836	—	—	185	1,412	1,427	—	15,389
Classified	—	—	224	—	696	—	—	—	920
Total C&I	15,645	121,057	59,380	67,621	83,688	168,863	92,487	979	609,720





C&I gross charge-offs (1)	11	—	—	—	—	—	—	—	11

Residential Real Estate:
Residential real estate:
Current	108,758	836,112	700,923	272,006	120,896	358,830	—	—	2,397,525
Past Due	—	—	392	530	1,406	3,402	—	—	5,730
Total residential real estate	108,758	836,112	701,315	272,536	122,302	362,232	—	—	2,403,255
Residential real estate gross charge-offs	—	—	—	—	—	—	—	—	—

Consumer:
Home equity:
Current	5,140	18,965	7,993	3,585	2,319	5,344	234,279	10,420	288,045
Past Due	—	—	—	—	—	63	317	453	833
Total home equity	5,140	18,965	7,993	3,585	2,319	5,407	234,596	10,873	288,878
Home equity gross charge-offs	—	—	—	—	—	—	—	—	—

Other:
Current	1,951	4,180	4,204	1,427	217	4,764	222	—	16,965
Past Due	15	—	—	—	—	—	—	—	15
Total other	1,966	4,180	4,204	1,427	217	4,764	222	—	16,980




Other gross charge-offs (1)	42	—	8	—	—	—	—	—	50

Total loans	$226,361	$1,536,710	$1,189,199	$525,439	$405,227	$995,689	$336,338	$13,006	$5,227,969
Total gross charge-offs	$53	$—	$8	$—	$—	$—	$—	$—	$61

(1)Gross charge-offs in 2023 represent charge-offs of business and consumer account overdraft balances.

-18-

Condensed Notes to Unaudited Consolidated Financial Statements – (continued)

The following table includes information on credit quality indicators for the Corporation’s loan portfolio, segregated by class of loans as of December 31, 2022:


(Dollars in thousands)	Term Loans Amortized Cost by Origination Year
	2022	2021	2020	2019	2018	Prior	Revolving Loans Amortized Cost	Revolving Loans Converted to Term Loans	Total
Commercial:
CRE:
Pass	$591,596	$383,062	$177,286	$170,259	$148,371	$242,061	$6,243	$1,437	$1,720,315
Special Mention	20,579	22,324	328	24,270	28,676	10,564	146	—	106,887
Classified	—	—	503	—	1,187	412	—	—	2,102
Total CRE	612,175	405,386	178,117	194,529	178,234	253,037	6,389	1,437	1,829,304
C&I:
Pass	127,152	63,180	71,265	86,470	85,011	114,241	90,987	745	639,051
Special Mention	13,566	—	—	—	1,427	—	1,426	—	16,419
Classified	—	225	—	7	—	—	695	—	927
Total C&I	140,718	63,405	71,265	86,477	86,438	114,241	93,108	745	656,397





Residential Real Estate:
Residential real estate:
Current	838,566	707,760	277,613	123,098	72,541	294,549	—	—	2,314,127
Past Due	—	600	—	266	2,315	5,694	—	—	8,875
Total residential real estate	838,566	708,360	277,613	123,364	74,856	300,243	—	—	2,323,002
Consumer:
Home equity:
Current	20,665	8,308	3,742	2,406	1,947	3,139	235,004	9,268	284,479
Past Due	—	—	—	—	68	98	548	522	1,236
Total home equity	20,665	8,308	3,742	2,406	2,015	3,237	235,552	9,790	285,715
Other:
Current	4,231	4,287	1,676	299	235	4,726	251	—	15,705
Past Due	16	—	—	—	—	—	—	—	16
Total other	4,247	4,287	1,676	299	235	4,726	251	—	15,721




Total Loans	$1,616,371	$1,189,746	$532,413	$407,075	$341,778	$675,484	$335,300	$11,972	$5,110,139

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.

-19-

Condensed Notes to Unaudited Consolidated Financial Statements – (continued)

Note 5 - Allowance for Credit Losses on Loans

The ACL on loans is management’s estimate of expected lifetime credit losses on loans carried at amortized cost. 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.

The following table presents the activity in the ACL on loans for the three months ended March 31, 2023:


(Dollars in thousands)	Commercial				Consumer
	CRE	C&I	Total Commercial	Residential Real Estate	Home Equity	Other	Total Consumer	Total
Beginning Balance	$18,435	$10,356	$28,791	$7,740	$1,115	$381	$1,496	$38,027

Charge-offs	—	(11)	(11)	—	—	(50)	(50)	(61)
Recoveries	—	5	5	—	1	8	9	14
Provision	2,939	(517)	2,422	(1,501)	(138)	17	(121)	800
Ending Balance	$21,374	$9,833	$31,207	$6,239	$978	$356	$1,334	$38,780

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


(Dollars in thousands)	Commercial				Consumer
	CRE	C&I	Total Commercial	Residential Real Estate	Home Equity	Other	Total Consumer	Total
Beginning Balance	$18,933	$10,832	$29,765	$7,860	$1,069	$394	$1,463	$39,088

Charge-offs	—	(5)	(5)	—	—	(31)	(31)	(36)
Recoveries	145	6	151	21	2	10	12	184
Provision	(618)	389	(229)	185	27	17	44	—
Ending Balance	$18,460	$11,222	$29,682	$8,066	$1,098	$390	$1,488	$39,236

Note 6 - Derivative Financial Instruments

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

Interest Rate Risk Management Agreements

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

Cash Flow Hedging Instruments

As of March 31, 2023 and December 31, 2022, the Corporation had an interest rate swap contract that was designated as a cash flow hedge to hedge the interest rate risk associated with short-term variable rate FHLB advances. The interest rate swap on borrowings matures in December 2023. In addition, at December 31, 2022, the Corporation had an interest rate swap contract that was designated as a cash flow hedge to hedge the interest rate risk associated with a pool of variable rate

-20-

Condensed Notes to Unaudited Consolidated Financial Statements – (continued)

commercial loans. On March 31, 2023, the Corporation terminated this interest rate swap contract and the derivative liability was derecognized. The loss on this interest rate swap included in the AOCL component of shareholders’ equity was updated to its termination date fair value of $26.5 million, or $20.1 million after tax. This loss will be amortized into earnings as a reduction of interest income on a straight-line basis over the remaining life of the original interest rate swap term, or through May 1, 2026.

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

Loan Related Derivative Contracts

Interest Rate Derivative Contracts with Customers

The Corporation enters into interest rate swap and interest rate cap contracts to help commercial loan borrowers manage their interest rate risk. These interest rate swap contracts allow borrowers to convert variable-rate loan payments to fixed-rate loan payments, while interest rate cap contracts allow borrowers to limit their interest rate exposure in a rising rate environment. When the Corporation enters into an interest rate derivative contract with a commercial loan borrower, it simultaneously enters into a “mirror” interest rate contract with a third party. For interest rate swaps, the third party exchanges the client’s fixed-rate loan payments for variable-rate loan payments. The Corporation retains the risk that is associated with the potential failure of counterparties and the risk inherent in originating loans. These derivatives are not designated as hedges and therefore, changes in fair value are recognized in earnings.

Risk Participation Agreements

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

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

Mortgage Loan Commitments

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

-21-

Condensed Notes to Unaudited Consolidated Financial Statements – (continued)

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


(Dollars in thousands)	March 31, 2023			December 31, 2022
		Fair Value			Fair Value
	Notional Amounts	Derivative Assets	Derivative Liabilities	Notional Amounts	Derivative Assets	Derivative Liabilities
Derivatives Designated as Cash Flow Hedging Instruments:
Interest rate risk management contracts:

Interest rate swaps (1)	$20,000	$405	$—	$320,000	$548	$31,178

Derivatives not Designated as Hedging Instruments:
Loan related derivative contracts:
Interest rate contracts with customers	933,832	1,131	53,185	935,099	32	68,137
Mirror contracts with counterparties	933,832	52,875	1,260	935,099	67,797	61
Risk participation agreements	284,325	—	2	282,191	—	2

Mortgage loan commitments:
Interest rate lock commitments	26,489	404	—	12,201	144	4
Forward sale commitments	38,810	12	305	23,150	58	150
Gross amounts		54,827	$54,752		68,579	99,532
Less: amounts offset (2)		1,260	1,260		23,524	23,524
Derivative balances, net of offset		53,567	53,492		45,055	76,008
Less: collateral pledged (3)		—	—		—	7,716
Net amounts		$53,567	$53,492		$45,055	$68,292

(1)The fair value of derivative assets includes accrued interest receivable of $25 thousand and $24 thousand, respectively, at March 31, 2023 and December 31, 2022. The fair value of derivative liabilities includes accrued interest payable $856 thousand at December 31, 2022.

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

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

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 (Loss), Net of Tax

Three months ended March 31,	2023	2022
Derivatives Designated as Cash Flow Hedging Instruments:
Interest rate risk management contracts:
Interest rate swaps	$2,797	($10,335)


Total	$2,797	($10,335)

For derivatives designated as cash flow hedging instruments, see Note 14 for additional disclosure pertaining to the amounts and location of reclassifications from AOCL into earnings.

-22-

Condensed Notes to Unaudited Consolidated Financial Statements – (continued)

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


(Dollars in thousands)		Amount of Gain (Loss) Recognized in Noninterest Income

Three months ended March 31,	Statement of Income Location	2023	2022
Derivatives not Designated as Hedging Instruments:
Loan related derivative contracts:
Interest rate contracts with customers	Loan related derivative income	$11,132	($40,822)
Mirror interest rate contracts with counterparties	Loan related derivative income	(11,171)	41,122
Risk participation agreements	Loan related derivative income	(11)	1

Mortgage loan commitments:
Interest rate lock commitments	Mortgage banking revenues	263	(934)
Forward sale commitments	Mortgage banking revenues	(124)	2,991
Total		$89	$2,358

Note 7 - Fair Value Measurements

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

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

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

•Level 2 – Quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in inactive markets; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets.

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

Fair Value Option Election

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

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


(Dollars in thousands)	March 31, 2023	December 31, 2022
Aggregate fair value	$7,445	$8,987
Aggregate principal balance	7,295	8,860
Difference between fair value and principal balance	$150	$127

Changes in fair value of mortgage loans held for sale accounted for under the fair value option election are included in mortgage banking revenues in the Unaudited Consolidated Statements of Income. Changes in fair value amounted to an increase to mortgage banking revenues of $24 thousand for the three months ended March 31, 2023, compared to a decrease

-23-

Condensed Notes to Unaudited Consolidated Financial Statements – (continued)

to mortgage banking revenues of $1.1 million for the same period in 2022.

There were no mortgage loans held for sale 90 days or more past due as of March 31, 2023 and December 31, 2022.

Valuation Techniques

Debt Securities

Available for sale debt securities are recorded at fair value on a recurring basis. When available, the Corporation uses quoted market prices to determine the fair value of debt securities; such items are classified as Level 1. There were no Level 1 debt securities held at March 31, 2023 and December 31, 2022.

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

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, 2023 and December 31, 2022.

Mortgage Loans Held for Sale

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

Collateral Dependent Individually Analyzed Loans

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

Derivatives

Interest rate derivative contracts are traded in over-the-counter markets where quoted market prices are not readily available. Fair value measurements are determined using independent valuation software, which utilizes the present value of future cash flows discounted using market observable inputs such as forward rate assumptions. The Corporation evaluates the credit risk of its counterparties, as well as that of the Corporation. Accordingly, factors such as the likelihood of default by the Corporation and its counterparties, its net exposures and remaining contractual life are considered in determining if any fair value adjustments related to credit risk are required. Counterparty exposure is evaluated by netting positions that are subject to master netting agreements, as well as considering the amount of collateral securing the position, if any. The Corporation has determined that the majority of the inputs used to value its derivative positions fall within Level 2 of the fair value hierarchy. However, the credit valuation adjustments utilize Level 3 inputs. As of March 31, 2023 and December 31, 2022, 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. As a result, the Corporation has classified its derivative valuations in their entirety as Level 2.

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

-24-

Condensed Notes to Unaudited Consolidated Financial Statements – (continued)

Items Recorded at Fair Value on a Recurring Basis

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


(Dollars in thousands)	Total	Quoted Prices in Active Markets for Identical Assets (Level 1)	Significant Other Observable Inputs (Level 2)	Significant Unobservable Inputs (Level 3)
March 31, 2023
Assets:
Available for sale debt securities:
Obligations of U.S. government-sponsored enterprises	$222,664	$—	$222,664	$—
Mortgage-backed securities issued by U.S. government agencies and U.S. government-sponsored enterprises	811,870	—	811,870	—

Individual name issuer trust preferred debt securities	8,700	—	8,700	—

Corporate bonds	11,513	—	11,513	—
Mortgage loans held for sale	7,445	—	7,445	—
Derivative assets	53,567	—	53,567	—



Total assets at fair value on a recurring basis	$1,115,759	$—	$1,115,759	$—
Liabilities:
Derivative liabilities	$53,492	$—	$53,492	$—




Total liabilities at fair value on a recurring basis	$53,492	$—	$53,492	$—


(Dollars in thousands)	Total	Quoted Prices in Active Markets for Identical Assets (Level 1)	Significant Other Observable Inputs (Level 2)	Significant Unobservable Inputs (Level 3)
December 31, 2022
Assets:
Available for sale debt securities:
Obligations of U.S. government-sponsored enterprises	$199,582	$—	$199,582	$—
Mortgage-backed securities issued by U.S. government agencies and U.S. government-sponsored enterprises	774,102	—	774,102	—

Individual name issuer trust preferred debt securities	8,760	—	8,760	—

Corporate bonds	11,484	—	11,484	—

Mortgage loans held for sale	8,987	—	8,987	—
Derivative assets	45,055	—	45,055	—




Total assets at fair value on a recurring basis	$1,047,970	$—	$1,047,970	$—
Liabilities:
Derivative liabilities	$76,008	$—	$76,008	$—





Total liabilities at fair value on a recurring basis	$76,008	$—	$76,008	$—

-25-

Condensed Notes to Unaudited Consolidated Financial Statements – (continued)

Items Recorded at Fair Value on a Nonrecurring Basis

The following table presents the carrying value of assets held at March 31, 2023, which were written down to fair value during the three months ended March 31, 2023:



(Dollars in thousands)	Total	Quoted Prices in Active Markets for Identical Assets (Level 1)	Significant Other Observable Inputs (Level 2)	Significant Unobservable Inputs (Level 3)

Assets:
Collateral dependent individually analyzed loans	$1,292	$—	$—	$1,292


Total assets at fair value on a nonrecurring basis	$1,292	$—	$—	$1,292

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

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

(Dollars in thousands)

Fair Value

Valuation Technique

Unobservable Input

Range of Inputs Utilized
(Weighted Average)

March 31, 2023

Collateral dependent individually analyzed loans

$1,292

Appraisals of collateral

Discount for costs to sell

0% - 47% (43%)

Appraisal adjustments

0% - 100% (9%)

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, BOLI, non-maturity deposits and accrued interest payable. The Corporation considers cash and cash equivalents, accrued interest receivable and accrued interest payable as level 1 measurements within the fair value hierarchy. The Corporation considers FHLB stock, BOLI and non-maturity deposits as level 2 measurements.


(Dollars in thousands)
March 31, 2023	Carrying Amount	Total Fair Value	Quoted Prices in Active Markets for Identical Assets (Level 1)	Significant Other Observable Inputs (Level 2)	Significant Unobservable Inputs (Level 3)
Financial Assets:

Loans, net of allowance for credit losses on loans	$5,189,189	$5,044,231	$—	$—	$5,044,231

Financial Liabilities:
Time deposits	$1,531,835	$1,558,899	$—	$1,558,899	$—
FHLB advances	925,000	925,350	—	925,350	—
Junior subordinated debentures	22,681	18,558	—	18,558	—

-26-

Condensed Notes to Unaudited Consolidated Financial Statements – (continued)


(Dollars in thousands)
December 31, 2022	Carrying Amount	Total Fair Value	Quoted Prices in Active Markets for Identical Assets (Level 1)	Significant Other Observable Inputs (Level 2)	Significant Unobservable Inputs (Level 3)
Financial Assets:

Loans, net of allowance for credit losses on loans	$5,072,112	$4,929,449	$—	$—	$4,929,449

Financial Liabilities:
Time deposits	$1,122,882	$1,137,219	$—	$1,137,219	$—
FHLB advances	980,000	978,590	—	978,590	—
Junior subordinated debentures	22,681	18,963	—	18,963	—

Note 8 - Deposits

The following table presents a summary of deposits:


(Dollars in thousands)	Mar 31, 2023	Dec 31, 2022
Noninterest-bearing:
Demand deposits	$829,763	$858,953
Interest-bearing:
Interest-bearing demand deposits (1)	319,598	333,197
NOW accounts	828,700	871,875
Money market accounts	1,214,014	1,255,805
Savings accounts	544,604	576,250
Time deposits (2)	1,531,835	1,122,882
Total interest-bearing deposits	$4,438,751	$4,160,009
Total deposits	$5,268,514	$5,018,962

(1)Includes wholesale brokered demand deposit balances of $1,233 and $31,153, respectively, as of March 31, 2023 and December 31, 2022.

(2)Includes wholesale brokered time deposit balances of $607,329 and $327,044, respectively, as of March 31, 2023 and December 31, 2022.

The following table presents scheduled maturities of time certificates of deposit:


(Dollars in thousands)	Scheduled Maturity	Weighted Average Rate
April 1, 2023 to December 31, 2023	$945,304	3.44	%
2024	386,027	3.86
2025	112,789	2.99
2026	39,901	1.98
2027	33,817	2.88
2028 and thereafter	13,997	3.68
Balance at December 31, 2023	$1,531,835	3.46	%

Time certificates of deposit in denominations of $250 thousand or more totaled $241.8 million and $200.9 million, respectively, at December 31, 2023 and 2022.

-27-

Condensed Notes to Unaudited Consolidated Financial Statements – (continued)

Note 9 - Borrowings

Advances payable to the FHLB amounted to $925.0 million and $980.0 million, respectively, at March 31, 2023 and December 31, 2022.

As of March 31, 2023 and December 31, 2022, the Bank had access to a $40.0 million unused line of credit with the FHLB. Additionally, the Bank had a $215.0 million standby letter of credit with the FHLB at March 31, 2023 and December 31, 2022. This standby letter of credit was executed in 2022 to collateralize an institutional deposit. The Bank had remaining available borrowing capacity of $859.6 million and $668.3 million, respectively, with the FHLB at March 31, 2023 and December 31, 2022. 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, 2023:


(Dollars in thousands)	Scheduled Maturity	Weighted Average Rate
April 1, 2023 to December 31, 2023	$665,000	4.72	%
2024	40,000	4.56
2025	80,000	4.29
2026	90,000	4.31
2027	20,000	4.13
2028 and thereafter	30,000	4.12
Balance at March 31, 2023	$925,000	4.60	%

Note 10 - Shareholders' Equity

Stock Repurchase Program

The 2023 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 numbers 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 2023 Repurchase Program commenced on January 1, 2023 and expires on December 31, 2023, and may be modified, suspended, or discontinued at any time. During the three months ended March 31, 2023, the Corporation repurchased 200,000 shares, at an average price of $43.70 and a total cost of $8.7 million.

Regulatory Capital Requirements

Capital levels at March 31, 2023 exceeded the regulatory minimum levels to be considered “well capitalized.”

-28-

Condensed Notes to Unaudited Consolidated Financial Statements – (continued)

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


(Dollars in thousands)	Actual			For Capital Adequacy Purposes			To Be “Well Capitalized” Under Prompt Corrective Action Provisions
	Amount	Ratio		Amount	Ratio		Amount	Ratio
March 31, 2023
Total Capital (to Risk-Weighted Assets):
Corporation	$601,662	12.01	%	$400,831	8.00	%	N/A	N/A
Bank	584,596	11.67		400,723	8.00		$500,904	10.00	%
Tier 1 Capital (to Risk-Weighted Assets):
Corporation	565,329	11.28		300,623	6.00		N/A	N/A
Bank	548,263	10.95		300,542	6.00		400,723	8.00
Common Equity Tier 1 Capital (to Risk-Weighted Assets):
Corporation	543,333	10.84		225,467	4.50		N/A	N/A
Bank	548,263	10.95		225,407	4.50		325,587	6.50
Tier 1 Capital (to Average Assets): (1)
Corporation	565,329	8.25		273,951	4.00		N/A	N/A
Bank	548,263	8.01		273,868	4.00		342,336	5.00

December 31, 2022
Total Capital (to Risk-Weighted Assets):
Corporation	605,005	12.37		391,363	8.00		N/A	N/A
Bank	588,090	12.02		391,260	8.00		489,074	10.00
Tier 1 Capital (to Risk-Weighted Assets):
Corporation	571,794	11.69		293,522	6.00		N/A	N/A
Bank	554,879	11.35		293,445	6.00		391,260	8.00
Common Equity Tier 1 Capital (to Risk-Weighted Assets):
Corporation	549,798	11.24		220,142	4.50		N/A	N/A
Bank	554,879	11.35		220,083	4.50		317,898	6.50
Tier 1 Capital (to Average Assets): (1)
Corporation	571,794	8.65		264,295	4.00		N/A	N/A
Bank	554,879	8.40		264,177	4.00		330,222	5.00

(1) Leverage ratio.

In addition to the minimum regulatory capital required for capital adequacy purposes outlined in the table above, the Corporation is required to maintain a minimum capital conservation buffer, in the form of common equity, of 2.50% in order to avoid restrictions on capital distributions and discretionary bonuses. The Corporation’s capital levels exceeded the minimum regulatory capital requirements plus the capital conservation buffer at March 31, 2023 and December 31, 2022.

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, 2023 and December 31, 2022, $22.0 million in trust preferred securities were included in the Tier 1 capital of the Corporation for regulatory capital reporting purposes pursuant to the capital adequacy guidelines of the Federal Reserve.

In accordance with regulatory capital rules, the Corporation elected the option to delay the estimated impact of ASC 326 on its regulatory capital over a two-year deferral and subsequent three-year transition period ending December 31, 2024. As a result, capital ratios exclude the full impact of the increased ACL on loans and unfunded loan commitments attributed to the adoption of ASC 326, adjusted for an approximation of the after-tax provision for credit losses attributable to ASC 326 relative to the incurred loss methodology during the two-year deferral period. The cumulative difference at the end of the deferral period is being phased-in to regulatory capital over the three-year transition period, which began January 1, 2022.

-29-

Condensed Notes to Unaudited Consolidated Financial Statements – (continued)

Note 11 - Revenue from Contracts with Customers

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


For the three months ended March 31,	2023		2022
(Dollars in thousands)	Revenue (1)	ASC 606 Revenue (2)	Revenue (1)	ASC 606 Revenue (2)
Net interest income	$37,193	$—	$35,091	$—
Noninterest income:
Wealth management revenues	8,663	8,663	10,531	10,531
Mortgage banking revenues	1,245	—	3,501	—
Card interchange fees	1,132	1,132	1,164	1,164
Service charges on deposit accounts	777	777	668	668
Loan related derivative income	(51)	—	301	—
Income from bank-owned life insurance	1,165	—	601	—


Other income	352	276	393	286
Total noninterest income	13,283	10,848	17,159	12,649
Total revenues	$50,476	$10,848	$52,250	$12,649

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

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

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


(Dollars in thousands)

Three months ended March 31,	2023	2022
Revenue recognized at a point in time:
Card interchange fees	$1,132	$1,164
Service charges on deposit accounts	558	549
Other income	216	229
Revenue recognized over time:
Wealth management revenues	8,663	10,531
Service charges on deposit accounts	219	119
Other income	60	57
Total revenues from contracts in scope of Topic 606	$10,848	$12,649

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 $6.6 million and $5.1 million, respectively, at March 31, 2023 and December 31, 2022 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, 2023 and December 31, 2022 and were included in other liabilities in the Unaudited Consolidated Balance Sheets.

For commissions and incentives that are in scope of ASC 606, such as those paid to employees in our wealth management services and commercial banking segments in order to obtain customer contracts, contract cost assets are established. The contract cost assets are capitalized and amortized over the estimated useful life that the asset is expected to generate benefits. The carrying value of contract cost assets amounted to $2.0 million and $2.1 million, respectively, at March 31, 2023 and

-30-

Condensed Notes to Unaudited Consolidated Financial Statements – (continued)

December 31, 2022 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 12 - Defined Benefit Pension Plans

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

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


(Dollars in thousands)	Qualified Pension Plan		Non-Qualified Retirement Plans

Three months ended March 31,	2023	2022		2023	2022
Net Periodic Benefit Cost:
Service cost (1)	$351	$516		$39	$54
Interest cost (2)	884	592		176	106
Expected return on plan assets (2)	(1,147)	(1,159)		—	—

Recognized net actuarial loss (2)	—	255		59	173

Net periodic benefit cost	$88	$204		$274	$333

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

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

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


	Qualified Pension Plan		Non-Qualified Retirement Plans
For the three months ended March 31,	2023	2022	2023	2022
Measurement date	Dec 31, 2022	Dec 31, 2021	Dec 31, 2022	Dec 31, 2021
Equivalent single discount rate for benefit obligations	5.54%	3.00%	5.50%	2.89%
Equivalent single discount rate for service cost	5.60	3.11	5.61	3.16
Equivalent single discount rate for interest cost	5.43	2.67	5.40	2.48
Expected long-term return on plan assets	5.25	5.25	N/A	N/A
Rate of compensation increase	5.00	3.75	5.00	3.75

-31-

Condensed Notes to Unaudited Consolidated Financial Statements – (continued)

Note 13 - Business Segments

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

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

Commercial Banking

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

Wealth Management Services

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

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


(Dollars in thousands)	Commercial Banking		Wealth Management Services		Consolidated Total
Three months ended March 31,	2023	2022	2023	2022	2023	2022
Net interest income (expense)	$37,180	$35,108	$13	($17)	$37,193	$35,091
Provision for credit losses	800	100	—	—	800	100
Net interest income (expense) after provision for credit losses	36,380	35,008	13	(17)	36,393	34,991
Noninterest income	4,431	6,512	8,852	10,647	13,283	17,159
Noninterest expenses:
Depreciation and amortization expense	831	711	356	344	1,187	1,055
Other noninterest expenses	24,635	22,611	7,742	7,553	32,377	30,164
Total noninterest expenses	25,466	23,322	8,098	7,897	33,564	31,219
Income before income taxes	15,345	18,198	767	2,733	16,112	20,931
Income tax expense	3,087	3,797	213	651	3,300	4,448
Net income	$12,258	$14,401	$554	$2,082	$12,812	$16,483

Total assets at period end	$6,785,254	$5,773,796	$73,928	$74,203	$6,859,182	$5,847,999
Expenditures for long-lived assets	1,136	730	8	104	1,144	834

-32-

Condensed Notes to Unaudited Consolidated Financial Statements – (continued)

Note 14 - Other Comprehensive Income (Loss)

The following table presents the activity in other comprehensive income (loss):


Three months ended March 31,	2023			2022
(Dollars in thousands)	Pre-tax Amounts	Income Tax Benefit (Expense)	Net of Tax	Pre-tax Amounts	Income Tax Benefit (Expense)	Net of Tax
Available for Sale Debt Securities:
Change in fair value of available for sale debt securities	$17,365	($4,167)	$13,198	($65,078)	$15,618	($49,460)



Cash Flow Hedges:
Change in fair value of cash flow hedges	1,046	(251)	795	(13,201)	3,168	(10,033)
Net cash flow hedge losses (gains) reclassified into earnings (1)	2,636	(634)	2,002	(399)	97	(302)
Net change in fair value of cash flow hedges	3,682	(885)	2,797	(13,600)	3,265	(10,335)
Defined Benefit Plan Obligations:

Amortization of net actuarial losses (2)	59	(14)	45	428	(103)	325


Total other comprehensive income (loss)	$21,106	($5,066)	$16,040	($78,250)	$18,780	($59,470)

(1)For the three months ended March 31, 2023 and 2022, the pre-tax amounts reclassified into earnings in the Unaudited Consolidated Statements of Income include a reduction of $2.8 million and an increase of $493 thousand, respectively, in interest and fees on loans, as well as a reduction of $127 thousand and an increase of $94 thousand, respectively, in FHLB interest expense.

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

The following tables present the changes in AOCL by component, net of tax:


(Dollars in thousands)	Net Unrealized Losses on Available For Sale Debt Securities	Net Unrealized Losses on Cash Flow Hedges	Net Unrealized Losses on Defined Benefit Plan Obligations	Total
For the three months ended March 31, 2023
Balance at December 31, 2022	($131,033)	($22,645)	($4,122)	($157,800)
Other comprehensive income before reclassifications	13,198	795	—	13,993
Amounts reclassified from accumulated other comprehensive loss	—	2,002	45	2,047
Net other comprehensive income	13,198	2,797	45	16,040
Balance at March 31, 2023	($117,835)	($19,848)	($4,077)	($141,760)


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

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Condensed Notes to Unaudited Consolidated Financial Statements – (continued)

Note 15 - Earnings per Common Share

The following table presents the calculation of EPS:


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

Three months ended March 31,	2023	2022
Earnings for basic and diluted earnings per common share:
Net income	$12,812	$16,483
Less: dividends and undistributed earnings allocated to participating securities	(29)	(54)
Net income available to common shareholders	$12,783	$16,429

Shares:




Weighted average common shares outstanding	17,074	17,331
Dilutive effect of common stock equivalents	96	151
Weighted average diluted common shares outstanding	17,170	17,482

Earnings per common share:
Basic earnings per common share	$0.75	$0.95
Diluted earnings per common share	$0.74	$0.94

Weighted average common stock equivalents, not included in common stock equivalents above because they were anti-dilutive, totaled 303,982 for the three months ended March 31, 2023, compared to 94,175 for the same period in 2022.

Note 16 - Commitments and Contingencies

Financial Instruments with Off-Balance Sheet Risk

The Corporation is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers and to manage the Corporation’s exposure to fluctuations in interest rates. These financial instruments include commitments to extend credit, standby letters of credit, forward loan commitments, loan related derivative contracts and interest rate risk management contracts. These instruments involve, to varying degrees, elements of credit risk in excess of the amount recognized in the Unaudited Consolidated Balance Sheets. The contract or notional amounts of these instruments reflect the extent of involvement the Corporation has in particular classes of financial instruments.

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

Commitments to Extend Credit

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

Standby Letters of Credit

Standby letters of credit are conditional commitments issued to guarantee the performance of a customer to a third party. These standby letters of credit are primarily issued to support the financing needs of the Bank’s commercial customers. The credit risk involved in issuing standby letters of credit is essentially the same as that involved in extending loan facilities to customers. The collateral supporting those commitments is essentially the same as for other commitments. Most standby letters of credit extend for one year. At March 31, 2023 and December 31, 2022, there were no liabilities to beneficiaries resulting from standby letters of credit. Should the Corporation be required to make payments to the beneficiary, repayment from the customer to the Corporation is required.

Financial Instruments Whose Notional Amounts Exceed the Amount of Credit Risk

Mortgage Loan Commitments

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Condensed Notes to Unaudited Consolidated Financial Statements – (continued)

Corporation enters into forward sale commitments. Both interest rate lock commitments and forward sale commitments are derivative financial instruments.

Loan Related Derivative Contracts

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

Interest Rate Risk Management Contracts

The Corporation’s interest rate risk management contracts consist of interest rate swap agreements in which the Corporation and another party agree to exchange interest payments (e.g., fixed-rate for variable-rate payments) computed on a notional principal amount. The credit risk associated with these transactions is the risk of default by the counterparty. To minimize this risk, the Corporation enters into interest rate agreements only with highly rated counterparties that management believes to be creditworthy.

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


(Dollars in thousands)	Mar 31, 2023	Dec 31, 2022
Financial instruments whose contract amounts represent credit risk (unfunded commitments):
Commitments to extend credit:	$1,409,788	$1,308,873



Standby letters of credit	9,696	9,028
Financial instruments whose notional amounts exceed the amounts of credit risk:
Mortgage loan commitments:
Interest rate lock commitments	26,489	12,201
Forward sale commitments	38,810	23,150
Loan related derivative contracts:
Interest rate contracts with customers	933,832	935,099
Mirror interest rate contracts with counterparties	933,832	935,099
Risk participation-in agreements	221,634	221,247

Interest rate risk management contracts:
Interest rate swaps	20,000	320,000

See Note 6 for additional disclosure pertaining to derivative financial instruments.

ACL on Unfunded Commitments

The ACL on unfunded commitments is management’s estimate of expected lifetime credit losses over the expected contractual term 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. 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.

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Condensed Notes to Unaudited Consolidated Financial Statements – (continued)

The activity in the ACL on unfunded commitments for the three months ended March 31, 2023 is presented below:


(Dollars in thousands)	Commercial				Consumer
	CRE	C&I	Total Commercial	Residential Real Estate	Home Equity	Other	Total Consumer	Total
Beginning Balance	$1,236	$988	$2,224	$50	$—	$16	$16	$2,290

Provision	132	(105)	27	(25)	—	(2)	(2)	—
Ending Balance	$1,368	$883	$2,251	$25	$—	$14	$14	$2,290

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


(Dollars in thousands)	Commercial				Consumer
	CRE	C&I	Total Commercial	Residential Real Estate	Home Equity	Other	Total Consumer	Total
Beginning Balance	$1,267	$816	$2,083	$62	$—	$16	$16	$2,161

Provision	68	21	89	10	—	1	1	100
Ending Balance	$1,335	$837	$2,172	$72	$—	$17	$17	$2,261

Other Contingencies

Litigation

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

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Management's Discussion and Analysis

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

The following discussion should be read in conjunction with the Corporation’s Audited Consolidated Financial Statements and notes thereto included in the Annual Report on Form 10-K for the year ended December 31, 2022, and in conjunction with the condensed Unaudited Consolidated Financial Statements and notes thereto included in Item 1 of this report. Operating results for the three months ended March 31, 2023 are not necessarily indicative of the results for the full-year ended December 31, 2023 or any future period.

Forward-Looking Statements

This report contains statements that are “forward-looking statements.” We may also make forward-looking statements in other documents we file with the SEC, in our annual reports to shareholders, in press releases and other written materials, and in oral statements made by our officers, directors or employees. You can identify forward-looking statements by the use of the words “believe,” “expect,” “anticipate,” “intend,” “estimate,” “assume,” “outlook,” “will,” “should,” and other expressions that predict or indicate future events and trends and which do not relate to historical matters. You should not rely on forward-looking statements, because they involve known and unknown risks, uncertainties and other factors, some of which are beyond our control. These risks, uncertainties and other factors may cause our actual results, performance or achievements to be materially different than the anticipated future results, performance or achievements expressed or implied by the forward-looking statements.

Some of the factors that might cause these differences include the following:

•changes in general business and economic conditions on a national basis and in the local markets in which we operate;

•changes in customer behavior due to political, business and economic conditions, including inflation and concerns about liquidity;

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

•changes in loan demand and collectability;

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

•ongoing volatility in national and international financial markets;

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

•decreases in the value of securities and other assets;

•increases in defaults and charge-off rates;

•changes in the size and nature of our competition;

•changes in legislation or regulation and accounting principles, policies and guidelines;

•operational risks including, but not limited to, changes in information technology, cybersecurity incidents, fraud, natural disasters, war, terrorism, civil unrest and future pandemics;

•reputational risks; and

•changes in the assumptions used in making such forward-looking statements.

In addition, the factors described under “Risk Factors” in Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, as updated by our Quarterly Reports on Form 10-Q and other filings submitted to the SEC, may result in these differences. You should carefully review all of these factors and you should be aware that there may be other factors that could cause these differences. These forward-looking statements were based on information, plans and estimates at the date of this report, and we assume no obligation to update any forward-looking statements to reflect changes in underlying assumptions or factors, new information, future events or other changes.

Overview

Our largest source of operating income is net interest income, which is the difference between interest earned on loans and securities and interest paid on deposits and borrowings. In addition, we generate noninterest income from a number of

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Management's Discussion and Analysis

sources, including wealth management services, mortgage banking activities and deposit services. Our principal noninterest expenses include salaries and employee benefit costs, outsourced services provided by third-party vendors, occupancy and facility-related costs and other administrative expenses.

We continue to leverage our strong regional brand to build market share and remain steadfast in our commitment to provide superior service. We believe the key to future growth is providing customers with convenient in-person service and digital banking solutions. In April 2023, we opened a new full-service branch in Barrington, Rhode Island. In addition, we have plans to open a branch in the Olneyville section of Providence and another in Smithfield, Rhode Island later in 2023.

Risk Management

The Corporation has a comprehensive ERM program through which the Corporation identifies, measures, monitors and controls current and emerging material risks.

The Board of Directors is responsible for oversight of the ERM program. The ERM program enables the aggregation of risk across the Corporation and ensures the Corporation has the tools, programs and processes in place to support informed decision making, to anticipate risks before they materialize and to maintain the Corporation’s risk profile consistent with its risk strategy.

The Board of Directors has approved an ERM Policy that addresses each category of risk. The risk categories include: credit risk, interest rate risk, liquidity risk, price and market risk, compliance risk, strategic and reputation risk, and operational risk. A description of each risk category is provided below.

Credit risk represents the possibility that borrowers or other counterparties may not repay loans or other contractual obligations according to their terms due to changes in the financial capacity, ability and willingness of such borrowers or counterparties to meet their obligations. In some cases, the collateral securing payment of the loans may be sufficient to assure repayment, but in other cases the Corporation may experience significant credit losses which could have an adverse effect on its operating results. The Corporation makes various assumptions and judgments about the collectability of its loan portfolio, including the creditworthiness of its borrowers and counterparties and the value of the real estate and other assets serving as collateral for the repayment of loans. Credit risk also exists with respect to investment securities. For further discussion regarding the credit risk and the credit quality of the Corporation’s loan portfolio, see Note 4 and Note 5 to the Unaudited Consolidated Financial Statements. For further discussion regarding credit risk associated with unfunded commitments, see Note 16 to the Unaudited Consolidated Financial Statements. For further discussion regarding the Corporation’s securities portfolio, see Note 3 to the Unaudited Consolidated Financial Statements.

Interest rate risk is the risk of loss to future earnings due to changes in interest rates. It exists because the repricing frequency and magnitude of interest-earning assets and interest-bearing liabilities are not identical. See the “Asset/Liability Management and Interest Rate Risk” section below for additional disclosure.

Liquidity risk is the risk that the Corporation will not have the ability to generate adequate amounts of cash in the most economical way for it to meet its maturing liability obligations and customer loan demand. For detailed disclosure regarding liquidity management, see the “Liquidity and Capital Resources” section below.

Price and market risk refers to the risk of loss arising from adverse changes in interest rates and other relevant market rates and prices, such as equity prices. Interest rate risk, discussed above, is the most significant market risk to which the Corporation is exposed. The Corporation is also exposed to financial market risk and housing market risk.

Compliance risk represents the risk of regulatory sanctions or financial loss resulting from the failure to comply with laws, rules and regulations and standards of good banking practice. Activities which may expose the Corporation to compliance risk include, but are not limited to, those dealing with the prevention of money laundering, privacy and data protection, adherence to all applicable laws and regulations, and employment and tax matters.

Strategic and reputation risk represent the risk of loss due to impairment of reputation, failure to fully develop and execute business plans, and failure to assess existing and new opportunities and threats in business, markets, and products.

Operational risk is the risk of loss due to human behavior, inadequate or failed internal systems and controls, and external influences such as market conditions, fraudulent activities, natural disasters and security risks.

-38-

Management's Discussion and Analysis

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

For additional factors that could adversely impact Washington Trust’s future results of operations and financial condition, see Part II, Item 1A below and the section labeled “Risk Factors” in Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, as updated by our Quarterly Reports on Form 10-Q and other filings submitted to the SEC.

-39-

Management's Discussion and Analysis

Results of Operations

Summary

The following table presents a summarized consolidated statement of operations:


(Dollars in thousands)

			Change
Three months ended March 31,	2023	2022	$	%
Net interest income	$37,193	$35,091	$2,102	6	%
Noninterest income	13,283	17,159	(3,876)	(23)
Total revenues	50,476	52,250	(1,774)	(3)
Provision for credit losses	800	100	700	700
Noninterest expense	33,564	31,219	2,345	8
Income before income taxes	16,112	20,931	(4,819)	(23)
Income tax expense	3,300	4,448	(1,148)	(26)
Net income	$12,812	$16,483	($3,671)	(22	%)

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



Three months ended March 31,	2023		2022
Diluted earnings per common share	$0.74		$0.94
Return on average assets (net income divided by average assets)	0.77	%	1.14	%
Return on average equity (net income available for common shareholders divided by average equity)	11.27	%	12.04	%
Net interest income as a percentage of total revenues	74	%	67	%
Noninterest income as a percentage of total revenues	26	%	33	%

Net income totaled $12.8 million for the three months ended March 31, 2023, down by 22% from the $16.5 million reported for the same period in 2022. Results in 2023 were impacted by steep increases in market interest rates and a decline in wealth management revenues.

In 2023, growth in net interest income was driven by higher average interest-earning asset balances, but was partially offset by increased average wholesale funding balances. In addition, increases in funding costs outpaced increases in asset yields. The decline in noninterest income reflected lower mortgage banking revenues, as higher market interest rates have dampened mortgage activity. The decline in noninterest income also reflected lower wealth management asset-based revenues and AUA balances attributable to a higher level of client asset outflows and net investment depreciation. The increased provisioning was largely attributable to a higher level of loan growth in 2023. The provision also reflected a slowdown in loan prepayment speeds, continued negative outlook in economic forecasts and continued strength in our asset and credit quality. The increase in noninterest expenses largely reflected increases in salaries and employee benefits expense and FDIC deposit insurance costs, as well as modest increases in a variety of other interest expense categories.

-40-

Management's Discussion and Analysis

Average Balances / Net Interest Margin - Fully Taxable Equivalent Basis

The following table presents average balance and interest rate information. Tax-exempt income is converted to an FTE basis using the statutory federal income tax rate adjusted for applicable state income taxes net of the related federal tax benefit. Unrealized gains (losses) on available for sale securities and changes in fair value on mortgage loans held for sale are excluded from the average balance and yield calculations. Nonaccrual loans, as well as interest recognized on these loans, are included in amounts presented for loans.


Three months ended March 31,	2023			2022			Change
(Dollars in thousands)	Average Balance	Interest	Yield/ Rate	Average Balance	Interest	Yield/ Rate	Average Balance	Interest	Yield/ Rate
Assets:
Cash, federal funds sold and short-term investments	$103,269	$1,070	4.20	$183,684	$78	0.17	($80,415)	$992	4.03
Mortgage loans held for sale	13,132	152	4.69	28,471	232	3.30	(15,339)	(80)	1.39
Taxable debt securities	1,193,852	7,194	2.44	1,071,745	4,230	1.60	122,107	2,964	0.84



FHLB stock	46,102	597	5.25	12,294	67	2.21	33,808	530	3.04


Commercial real estate	1,859,331	25,300	5.52	1,631,819	11,891	2.96	227,512	13,409	2.56
Commercial & industrial	630,778	9,070	5.83	634,869	6,226	3.98	(4,091)	2,844	1.85
Total commercial	2,490,109	34,370	5.60	2,266,688	18,117	3.24	223,421	16,253	2.36
Residential real estate	2,353,266	21,664	3.73	1,740,087	13,987	3.26	613,179	7,677	0.47
Home equity	286,348	3,759	5.32	246,766	1,875	3.08	39,582	1,884	2.24
Other	16,405	184	4.55	16,933	195	4.67	(528)	(11)	(0.12)
Total consumer	302,753	3,943	5.28	263,699	2,070	3.18	39,054	1,873	2.10
Total loans	5,146,128	59,977	4.73	4,270,474	34,174	3.25	875,654	25,803	1.48
Total interest-earning assets	6,502,483	68,990	4.30	5,566,668	38,781	2.83	935,815	30,209	1.47
Noninterest-earning assets	241,513			298,000			(56,487)
Total assets	$6,743,996			$5,864,668			$879,328
Liabilities and Shareholders’ Equity:
Interest-bearing demand deposits (in-market)	$298,158	$2,639	3.59	$248,395	$70	0.11	$49,763	$2,569	3.48
NOW accounts	821,590	358	0.18	847,848	130	0.06	(26,258)	228	0.12
Money market accounts	1,253,141	7,576	2.45	1,174,833	615	0.21	78,308	6,961	2.24
Savings accounts	566,258	314	0.22	561,339	71	0.05	4,919	243	0.17
Time deposits (in-market)	830,574	4,577	2.23	793,169	2,017	1.03	37,405	2,560	1.20
Interest-bearing in-market deposits	3,769,721	15,464	1.66	3,625,584	2,903	0.32	144,137	12,561	1.34
Wholesale brokered demand deposits	16,257	177	4.42	—	—	—	16,257	177	4.42
Wholesale brokered time deposits	427,051	3,948	3.75	455,785	200	0.18	(28,734)	3,748	3.57
Wholesale brokered deposits	443,308	4,125	3.77	455,785	200	0.18	(12,477)	3,925	3.59
Total interest-bearing deposits	4,213,029	19,589	1.89	4,081,369	3,103	0.31	131,660	16,486	1.58
FHLB advances	1,044,056	11,626	4.52	150,922	244	0.66	893,134	11,382	3.86
Junior subordinated debentures	22,681	354	6.33	22,681	99	1.77	—	255	4.56

Total interest-bearing liabilities	5,279,766	31,569	2.42	4,254,972	3,446	0.33	1,024,794	28,123	2.09
Noninterest-bearing demand deposits	835,298			940,220			(104,922)
Other liabilities	168,826			116,291			52,535
Shareholders’ equity	460,106			553,185			(93,079)
Total liabilities and shareholders’ equity	$6,743,996			$5,864,668			$879,328
Net interest income (FTE)		$37,421			$35,335			$2,086
Interest rate spread			1.88			2.50			(0.62)
Net interest margin			2.33			2.57			(0.24)

-41-

Management's Discussion and Analysis

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


(Dollars in thousands)
Three months ended March 31,	2023	2022	Change
Commercial loans	$228	$244	($16)

Net Interest Income

Net interest income, the primary source of our operating income, totaled $37.2 million for the three months ended March 31, 2023, compared to $35.1 million for the same period in 2022. Net interest income is affected by the level of and changes in interest rates, and changes in the amount and composition of interest-earning assets and interest-bearing liabilities. Prepayment penalty income associated with loan payoffs is included in net interest income.

The following discussion presents net interest income on an FTE basis by adjusting income and yields on tax-exempt loans and securities to be comparable to taxable loans and securities.

The analysis of net interest income, NIM and the yield on loans may be impacted by the periodic recognition of prepayment penalty fee income associated with commercial loan payoffs. Prepayment penalty fee income amounted to $124 thousand (or 0 basis point benefit to NIM) for the three months ended March 31, 2023, compared to $76 thousand (or 0 basis point benefit to NIM) for the same period in 2022.

The analysis of net interest income, NIM and the yield on loans is also impacted by changes in the level of net amortization of premiums and discounts on securities and loans, which is included in interest income. Changes in market interest rates affect the level of loan prepayments and the receipt of payments on mortgage-backed securities. Prepayment speeds generally increase as market interest rates decline and decrease as market interest rates rise. Changes in prepayment speeds could increase or decrease the level of net amortization of premiums and discounts, thereby affecting interest income. Additionally, as PPP loans were forgiven by the SBA in the previous year, related unamortized net fee balances were accelerated and amortized, increasing net interest income.

As noted in the Unaudited Consolidated Statements of Cash Flows, net amortization of premiums and discounts on securities and loans (a net reduction to interest income) amounted to $324 thousand for the three months ended March 31, 2023, compared $966 thousand for the same period in 2022. This included no accelerated amortization of net deferred fee balances on PPP loans forgiven by the SBA for the three months ended March 31, 2023, compared to $819 thousand (or 6 basis points benefit to NIM) for the same period in 2022.

FTE net interest income for the three months ended March 31, 2023 amounted to $37.4 million, up by $2.1 million from the same period in 2022. In the three months ended March 31, 2023, growth in average interest-earning assets net of increased average interest-bearing liability balances, contributed approximately $2.2 million of net interest income. Increases in funding costs outpaced increases in asset yields, reducing net interest income by $138 thousand for the three months ended March 31, 2023.

NIM was 2.33% for the three months ended March 31, 2023, compared to 2.57% for the same period in 2022. While NIM benefited from higher market interest rates on loans, it was adversely impacted by a higher cost of funds.

Total average securities for the three months ended March 31, 2023 increased by $122.1 million from the average balances for the same period a year earlier. The FTE rate of return on the securities portfolio for the three months ended March 31, 2023 was 2.44%, compared to 1.60% for the same period in 2022, reflecting the impact of higher market interest rates in 2023.

Total average loan balances for the three months ended March 31, 2023 increased by $875.7 million from the average loan balances for the comparable 2022 period, largely reflecting growth in average residential real estate loan and CRE balances. The yield on total loans for the three months ended March 31, 2023 was 4.73%, compared to 3.25% in the corresponding period in 2022. As discussed above, the yield on total loans was impacted by the accelerated amortization of net deferred fee balances on PPP loans when such loans were forgiven by the SBA and to a lesser extent by the periodic recognition of

-42-

Management's Discussion and Analysis

commercial loan prepayment fee income. Excluding the impact of these items for both periods, the yield on total loans for the three months ended March 31, 2023 was 4.72%, up from 3.16% for the same period in 2022, reflecting higher market interest rates.

The average balance of FHLB advances for the three months ended March 31, 2023 increased by $893.1 million compared to the average balances for the same period in 2022, as higher levels of wholesale funding were utilized to fund balance sheet growth. Due to increases in market interest rates, the average rate paid on such advances for the three months ended March 31, 2023 was 4.52%, up from 0.66% for the same period in 2022.

Included in total average interest-bearing deposits were wholesale brokered deposits, which decreased by $12.5 million from the same period in 2022. Due to increases in market interest rates, the average rate paid on wholesale brokered deposits for the three months ended March 31, 2023 was 3.77%, compared to 0.18% for the same period in 2022.

Average in-market interest-bearing deposits, which excludes wholesale brokered deposits, for the three months ended March 31, 2023 increased by $144.1 million from the average balances for the same period in 2022, with increases in money market accounts, demand deposits and time deposits. The average rate paid on in-market interest-bearing deposits for the three months ended March 31, 2023 increased by 134 basis points from the same period in 2022, reflecting the impact of increases in market interest rates.

The average balance of noninterest-bearing demand deposits for the three months ended March 31, 2023 decreased by $104.9 million from the average balance for the same period in 2022.

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Management's Discussion and Analysis

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

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


(Dollars in thousands)	Three Months Ended March 31, 2023 vs. 2022
	Change Due to
	Volume	Rate	Net Change
Interest on Interest-Earning Assets:
Cash, federal funds sold and other short-term investments	($48)	$1,040	$992
Mortgage loans held for sale	(154)	74	(80)
Taxable debt securities	529	2,435	2,964



FHLB stock	353	177	530


Commercial real estate	1,862	11,547	13,409
Commercial & industrial	(40)	2,884	2,844
Total commercial	1,822	14,431	16,253
Residential real estate	5,448	2,229	7,677
Home equity	340	1,544	1,884
Other	(6)	(5)	(11)
Total consumer	334	1,539	1,873
Total loans	7,604	18,199	25,803
Total interest income	8,284	21,925	30,209
Interest on Interest-Bearing Liabilities:
Interest-bearing demand deposits (in-market)	32	2,537	2,569
NOW accounts	(4)	232	228
Money market accounts	43	6,918	6,961
Savings accounts	1	242	243
Time deposits (in-market)	100	2,460	2,560
Interest-bearing in-market deposits	172	12,389	12,561
Wholesale brokered demand deposits	177	—	177
Wholesale brokered time deposits	(14)	3,762	3,748
Wholesale brokered deposits	163	3,762	3,925
Total interest-bearing deposits	335	16,151	16,486
FHLB advances	5,725	5,657	11,382
Junior subordinated debentures	—	255	255

Total interest expense	6,060	22,063	28,123
Net interest income (FTE)	$2,224	($138)	$2,086

Provision for Credit Losses

The provision for credit losses results from management’s review of the adequacy of the ACL. The ACL is management’s estimate, at the reporting date, of expected lifetime credit losses and includes consideration of current forecasted economic conditions. Estimating an appropriate level of ACL necessarily involves a high degree of judgment.

The Corporation recorded a provision for credit losses of $800 thousand for the three months ended March 31, 2023, compared to $100 thousand for the same period in 2022. The provision recognized in 2023 provided for loan growth and included modest additional reserve allocation for commercial loans migrating to nonaccrual status. The provision also reflected a slowdown in loan prepayment speeds and continued negative outlook in economic forecasts, partially offset by continued strength in asset and credit quality metrics. The provision recorded in three months ended March 31, 2022 related

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Management's Discussion and Analysis

to an increase in the ACL on unfunded commitments. There was no provision for credit losses on loans recognized in the first quarter of 2022, largely reflecting modest loan growth in that period, low loss rates and strong asset and credit quality.

Net charge-offs totaled $47 thousand for the three months ended March 31, 2023, compared to net recoveries of $148 thousand for the same period in 2022.

The ACL on loans was $38.8 million, or 0.74% of total loans, at March 31, 2023, compared to $38.0 million, or 0.74% of total loans, at December 31, 2022. See additional discussion under the caption “Asset Quality” for further information on the ACL on loans.

Noninterest Income

Noninterest income is an important source of revenue for Washington Trust. The principal categories of noninterest income are shown in the following table:


(Dollars in thousands)

			Change
Three months ended March 31,	2023	2022	$	%
Noninterest income:
Wealth management revenues	$8,663	$10,531	($1,868)	(18	%)

Mortgage banking revenues	1,245	3,501	(2,256)	(64)
Card interchange fees	1,132	1,164	(32)	(3)
Service charges on deposit accounts	777	668	109	16
Loan related derivative income	(51)	301	(352)	(117)
Income from bank-owned life insurance	1,165	601	564	94



Other income	352	393	(41)	(10)




Total noninterest income	$13,283	$17,159	($3,876)	(23	%)

Noninterest Income Analysis

Revenue from wealth management services represented 65% of total noninterest income for the three months ended March 31, 2023, compared to 61% for the same period in 2022. A substantial portion of wealth management revenues is dependent on the value of wealth management AUA and is closely tied to the performance of the financial markets. This portion of wealth management revenues is referred to as “asset-based” and includes trust and investment management fees. Wealth management revenues also include “transaction-based” revenues, such as commissions and other service fees that are not primarily derived from the value of assets.

The categories of wealth management revenues are shown in the following table:


(Dollars in thousands)

			Change
Three months ended March 31,	2023	2022	$	%
Wealth management revenues:


Asset-based revenues	$8,429	$10,211	($1,782)	(17	%)
Transaction-based revenues	234	320	(86)	(27)
Total wealth management revenues	$8,663	$10,531	($1,868)	(18	%)

Wealth management revenues for the three months ended March 31, 2023 decreased by $1.9 million from the same period in 2022, reflecting a decrease in asset-based revenues. The change in asset-based revenues correlated with the change in AUA balances. The average balance of AUA for the three months ended March 31, 2023 decreased by 19% from the average balance for the same period in 2022. The end of period AUA balance amounted to $6.2 billion at March 31, 2023, down by $1.3 billion, or 18%, from March 31, 2022. This decline included $872 million of net client asset outflows and net investment depreciation of $457 million.

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Management's Discussion and Analysis

The following table presents the changes in wealth management AUA balances:


(Dollars in thousands)

Three months ended March 31,	2023	2022
Wealth management assets under administration:
Balance at the beginning of period	$5,961,990	$7,784,211
Net investment appreciation (depreciation) & income	286,262	(388,733)
Net client asset (outflows) inflows	(84,830)	97,415
Balance at the end of period	$6,163,422	$7,492,893

AUA and related asset-based revenues were adversely impacted by client withdrawals associated with the departure of four client-facing advisors at the end of the third quarter of 2022. These four advisors were associated with approximately $1.0 billion of AUA as of September 30, 2022. Through March 31, 2023, cumulative client asset withdrawals associated with the departure of the advisors amounted to $651 million, of which $47 million were withdrawn in the first quarter of 2023 and $604 million in the fourth quarter of 2022. The cumulative withdrawals resulted in a reduction of wealth management revenues of $928 thousand in the first quarter of 2023 and $525 thousand in the fourth quarter of 2022. From April 1, 2023 through April 28, 2023, we have been notified of additional client AUA withdrawals of approximately $29 million. We currently estimate a decline in full-year 2023 revenues of approximately $3.9 million associated with these withdrawals. While there are cost savings in salaries and employee benefits expense associated with the departure of these advisors, they currently are being offset by a higher level of legal expenses also associated with this matter.

Mortgage banking revenues represented 9% of total noninterest income for the three months ended March 31, 2023, compared to 20% for the same period in 2022. These revenues are dependent on mortgage origination volume and are sensitive to interest rates and the condition of housing markets. The composition of mortgage banking revenues and the volume of loans sold to the secondary market are shown in the following table:


(Dollars in thousands)

			Change
Three months ended March 31,	2023	2022	$	%
Mortgage banking revenues:
Realized gains on loan sales, net (1)	$576	$3,327	($2,751)	(83	%)
Changes in fair value, net (2)	86	(242)	328	136
Loan servicing fee income, net (3)	583	416	167	40
Total mortgage banking revenues	$1,245	$3,501	($2,256)	(64	%)

Loans sold to the secondary market (4)	$29,328	$130,128	($100,800)	(77	%)

(1)Includes gains on loan sales, commission income on loans originated for others, servicing right gains, and gains (losses) on forward loan commitments.

(2)Represents fair value changes on mortgage loans held for sale and forward loan commitments.

(3)Represents loan servicing fee income, net of servicing right amortization and valuation adjustments.

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

For the three months ended March 31, 2023, mortgage banking revenues were down by $2.3 million, or 64%, compared to the same period in 2022. The decline in mortgage banking revenues was mainly attributable to a decline in sales volume and a reduction in the sales yield. Mortgage loans sold to the secondary market totaled $29.3 million for the three months ended March 31, 2023, compared to $130.1 million for the same period in 2022, reflecting an overall reduction in mortgage origination, refinancing and sales activity, as well as a shift to a higher proportion of loans originated for retention in portfolio in 2023. The reduction of mortgage activity was driven by increase in market interest rates and changes in the housing markets. Mortgage banking revenues were also impacted by changes in the fair value of mortgage loans held for sale and forward loan commitments, which are primarily based on current market prices in the secondary market and correlate to changes in the size of the mortgage pipeline. In addition, the decline in mortgage banking revenues was partially offset by higher net loan servicing fee income associated with loans sold with servicing retained. The increase in net loan servicing fee income was largely due to lower amortization of servicing rights, reflecting lower prepayment speeds on the serviced mortgage portfolio.

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Management's Discussion and Analysis

Income from BOLI for the three months ended March 31, 2023, was up by $564 thousand from the same period in 2022, reflecting the recognition of $476 thousand in non-taxable income in the first quarter of 2023 associated with the receipt of life insurance proceeds.

For the three months ended March 31, 2023, loan related derivative income decreased by $352 thousand from the same period in 2022, reflecting a lower volume of commercial borrower interest rate derivative transactions.

Noninterest Expense

The following table presents noninterest expense comparisons:



(Dollars in thousands)			Change
Three months ended March 31,	2023	2022	$	%
Noninterest expense:
Salaries and employee benefits	$21,784	$21,002	$782	4	%
Outsourced services	3,496	3,242	254	8
Net occupancy	2,437	2,300	137	6
Equipment	1,028	918	110	12

Legal, audit and professional fees	896	770	126	16
FDIC deposit insurance costs	872	366	506	138
Advertising and promotion	408	351	57	16
Amortization of intangibles	212	217	(5)	(2)




Other	2,431	2,053	378	18
Total noninterest expense	$33,564	$31,219	$2,345	8	%

Noninterest Expense Analysis

Salaries and employee benefits expense, the largest component of noninterest expense, for the three months ended March 31, 2023 increased by $782 thousand, compared to the same period in 2022. This largely reflected annual merit increases and higher staffing levels, partially offset by volume-related decreases in mortgage originator compensation expense.

Outsourced services expense for the three months ended March 31, 2023, increased by $254 thousand, compared to the same period in the prior year, due to changes to and expansion of services provided by third party vendors.

FDIC deposit insurance costs for the three months ended March 31, 2023 increased by $506 thousand, compared to the same period in 2022, reflecting an increase in the FDIC’s deposit assessment rate.

Other expense for the three months ended March 31, 2023 increased by $378 thousand, compared to the same period in 2022, reflecting modest increases across a variety of other noninterest expense categories.

Income Taxes

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


(Dollars in thousands)

Three months ended March 31,	2023		2022
Income tax expense	$3,300		$4,448
Effective income tax rate	20.5	%	21.3	%

The effective income tax rates for the three months ended March 31, 2023 and 2022 differed from the federal rate of 21%, primarily due to state income tax expense, partially offset by the benefits of tax-exempt income, income from BOLI, federal tax credits and the recognition of excess tax expense or benefits associated with the settlement of share-based awards.

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Management's Discussion and Analysis

The decrease in the effective tax rate for the three months ended March 31, 2023 compared to the same period in 2022 largely reflected an increase in benefits from BOLI income.

Segment Reporting

The Corporation manages its operations through two reportable business segments, consisting of Commercial Banking and Wealth Management Services. See Note 13 to the Unaudited Consolidated Financial Statements for additional disclosure related to business segments.

Commercial Banking

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



(Dollars in thousands)			Change
Three months ended March 31,	2023	2022	$	%
Net interest income	$37,180	$35,108	$2,072	6	%
Provision for credit losses	800	100	700	700
Net interest income after provision for credit losses	36,380	35,008	1,372	4
Noninterest income	4,431	6,512	(2,081)	(32)
Noninterest expense	25,466	23,322	2,144	9
Income before income taxes	15,345	18,198	(2,853)	(16)
Income tax expense	3,087	3,797	(710)	(19)
Net income	$12,258	$14,401	($2,143)	(15	%)

Net interest income for the Commercial Banking segment for the three months ended March 31, 2023, increased by $2.1 million from the same period in 2022. Net interest income largely benefited from growth in and higher rates on average interest-earning assets, but was adversely impacted by a higher cost of funds.

The Corporation recorded a provision for credit losses of $800 thousand for the three months ended March 31, 2023, compared to $100 thousand provision for the same period in 2022. See additional discussion under the caption “Provision for Credit Losses.”

Noninterest income derived from the Commercial Banking segment for the three months ended March 31, 2023 was down by $2.1 million, from the comparable period in 2022, primarily due to lower mortgage banking revenues. See additional discussion regarding mortgage banking revenues under the caption “Noninterest Income” above.

Commercial Banking noninterest expenses for the three months ended March 31, 2023 were up by $2.1 million from the same period in 2022, largely reflecting increases in salaries and employee benefits expense, FDIC deposit insurance costs and outsourced services expense. See additional discussion under the caption “Noninterest Expense” above.

Wealth Management Services

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



(Dollars in thousands)			Change
Three months ended March 31,	2023	2022	$	%
Net interest expense	$13	($17)	$30	176	%


Noninterest income	8,852	10,647	(1,795)	(17)
Noninterest expense	8,098	7,897	201	3
Income before income taxes	767	2,733	(1,966)	(72)
Income tax expense	213	651	(438)	(67)
Net income	$554	$2,082	($1,528)	(73	%)

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Management's Discussion and Analysis

For the three months ended March 31, 2023, noninterest income derived from the Wealth Management Services segment decreased by $1.8 million from the same period in 2022, largely reflecting a decrease in asset-based revenues. See further discussion under the caption “Noninterest Income” above.

For the three months ended March 31, 2023, noninterest expenses for the Wealth Management Services segment increased by $201 thousand from the comparable period in 2022. These included modest changes across a variety of noninterest expense categories.

Financial Condition

Summary

The following table presents selected financial condition data:


(Dollars in thousands)			Change
	March 31, 2023	December 31, 2022	$	%
Cash and due from banks	$134,989	$115,492	$19,497	17	%
Total securities	1,054,747	993,928	60,819	6
Total loans	5,227,969	5,110,139	117,830	2
Allowance for credit losses on loans	38,780	38,027	753	2
Total assets	6,859,182	6,660,051	199,131	3
Total deposits	5,268,514	5,018,962	249,552	5
FHLB advances	925,000	980,000	(55,000)	(6)
Total shareholders’ equity	464,983	453,669	11,314	2

Total assets amounted to $6.9 billion at March 31, 2023, up by $199.1 million, or 3%, from the end of 2022, reflecting loan growth and an increase in the securities portfolio.

Cash and due from banks balances increased by $19.5 million, or 17%, from the end of 2022, reflecting higher cash balances on deposit at correspondent banks.

The securities portfolio increased by $60.8 million, or 6%, from the end of 2022, reflecting purchases of debt securities and an increase in fair value of available for sale securities primarily attributable to changes in interest rates, partially offset by routine pay-downs on mortgage-backed securities.

Total loans increased by $117.8 million, or 2%, from the end of 2022, with growth in both the residential real estate and commercial portfolios.

Total deposits increased by $249.6 million, or 5%, from the end of 2022, due to an increase in wholesale brokered deposits. In-market deposits were slightly down by $813 thousand, or 0.02%.

FHLB advances decreased by $55.0 million, or 6%, from December 31, 2022 reflecting a shift to wholesale brokered deposits to fund loan growth and purchases of debt securities.

Shareholders’ equity increased by $11.3 million, or 2%, reflecting net income and an increase in the AOCL component of shareholders' equity due to increases in the fair value of available for sale debt securities and cash flow hedges that were primarily attributable to relative changes in market interest rates. These increases were partially offset by dividend declarations and an increase in treasury stock balances, largely due to stock repurchases.

Securities

Investment security activity is monitored by the Investment Committee, the members of which also sit on the ALCO. Asset and liability management objectives are the primary influence on the Corporation’s investment activities. However, the Corporation also recognizes that there are certain specific risks inherent in investment activities. The securities portfolio is managed in accordance with regulatory guidelines and established internal corporate investment policies that provide limitations on specific risk factors such as market risk, credit risk and concentration, liquidity risk and operational risk to help

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Management's Discussion and Analysis

monitor risks associated with investing in securities. Reports on the activities conducted by the Investment Committee and the ALCO are presented to the Board of Directors on a regular basis.

The Corporation’s securities portfolio is managed to generate interest income, to implement interest rate risk management strategies, and to provide a readily available source of liquidity for balance sheet management. Securities are designated as either available for sale, held to maturity or trading at the time of purchase. The Corporation does not maintain a portfolio of trading securities and does not have securities designated as held to maturity. Securities available for sale may be sold in response to changes in market conditions, prepayment risk, rate fluctuations, liquidity, or capital requirements. Debt securities available for sale are reported at fair value, with any unrealized gains and losses excluded from earnings and reported as a separate component of shareholders’ equity, net of tax, until realized.

Determination of Fair Value

The Corporation uses an independent pricing service to obtain quoted prices. The prices provided by the independent pricing service are generally based on observable market data in active markets. The determination of whether markets are active or inactive is based upon the level of trading activity for a particular security class. Management reviews the independent pricing service’s documentation to gain an understanding of the appropriateness of the pricing methodologies. Management also reviews the prices provided by the independent pricing service for reasonableness based upon current trading levels for similar securities. If the prices appear unusual, they are re-examined and the value is either confirmed or revised. In addition, management periodically performs independent price tests of securities to ensure proper valuation and to verify our understanding of how securities are priced. As of March 31, 2023 and December 31, 2022, management did not make any adjustments to the prices provided by the pricing service.

Our fair value measurements generally utilize Level 2 inputs, representing quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in inactive markets, and model-derived valuations in which all significant input assumptions are observable in active markets.

See Notes 3 and 7 to the Unaudited Consolidated Financial Statements for additional information regarding the determination of fair value of investment securities.

Securities Portfolio

The carrying amounts of securities held are as follows:


(Dollars in thousands)	March 31, 2023			December 31, 2022
	Amount	%		Amount	%
Available for Sale Debt Securities:
Obligations of U.S. government-sponsored enterprises	$222,664	21	%	$199,582	20	%
Mortgage-backed securities issued by U.S. government agencies and U.S. government-sponsored enterprises	811,870	77		774,102	78

Individual name issuer trust preferred debt securities	8,700	1		8,760	1

Corporate bonds	11,513	1		11,484	1

Total available for sale debt securities	$1,054,747	100	%	$993,928	100	%

The securities portfolio represented 15% of total assets at March 31, 2023, unchanged from December 31, 2022. The largest component of the securities portfolio is mortgage-backed securities, all of which are issued by U.S. government agencies or U.S. government-sponsored enterprises.

The securities portfolio increased by $60.8 million, or 6%, from the end of 2022. This included purchases of U.S. government agency and U.S. government-sponsored debt securities, including mortgage-backed securities, totaling $60.2 million, with a weighted average yield of 4.98%, as well as an increase of $17.4 million (pre-tax) in the fair value of available for sale securities. These were partially offset by $16.4 million of routine pay-downs on mortgage-backed securities.

As of March 31, 2023, the carrying amount of available for sale debt securities included net unrealized losses of $155.0 million, compared to net unrealized losses of $172.4 million as of December 31, 2022. The increase in fair value of

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Management's Discussion and Analysis

available for sale debt securities from the end of 2022 was primarily concentrated in obligations of U.S. government agencies and U.S. government-sponsored enterprises, including mortgage-backed securities, and primarily attributable to relative changes in interest rates since the time of purchase. See Note 3 to the Unaudited Consolidated Financial Statements for additional information.

Loans

Total loans amounted to $5.2 billion at March 31, 2023, up by $117.8 million, or 2%, from the end of 2022, with growth in both the residential real estate and commercial portfolios.

The following is a summary of loans:


(Dollars in thousands)	March 31, 2023			December 31, 2022
	Amount	%		Amount	%
Commercial:
Commercial real estate (1)	$1,909,136	37	%	$1,829,304	36	%
Commercial & industrial (2)	609,720	11		656,397	13
Total commercial	2,518,856	48		2,485,701	49
Residential Real Estate:
Residential real estate (3)	2,403,255	46		2,323,002	45
Consumer:
Home equity	288,878	6		285,715	6
Other (4)	16,980	—		15,721	—
Total consumer	305,858	6		301,436	6
Total loans	$5,227,969	100	%	$5,110,139	100	%

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

(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.

Commercial Loans

The commercial loan portfolio represented 48% of total loans at March 31, 2023.

In making commercial loans, we may occasionally solicit the participation of other banks. The Bank also participates in commercial loans originated by other banks. In such cases, these loans are individually underwritten by us using standards similar to those employed for our self-originated loans. Our participation in commercial loans originated by other banks amounted to $534.2 million and $510.6 million, respectively, at March 31, 2023 and December 31, 2022. Our participation in commercial loans originated by other banks also includes shared national credits. Shared national credits are defined as participation in loans or loan commitments of at least $100.0 million that are shared by three or more banks.

Commercial loans fall into two main categories, CRE and C&I loans. CRE loans consist of commercial mortgages secured by real property where the primary source of repayment is derived from rental income associated with the property or the proceeds of the sale, refinancing or permanent financing of the property. CRE loans also include construction loans made to businesses for land development or the on-site construction of industrial, commercial, or residential buildings. C&I loans primarily provide working capital, equipment financing and financing for other business-related purposes. C&I loans are frequently collateralized by equipment, inventory, accounts receivable, and/or general business assets. A portion of the Bank’s C&I loans is also collateralized by real estate. C&I loans also include PPP loans that are fully guaranteed by the U.S. government, tax-exempt loans made to states and political subdivisions, as well as industrial development or revenue bonds issued through quasi-public corporations for the benefit of a private or non-profit entity where that entity rather than the governmental entity is obligated to pay the debt service.

Commercial Real Estate Loans

CRE loans totaled $1.9 billion at March 31, 2023, up by $79.8 million, or 4%, from the balance at December 31, 2022. In 2023, CRE loan originations and advances of approximately $62 million were partially offset by payments of approximately

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Management's Discussion and Analysis

$16 million. Included in the net increase in CRE this quarter were reclassifications of $34 million from C&I, predominantly due to changes in the source of repayment.

Included in the CRE loan portfolio were construction and development loans of $165.7 million and $164.1 million, respectively, as of March 31, 2023 and December 31, 2022.

Shared national credit balances outstanding included in the CRE loan portfolio totaled $12.6 million and $10.5 million, respectively, at March 31, 2023 and December 31, 2022. The balances were included in the pass-rated category of commercial loan credit quality and were current with respect to contractual payment terms at both March 31, 2023 and December 31, 2022.

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


(Dollars in thousands)	March 31, 2023			December 31, 2022
	Outstanding Balance	% of Total		Outstanding Balance	% of Total
Connecticut	$695,512	36	%	$691,780	38	%
Massachusetts	624,411	33		566,717	31
Rhode Island	393,580	21		387,759	21
Subtotal	1,713,503	90		1,646,256	90
All other states	195,633	10		183,048	10
Total	$1,909,136	100	%	$1,829,304	100	%

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


(Dollars in thousands)	March 31, 2023				December 31, 2022
	Count	Outstanding Balance	% of Total		Count	Outstanding Balance	% of Total
CRE Portfolio Segmentation:
Multi-family dwelling	130	$488,219	26	%	127	$469,233	26	%
Retail	106	421,341	22		108	421,617	23
Office	53	264,429	14		53	257,551	14
Hospitality	42	218,328	11		33	214,829	12
Industrial and warehouse	44	201,701	11		42	192,717	11
Healthcare	18	165,978	9		17	136,225	7
Commercial mixed use	22	56,808	3		21	54,976	3
Other	36	92,332	4		34	82,156	4
Total CRE loans	451	$1,909,136	100	%	435	$1,829,304	100	%

Average CRE loan size		$4,233				$4,205
Largest individual CRE loan outstanding		$65,438				$65,431

Commercial and Industrial Loans

C&I loans amounted to $609.7 million at March 31, 2023, down by $46.7 million, or 7%, from the balance at December 31, 2022. The net reduction in C&I reflected payments of approximately $29 million and reclassifications of $34 million to CRE, partially offset by originations and advances of $16 million.

Shared national credit balances outstanding included in the C&I loan portfolio totaled $40.9 million at both March 31, 2023 and December 31, 2022. All of these loans were included in the pass-rated category of commercial loan credit quality and were current with respect to contractual payment terms at both March 31, 2023 and December 31, 2022.

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Management's Discussion and Analysis

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


(Dollars in thousands)	March 31, 2023				December 31, 2022
	Count	Outstanding Balance	% of Total		Count	Outstanding Balance	% of Total
C&I Portfolio Segmentation:
Healthcare and social assistance	69	$166,102	27	%	69	$193,052	29	%
Owner occupied and other real estate	161	65,818	11		168	72,429	11
Manufacturing	56	60,510	10		55	60,601	9
Retail	54	58,870	10		50	56,012	9
Transportation and warehousing	17	50,269	8		20	51,347	8
Educational services	19	46,245	8		19	46,708	7
Finance and insurance	51	30,560	5		55	28,313	4
Entertainment and recreation	22	24,224	4		24	25,646	4
Information	5	23,637	4		5	23,948	4
Accommodation and food services	41	12,831	2		49	17,167	3
Professional, scientific and technical	35	6,042	1		37	6,451	1
Public administration	11	3,709	1		11	3,789	1
Other	156	60,903	9		162	70,934	10
Total C&I loans	697	$609,720	100	%	724	$656,397	100	%

Average C&I loan size		$875				$907
Largest individual C&I loan outstanding		$25,571				$27,676

Residential Real Estate Loans

The residential real estate loan portfolio represented 46% of total loans at March 31, 2023.

Residential real estate loans held in portfolio amounted to $2.4 billion at March 31, 2023, up by $80.3 million, or 3%, from the balance at December 31, 2022. While total residential real estate loan origination activity has slowed, a higher proportion of loans were originated for portfolio than for sale in 2023.

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


(Dollars in thousands)	March 31, 2023			December 31, 2022
	Amount	% of Total		Amount	% of Total
Massachusetts	$1,757,176	73	%	$1,698,240	73	%
Rhode Island	460,097	19		446,010	19
Connecticut	157,906	7		153,323	7
Subtotal	2,375,179	99		2,297,573	99
All other states	28,076	1		25,429	1
Total (1)	$2,403,255	100	%	$2,323,002	100	%

(1)Includes residential mortgage loans purchased from and serviced by other financial institutions totaling $58.0 million and $59.9 million, respectively, as of March 31, 2023 and December 31, 2022.

Residential real estate loans are originated both for sale to the secondary market as well as for retention in the Bank’s loan portfolio. We also originate residential real estate loans for various investors in a broker capacity, including conventional mortgages and reverse mortgages.

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Management's Discussion and Analysis

The table below presents residential real estate loan origination activity:


(Dollars in thousands)

Three months ended March 31,	2023			2022
	Amount	% of Total		Amount	% of Total
Originations for retention in portfolio (1)	$109,768	80	%	$164,401	61	%
Originations for sale to the secondary market (2)	27,763	20		106,619	39
Total	$137,531	100	%	$271,020	100	%

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

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

The table below presents residential real estate loan sales activity:


(Dollars in thousands)

Three months ended March 31,	2023			2022
	Amount	% of Total		Amount	% of Total
Loans sold with servicing rights retained	$17,114	58	%	$14,627	11	%
Loans sold with servicing rights released (1)	12,214	42		115,501	89
Total	$29,328	100	%	$130,128	100	%

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

Residential real estate loan origination, refinancing and sales activity decreased in response to increases in market interest rates and changes in the housing markets.

We have active relationships with various secondary market investors that purchase residential real estate loans we originate. In addition to managing our interest rate risk position and earnings through the sale of these loans, we are also able to manage our liquidity position through timely sales of residential real estate loans to the secondary market.

Loans are sold with servicing retained or released. Loans sold with servicing rights retained result in the capitalization of servicing rights. Loan servicing rights are included in other assets and are subsequently amortized as an offset to mortgage banking revenues over the estimated period of servicing. The net balance of capitalized servicing rights amounted to $8.8 million and $9.0 million, respectively, as of March 31, 2023 and December 31, 2022. The balance of residential mortgage loans serviced for others, which are not included in the Unaudited Consolidated Balance Sheets, amounted to $1.5 billion as of both March 31, 2023 and December 31, 2022.

Consumer Loans

Consumer loans include home equity loans and lines of credit and personal installment loans. Home equity lines of credit and home equity loans represented 94% of the total consumer portfolio at March 31, 2023. Our home equity line and home equity loan origination activities are conducted primarily in southern New England. The Bank estimates that approximately 55% of the combined home equity lines of credit and home equity loan balances are first lien positions or subordinate to other Washington Trust mortgages.

The consumer loan portfolio totaled $305.9 million at March 31, 2023, up by $4.4 million, or 1%, from December 31, 2022, reflecting increases in home equity lines and loans. Purchased consumer loans, consisting of loans to individuals secured by general aviation aircraft, amounted to $10.9 million and $9.6 million, respectively, at March 31, 2023 and December 31, 2022.

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Management's Discussion and Analysis

Asset Quality

The Corporation continually monitors the asset quality of the loan portfolio using all available information.

In the course of resolving problem loans, the Corporation may choose to modify the contractual terms of certain loans. As disclosed in Note 2, the Corporation adopted ASU 2022-02, which eliminated the accounting guidance for TDRs and added enhanced disclosures with respect to certain modifications for borrowers experiencing financial difficulty. Effective January 1, 2023, a loan that has been modified is considered a TLM when the following conditions are met: (1) the modification is considered a continuation of an existing loan and not a new loan in accordance with GAAP, (2) the modification is made to a borrower experiencing financial difficulty and (3) the modification has a direct impact to the contractual cash flows. During the three months ended March 31, 2023, there were no TLMs.

Nonperforming Assets

Nonperforming assets include nonaccrual loans and OREO.

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


(Dollars in thousands)	Mar 31, 2023		Dec 31, 2022


Commercial:
Commercial real estate	$1,601		$—
Commercial & industrial	920		—
Total commercial	2,521		—
Residential Real Estate:
Residential real estate	10,470		11,894
Consumer:
Home equity	989		952
Other	—		—
Total consumer	989		952
Total nonaccrual loans	13,980		12,846

OREO, net	683		—
Total nonperforming assets	$14,663		$12,846

Nonperforming assets to total assets	0.21	%	0.19	%
Nonperforming loans to total loans	0.27	%	0.25	%
Total past due loans to total loans	0.15	%	0.23	%
Allowance for credit losses on loans to total loans	0.74	%	0.74	%
Accruing loans 90 days or more past due	$—		$—

Nonaccrual Loans

During the three months ended March 31, 2023, the Corporation made no changes in its practices or policies concerning the placement of loans into nonaccrual status.

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Management's Discussion and Analysis

The following table presents the activity in nonaccrual loans:


(Dollars in thousands)

For the periods ended March 31,	2023	2022
Balance at beginning of period	$12,846	$14,203
Additions to nonaccrual status	2,570	427
Loans returned to accruing status	(110)	(63)
Loans charged-off	(61)	(36)
Loans transferred to other real estate owned	(683)	—
Payments, payoffs and other changes	(582)	(1,942)
Balance at end of period	$13,980	$12,589

The following table presents additional detail on nonaccrual loans:


(Dollars in thousands)	March 31, 2023					December 31, 2022
	Days Past Due					Days Past Due
	Over 90	Under 90	Total	% (1)		Over 90	Under 90	Total	% (1)
Commercial:
Commercial real estate	$—	$1,601	$1,601	0.08	%	$—	$—	$—	—	%
Commercial & industrial	224	696	920	0.15		—	—	—	—
Total commercial	224	2,297	2,521	0.10		—	—	—	—
Residential Real Estate:
Residential real estate	2,506	7,964	10,470	0.44		3,779	8,115	11,894	0.51
Consumer:
Home equity	—	989	989	0.34		—	952	952	0.33
Other	—	—	—	—		—	—	—	—
Total consumer	—	989	989	0.32		—	952	952	0.32
Total nonaccrual loans	$2,730	$11,250	$13,980	0.27	%	$3,779	$9,067	$12,846	0.25	%

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

There were no significant commitments to lend additional funds to borrowers whose loans were on nonaccrual status at March 31, 2023.

As of March 31, 2023, the composition of nonaccrual loans was 82% residential and consumer and 18% commercial, compared to 100% residential and consumer as of December 31, 2022. Total nonaccrual loans increased by $1.1 million from the end of 2022.

Nonaccrual residential real estate mortgage loans amounted to $10.5 million at March 31, 2023, down by $1.4 million from the end of 2022. As of March 31, 2023, the balance of nonaccrual residential mortgage loans was predominately secured by properties in Massachusetts, Connecticut and Rhode Island. Included in total nonaccrual residential real estate loans at March 31, 2023 were four loans purchased for portfolio and serviced by others amounting to $1.1 million. Management monitors the collection efforts of its third-party servicers as part of its assessment of the collectability of nonperforming loans.

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Management's Discussion and Analysis

Past Due Loans

The following table presents past due loans by category:


(Dollars in thousands)	March 31, 2023			December 31, 2022
	Amount	% (1)		Amount	% (1)


Commercial:
Commercial real estate	$1,188	0.06	%	$1,187	0.06	%
Commercial & industrial	229	0.04		265	0.04
Total commercial	1,417	0.06		1,452	0.06
Residential Real Estate:
Residential real estate	5,730	0.24		8,875	0.38
Consumer:
Home equity	833	0.29		1,235	0.43
Other	15	0.09		16	0.10
Total consumer	848	0.28		1,251	0.42
Total past due loans	$7,995	0.15	%	$11,578	0.23	%

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

As of March 31, 2023 and December 31, 2022, the composition of past due loans (loans past due 30 days or more) was 82% residential and consumer and 18% commercial, compared to 87% residential and consumer and 13% commercial at December 31, 2022. Total past due loans decreased by $3.6 million from the end of 2022.

Total past due loans included $5.6 million of nonaccrual loans as of March 31, 2023, compared to $7.2 million as of December 31, 2022.

All loans 90 days or more past due at March 31, 2023 and December 31, 2022 were classified as nonaccrual.

Potential Problem Loans

The Corporation classifies certain loans as “substandard,” “doubtful,” or “loss” based on criteria consistent with guidelines provided by banking regulators. Potential problem loans include classified accruing commercial loans that were less than 90 days past due at March 31, 2023 and other loans for which known information about possible credit problems of the related borrowers causes management to have doubts as to the ability of such borrowers to comply with the present loan repayment terms and which may result in disclosure of such loans as nonperforming at some time in the future.

Potential problem loans are not included in the amounts of nonaccrual loans presented above. They are assessed for loss exposure using the methods described in Note 4 to the Unaudited Consolidated Financial Statements under the caption “Credit Quality Indicators.” Management cannot predict the extent to which economic conditions or other factors may impact borrowers and the potential problem loans. Accordingly, there can be no assurance that other loans will not become 90 days or more past due, be placed on nonaccrual, become modified, or require an increased allowance coverage and provision for credit losses on loans.

As of March 31, 2023, there were no loans deemed to be potential problem loans.

Allowance for Credit Losses on Loans

The ACL on loans is management’s estimate of expected lifetime credit losses on loans carried at amortized cost. The ACL on loans is established through a provision for credit losses recognized in earnings. The ACL on loans is reduced by charge-offs on loans and is increased by recoveries of amounts previously charged off.

The Corporation’s general practice is to identify problem credits early and recognize full or partial charge-offs as promptly as practicable when it is determined that the collection of loan principal is unlikely. Full or partial charge-offs on collateral dependent individually analyzed loans are recognized when the collateral is deemed to be insufficient to support the carrying value of the loan. The Corporation does not recognize a recovery when new appraisals indicate a subsequent increase in value.

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Management's Discussion and Analysis

Appraisals are generally obtained with values determined on an “as is” basis from independent appraisal firms for real estate collateral dependent commercial loans in the process of collection or when warranted by other deterioration in the borrower’s credit status. New appraisals are generally obtained for nonaccrual loans or when management believes it is warranted. The Corporation has continued to maintain appropriate professional standards regarding the professional qualifications of appraisers and has an internal review process to monitor the quality of appraisals.

For residential real estate loans and real estate collateral dependent consumer loans that are in the process of collection, valuations are obtained from independent appraisal firms with values determined on an “as is” basis.

The following table presents additional detail on the Corporation’s loan portfolio and associated allowance:


(Dollars in thousands)	March 31, 2023				December 31, 2022
	Loans	Related Allowance	Allowance / Loans		Loans	Related Allowance	Allowance / Loans
Individually analyzed loans	$8,222	$532	6.47	%	$9,996	$115	1.15	%
Pooled (collectively evaluated) loans	5,219,747	38,248	0.73		5,100,143	37,912	0.74
Total	$5,227,969	$38,780	0.74	%	$5,110,139	$38,027	0.74	%

Management employs a process and methodology to estimate the ACL on loans that evaluates both quantitative and qualitative factors. The methodology for evaluating quantitative factors consists of two basic components. The first component involves pooling loans into portfolio segments for loans that share similar risk characteristics. The second component involves individually analyzed loans that do not share similar risk characteristics with loans that are pooled into portfolio segments.

The ACL for individually analyzed loans is measured using a DCF method based upon the loan’s contractual effective interest rate, or at the loan’s observable market price, or, if the loan was collateral dependent, at the fair value of the collateral.

The ACL for pooled loans is measured utilizing a DCF methodology to estimate credit losses for each pooled portfolio segment. The methodology incorporates a probability of default and loss given default framework. Loss given default is estimated based on historical credit loss experience. Probability of default is estimated using a regression model that incorporates econometric factors. Management utilizes forecasted econometric factors with a one-year reasonable and supportable forecast period and one-year straight-line reversion period in order to estimate the probability of default for each loan portfolio segment. The DCF methodology combines the probability of default, the loss given default, prepayment speeds and remaining life of the loan to estimate a reserve for each loan. The sum of all the loan level reserves are aggregated for each portfolio segment and a loss rate factor is derived. Quantitative loss factors for pooled loans are also supplemented by certain qualitative risk factors reflecting management’s view of how losses may vary from those represented by quantitative loss rates.

The ACL on loans amounted to $38.8 million at March 31, 2023, up by $753 thousand, or 2%, from the balance at December 31, 2022. The ACL on loans as a percentage of total loans, also known as the reserve coverage ratio, was 0.74% at March 31, 2023, unchanged from December 31, 2022.

The Corporation recorded a provision for credit losses of $800 thousand for the three months ended March 31, 2023. The provision provided for loan growth and included modest additional reserve allocation for commercial loans migrating to nonaccrual status. The provision also reflected a slowdown in loan prepayment speeds and continued negative outlook in economic forecasts, partially offset by continued strength in asset and credit quality metrics.

Net charge-offs totaled $47 thousand for the three months ended March 31, 2023, compared to net recoveries of $148 thousand for the same period in 2022.

The ACL on loans is an estimate and ultimate losses may vary from management’s estimate. Deteriorating conditions or assumptions could lead to further increases in the ACL on loans; conversely, improving conditions or assumptions could lead to further reductions in the ACL on loans.

-58-

Management's Discussion and Analysis

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


(Dollars in thousands)	March 31, 2023					December 31, 2022
	Allocated ACL	ACL to Loans		Loans to Total Portfolio (1)		Allocated ACL	ACL to Loans		Loans to Total Portfolio (1)
Commercial:


Commercial real estate	$21,374	1.12	%	37	%	$18,435	1.01	%	36	%
Commercial & industrial	9,833	1.61		11		10,356	1.58		13
Total commercial	31,207	1.24		48		28,791	1.16		49


Residential Real Estate:
Residential real estate	6,239	0.26		46		7,740	0.33		45
Consumer:
Home equity	978	0.34		6		1,115	0.39		6
Other	356	2.10		—		381	2.42		—
Total consumer	1,334	0.44		6		1,496	0.50		6

Total ACL on loans at end of period	$38,780	0.74	%	100	%	$38,027	0.74	%	100	%

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

Sources of Funds

Our sources of funds include in-market deposits, wholesale brokered deposits, FHLB advances, other borrowings and proceeds from the sales, maturities and payments of loans and investment securities. The Corporation uses funds to originate and purchase loans, purchase investment securities, conduct operations, expand the branch network and pay dividends to shareholders.

Deposits

The Corporation offers a wide variety of deposit products to consumer and business customers. Deposits provide an important source of funding for the Bank, as well as an ongoing stream of fee revenue.

The Bank is a participant in the DDM program, ICS program and the CDARS program. The Bank uses these deposit sweep services to place customer and client funds into interest-bearing demand accounts, money market accounts, and/or time deposits issued by other participating banks. Customer and client funds are placed at one or more participating banks to ensure that each deposit customer is eligible for the full amount of FDIC insurance. As a program participant, we receive reciprocal amounts of deposits from other participating banks. We consider these reciprocal deposit balances to be in-market deposits as distinguished from traditional wholesale brokered deposits.

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Management's Discussion and Analysis

The following table presents a summary of deposits:


(Dollars in thousands)			Change
	March 31, 2023	December 31, 2022	$	%
Noninterest-bearing demand deposits	$829,763	$858,953	($29,190)	(3	%)
Interest-bearing demand deposits (in market)	318,365	302,044	16,321	5
NOW accounts	828,700	871,875	(43,175)	(5)
Money market accounts	1,214,014	1,255,805	(41,791)	(3)
Savings accounts	544,604	576,250	(31,646)	(5)
Time deposits (in-market)	924,506	795,838	128,668	16
Total in-market deposits	4,659,952	4,660,765	(813)	—
Wholesale brokered demand deposits	1,233	31,153	(29,920)	(96)
Wholesale brokered time deposits	607,329	327,044	280,285	86
Total wholesale brokered deposits	608,562	358,197	250,365	70
Total deposits	$5,268,514	$5,018,962	$249,552	5	%

Total deposits amounted to $5.3 billion at March 31, 2023, up by $249.6 million, or 5%, from December 31, 2022, reflecting an increase in wholesale brokered time deposits.

Wholesale brokered deposits increased by $250.4 million, or 70%, from December 31, 2022, as higher levels were utilized to fund balance sheet growth.

In-market deposits, which exclude wholesale brokered deposits, were slightly down by $813 thousand, or 0.02%, from the balance at December 31, 2022. As expected, due to higher market interest rates, in-market deposits shifted from relatively lower cost products to higher cost time deposits in the first quarter of 2023. As of March 31, 2023, in-market deposits were approximately 58% retail and 42% commercial. Our in-market deposits are well-diversified by industry and customer type. The average size of our in-market deposit accounts was approximately $37 thousand at March 31, 2023.

The following table presents a summary of the Bank’s uninsured / unprotected deposits:


(Dollars in thousands)	March 31, 2023			December 31, 2022
	Balance	% of Total Deposits		Balance	% of Total Deposits
Uninsured / Unprotected Deposits:
Uninsured deposits (1)	$1,394,178	26	%	$1,514,900	30	%


Less: fully-collateralized preferred deposits (2)	319,308	6	%	329,868	6	%
Unprotected deposits	$1,074,870	20	%	$1,185,032	24	%

(1)Determined in accordance with regulatory reporting requirements.

(2)Uninsured deposits of states and political subdivisions, which are secured or collateralized as required by state law.

Borrowings

Borrowings primarily consist of FHLB advances, which are used as a source of funding for liquidity and interest rate risk management purposes. FHLB advances totaled $925.0 million at March 31, 2023, down by $55.0 million, or 6%, from the balance at the end of 2022.

For additional information regarding FHLB advances see Note 9 to the Unaudited Consolidated Financial Statements.

-60-

Management's Discussion and Analysis

Liquidity and Capital Resources

Liquidity Management

Liquidity is the ability of a financial institution to meet maturing liability obligations and customer loan demand. The Corporation’s primary source of liquidity is in-market deposits, which funded approximately 68% of total average assets in the three months ended March 31, 2023. While the generally preferred funding strategy is to attract and retain low-cost deposits, the ability to do so is affected by competitive interest rates and terms in the marketplace. Other sources of funding include discretionary use of purchased liabilities (e.g., FHLB term advances and brokered deposits), cash flows from the investment securities portfolio and loan repayments. Securities designated as available for sale may also be sold in response to short-term or long-term liquidity needs, although management has no intention to do so at this time.

The Corporation has a detailed liquidity funding policy and a contingency funding plan that provide for the prompt and comprehensive response to unexpected demands for liquidity. Management employs stress testing methodology to estimate needs for contingent funding that could result from unexpected outflows of funds in excess of “business as usual” cash flows. In management’s estimation, risks are concentrated in two major categories: (1) runoff of in-market deposit balances; and (2) unexpected drawdown of loan commitments. Of the two categories, potential runoff of deposit balances would have the most significant impact on contingent liquidity. Our stress test scenarios, therefore, emphasize attempts to quantify deposits at risk over selected time horizons. In addition to these unexpected outflow risks, several other “business as usual” factors enter into the calculation of the adequacy of contingent liquidity including: (1) payment proceeds from loans and investment securities; (2) maturing debt obligations; and (3) maturing time deposits. The Corporation has established collateralized borrowing capacity with the FRBB and also maintains additional collateralized borrowing capacity with the FHLB in excess of levels used in the ordinary course of business. Borrowing capacity is impacted by the amount and type of assets available to be pledged.

The table below presents a summary of contingent liquidity balances by source:


(Dollars in thousands)	March 31, 2023		December 31, 2022
Contingent Liquidity:
Federal Home Loan Bank of Boston (1)	$859,589		$668,295
Federal Reserve Bank of Boston (2)	26,119		27,059
Unencumbered securities	710,578		691,893
Total contingent liquidity	$1,596,286		$1,387,247

Percentage of total contingent liquidity to uninsured deposits	114.5	%	91.6	%
Percentage of total contingent liquidity to unprotected deposits	148.5	%	117.1	%

(1)As of March 31, 2023 and December 31, 2022, loans with a carrying value of $2.6 billion and $2.4 billion, respectively, and securities available for sale with carrying values of $107.3 million and $102.1 million, respectively, were pledged to the FHLB resulting in this additional borrowing capacity.

(2)As of March 31, 2023 and December 31, 2022, loans with a carrying value of $19.5 million and $20.9 million, respectively, and securities available for sale with a carrying value of $12.7 million and $12.7 million, respectively, were pledged to the FRBB for the discount window resulting in this additional unused borrowing capacity.

In addition to the amounts presented above, the Bank also had access to a $40.0 million unused line of credit with the FHLB. Additionally, $215.0 million of availability was utilized in the year to collateralize an institutional deposit through a standby letter of credit with the FHLB.

The ALCO establishes and monitors internal liquidity measures to manage liquidity exposure. Liquidity remained within target ranges established by the ALCO during the three months ended March 31, 2023. Based on its assessment of the liquidity considerations described above, management believes the Corporation’s sources of funding meet anticipated funding needs.

Contractual Obligations, Commitments and Off-Balance Sheet Arrangements

In the ordinary course of business, the Corporation enters into contractual obligations that require future cash payments. These include payments related to lease obligations, time deposits with stated maturity dates, and borrowings. Also, in the ordinary course of business, the Corporation engages in a variety of financial transactions that, in accordance with GAAP, are not recorded in the financial statements, or are recorded in amounts that differ from the notional amounts. These financial

-61-

Management's Discussion and Analysis

transactions include commitments to extend credit, standby letters of credit, forward loan commitments, loan related derivative contracts and interest rate risk management contracts. These transactions involve, to varying degrees, elements of credit, interest rate and liquidity risk. The Corporation’s credit policies with respect to interest rate contracts with commercial borrowers, commitments to extend credit, and standby letters of credit are similar to those used for loans. Some commitments to extend credit and standby letters of credit are expected to expire without being drawn upon, and thus, total amounts do not necessarily represent future cash requirements. Interest rate risk management contracts with other counterparties are generally subject to bilateral collateralization terms. These contracts with various counterparties may subject the Corporation to various cash flow requirements, which may include posting of cash as collateral for arrangements that are in a liability position. For additional information on derivative financial instruments and financial instruments with off-balance sheet risk see Notes 6 and 16 to the Consolidated Financial Statements.

Capital Resources

Total shareholders’ equity amounted to $465.0 million at March 31, 2023, up by $11.3 million from December 31, 2022. The increase included net income of $12.8 million. In addition, the AOCL component of shareholders' equity increased by $16.0 million, reflecting increases in the fair value of available for sale debt securities and cash flow hedges primarily attributable to changes in market interest rates. These increases to shareholders’ equity were partially offset by $9.6 million in dividend declarations and a net increase in treasury stock balances of $8.6 million. The increase in treasury stock reflected the repurchase of 200,000 shares in January and February at an average price of $43.70 and a total cost of $8.7 million, under the 2023 Repurchase Program.

The Corporation declared a quarterly dividend of 56 cents per share for the three months ended March 31, 2023, compared to 54 cents per share declared for the same period in 2022.

The ratio of total equity to total assets was 6.78% at March 31, 2023, compared to a ratio of 6.81% at December 31, 2022. Book value per share was $27.37 at March 31, 2023, compared to $26.40 at December 31, 2022.

The Bancorp and the Bank are subject to various regulatory capital requirements and are considered “well capitalized” with the Bancorp having a total risk-based capital ratio of 12.01% at March 31, 2023, compared to 12.37% at December 31, 2022.

See Note 10 to the Unaudited Consolidated Financial Statements for additional discussion regarding shareholders’ equity, including the stock repurchase program and regulatory capital requirements.

Asset/Liability Management and Interest Rate Risk

Interest rate risk is the risk of loss to future earnings due to changes in interest rates. The ALCO is responsible for establishing policy guidelines on liquidity and acceptable exposure to interest rate risk. Periodically, the ALCO reports on the status of liquidity and interest rate risk matters to the Bank’s Board of Directors. The objective of the ALCO is to manage assets and funding sources to produce results that are consistent with the Corporation’s liquidity, capital adequacy, growth, risk and profitability goals.

The Corporation utilizes the size and duration of the investment securities portfolio, the size and duration of the wholesale funding portfolio, interest rate contracts and the pricing and structure of loans and deposits, to manage interest rate risk. The interest rate contracts may include interest rate swaps, caps and floors. These interest rate contracts involve, to varying degrees, credit risk and interest rate risk. Credit risk is the possibility that a loss may occur if a counterparty to a transaction fails to perform according to terms of the contract. The notional amount of the interest rate contracts is the amount upon which interest and other payments are based. The notional amount is not exchanged, and therefore, should not be taken as a measure of credit risk. See Notes 6 and 16 to the Unaudited Consolidated Financial Statements for additional information.

The ALCO uses income simulation to measure interest rate risk inherent in the Corporation’s financial instruments at a given point in time by showing the effect of interest rate shifts on net interest income over a 12-month horizon, a 13- to 24-month horizon and a 60-month horizon. The simulations assume that the size and general composition of the Corporation’s balance sheet remain static over the simulation horizons, with the exception of certain deposit mix shifts from low-cost savings to higher-cost time deposits in selected interest rate scenarios. Additionally, the simulations take into account the specific repricing, maturity, call options, and prepayment characteristics of differing financial instruments that may vary under different interest rate scenarios. The characteristics of financial instrument classes are reviewed periodically by the ALCO to ensure their accuracy and consistency.

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Management's Discussion and Analysis

The ALCO reviews simulation results to determine whether the Corporation’s exposure to a decline in net interest income remains within established tolerance levels over the simulation horizons and to develop appropriate strategies to manage this exposure. As of March 31, 2023 and December 31, 2022, net interest income simulations indicated that exposure to changing interest rates over the simulation horizons remained within tolerance levels established by the Corporation. All changes are measured in comparison to the projected net interest income that would result from an “unchanged” rate scenario where both interest rates and the composition of the Corporation’s balance sheet remain stable for a 60-month period. In addition to measuring the change in net interest income as compared to an unchanged rate scenario, the ALCO also measures the trend of both net interest income and NIM over a 60-month horizon to ensure the stability and adequacy of this source of earnings in different interest rate scenarios.

The ALCO regularly reviews a wide variety of interest rate shift scenario results to evaluate interest rate risk exposure, including scenarios showing the effect of steepening or flattening changes in the yield curve of up to 500 basis points, as well as parallel changes in interest rates of up to 400 basis points. Because income simulations assume that the Corporation’s balance sheet will remain static over the simulation horizon, the results do not reflect adjustments in strategy that the ALCO could implement in response to rate shifts.

The following table sets forth the estimated change in net interest income from an unchanged rate scenario over the periods indicated for parallel changes in market interest rates using the Corporation’s on- and off-balance sheet financial instruments as of March 31, 2023 and December 31, 2022. Interest rates are assumed to shift by a parallel 100, 200 or 300 basis points upward, as well as 100 or 200 basis points downward over a 12-month period, except for savings deposits, which are assumed to shift by lesser amounts due to their relative historical insensitivity to market interest rate movements. Since market interest rates have risen sharply, management has incorporated the down 200 basis point scenario into the tabular presentation below. Further, deposits are assumed to have certain minimum rate levels below which they will not fall. It should be noted that the rate scenarios shown do not necessarily reflect the ALCO’s view of the “most likely” change in interest rates over the periods indicated.


	March 31, 2023				December 31, 2022
	Months 1 - 12		Months 13 - 24		Months 1 - 12		Months 13 - 24
100 basis point rate decrease	(2.25)	%	0.60	%	(1.09)	%	1.55	%
200 basis point rate decrease	(6.79)		(8.14)		(4.17)		(5.21)
100 basis point rate increase	0.56		(4.37)		(0.78)		(5.45)
200 basis point rate increase	3.14		(5.46)		0.35		(7.65)
300 basis point rate increase	5.73		(6.72)		1.42		(10.07)

The relative change in interest rate sensitivity from December 31, 2022, as shown in the above table, was largely attributable to the March 31, 2023 termination of an interest rate swap contract that was designated as a cash flow hedge to hedge the risk associated with a pool of variable rate commercial loans. This receive-fixed, pay-floating interest rate swap previously mitigated exposure to declining rates and reduced positive exposure to rising rates. See Note 6 to the Unaudited Consolidated Financial Statements for additional information on the termination.

As of March 31, 2023, the ALCO estimates that negative exposure of net interest income to falling rates as compared to an unchanged rate scenario in Year 1 results from a more rapid decline in earning asset yields compared to rates paid on deposits. If market interest rates were to fall and remain lower for a sustained period, certain savings and time deposit rates could decline more slowly and by a lesser amount than other market interest rates. For simulation purposes, deposit rate changes are anticipated to lag behind other market interest rates in both timing and magnitude. Asset yields would likely decline more rapidly than deposit costs as current asset holdings mature or reprice, since cash flow from mortgage-related prepayments and redemption of callable securities would increase as market interest rates fall. The ALCO estimates that the positive exposure of net interest income in the down 100 basis point scenario in Year 2 results from a more rapid projected relative rate of decline in funding costs than asset yields. The negative exposure in the down 200 basis point scenario in Year 2 reflects the insensitivity of certain deposit rates to market interest rate declines as they approach their floors.

The positive exposure of net interest income in Year 1 to rising rates at March 31, 2023 as compared to an unchanged rate scenario results from a more rapid projected relative rate of increase in asset yields than funding costs over the near term. For simulation purposes, deposit rate changes are anticipated to lag behind other market interest rates in both timing and magnitude. The negative exposure to rising rates in Year 2 is due to a higher level of longer-term fixed rate assets, as well as

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Management's Discussion and Analysis

larger proportion of wholesale funds to total sources of funds. Fixed rate assets would not reprice upward in a rising rate environment. Wholesale funds generally would reprice more quickly and by a greater amount than the repricing of in-market deposits in response to changes in market interest rates. As market rates increase, ALCO modeling assumes that deposits shift from low cost to higher cost deposits. This assumption reflects historical operating conditions in rising rate cycles. Although asset yields would increase in a rising interest rate environment, the cumulative impact of relative growth in rate-sensitive higher cost deposit categories and wholesale funds suggests that the increase in the Corporation’s cost of funds could result in a relative decline in net interest income in Year 2 compared to an unchanged rate scenario.

While the ALCO reviews and updates simulation assumptions and also periodically back-tests the simulation results to ensure that the assumptions are reasonable and current, income simulation may not always prove to be an accurate indicator of interest rate risk or future NIM. Over time, the repricing, maturity and prepayment characteristics of financial instruments and the composition of the Corporation’s balance sheet may change to a different degree than estimated. Simulation modeling assumes a static balance sheet, with the exception of certain modeled deposit mix shifts from low-cost savings deposits to higher-cost time deposits in rising rate scenarios as noted above.

As part of its policy response to the COVID-19 pandemic in 2020, the Federal Reserve reduced its target range for the Fed Funds rate to 0% - 0.25%. This, and various Federal stimulus programs, had the effect of attracting low-cost deposits across the banking industry. During 2022 and into 2023, the Federal Reserve reversed policy and increased the target range to 4.75% - 5.00% as of March 31, 2023. This policy change has resulted in higher rates on existing deposit products and a shift of low-cost balances into higher cost alternatives, which could continue into the future, particularly if interest rates continue to rise. As such, the ALCO has modeled deposit shifts out of these low-cost categories into higher-cost alternatives in the rising rate simulation scenarios presented above. Deposit balances may also be subject to possible outflow to non-bank alternatives in a rising rate environment, as well as due to heightened uncertainty in the banking industry. This may cause interest rate sensitivity to differ from the results as presented. Another significant simulation assumption is the sensitivity of savings deposits to fluctuations in interest rates. Income simulation results assume that changes in both savings deposit rates and balances are related to changes in short-term interest rates. The relationship between short-term interest rate changes and deposit rate and balance changes may differ from the ALCO’s estimates used in income simulation.

It should also be noted that the static balance sheet assumption does not necessarily reflect the Corporation’s expectation for future balance sheet growth, which is a function of the business environment and customer behavior.

Mortgage-backed securities and residential real estate loans involve a level of risk that unforeseen changes in prepayment speeds may cause related cash flows to vary significantly in differing rate environments. Such changes could affect the level of reinvestment risk associated with cash flow from these instruments, as well as their market value. Changes in prepayment speeds could also increase or decrease the amortization of premium or accretion of discounts related to such instruments, thereby affecting interest income.

The Corporation also monitors the potential change in market value of its available for sale debt securities in changing interest rate environments. The purpose is to determine market value exposure that may not be captured by income simulation, but which might result in changes to the Corporation’s capital position. Results are calculated using industry-standard analytical techniques and securities data.

The following table summarizes the potential change in market value of the Corporation’s available for sale debt securities as of March 31, 2023 and December 31, 2022 resulting from immediate parallel rate shifts:


(Dollars in thousands)
Security Type	Down 100 Basis Points	Up 200 Basis Points

U.S. government-sponsored enterprise securities (callable)	$5,023	($23,058)

Mortgage-backed securities issued by U.S. government agencies and U.S. government-sponsored enterprises	56,283	(110,995)
Trust preferred debt and other corporate debt securities	(24)	24
Total change in market value as of March 31, 2023	$61,282	($134,029)
Total change in market value as of December 31, 2022	$63,712	($125,079)

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Management's Discussion and Analysis

Critical Accounting Policies and Estimates

Estimates and assumptions are necessary in the application of certain accounting policies and procedures and can be susceptible to significant change. Critical accounting policies are defined as those that involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on the Corporation’s financial condition or results of operations.

Management considers its accounting policy relating to the ACL on loans to be a critical accounting policy. There have been no material changes in the Corporation’s critical accounting policies and estimates from those disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022.

Recently Issued Accounting Pronouncements

See Note 2 to the Unaudited Consolidated Financial Statements for details of recently issued accounting pronouncements and their expected impact on the Corporation’s financial statements.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

Information regarding quantitative and qualitative disclosures about market risk appears under Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” under the caption “Asset/Liability Management and Interest Rate Risk.”

For factors that could adversely impact Washington Trust’s future results of operations and financial condition, see Part II, Item 1A below and the section labeled “Risk Factors” in Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, as updated by our Quarterly Reports on Form 10-Q and other filings submitted to the SEC.

Item 4. Controls and Procedures

Disclosure Controls and Procedures

As required by Rule 13a-15 under the Exchange Act, the Corporation carried out an evaluation under the supervision and with the participation of the Corporation’s management, including the Corporation’s principal executive officer and principal financial officer, of the Corporation’s disclosure controls and procedures as of the period ended March 31, 2023. Based upon that evaluation, the principal executive officer and principal financial officer concluded that the Corporation’s disclosure controls and procedures are effective and designed to ensure that information required to be disclosed by the Corporation in the reports it files or submits under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated to the Corporation’s management including its Chief Executive Officer and Chief Financial Officer as appropriate to allow timely decisions regarding required disclosures. The Corporation will continue to review and document its disclosure controls and procedures and consider such changes in future evaluations of the effectiveness of such controls and procedures, as it deems appropriate.

Internal Control Over Financial Reporting

There has been no change in the Corporation’s internal controls over financial reporting during the quarter ended March 31, 2023 that has materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. Other Information

Item 1. Legal Proceedings

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

Item 1A. Risk Factors

This section supplements and updates certain of the information found under Part I, Item 1A. “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2022 filed with the SEC on February 23, 2023 (“Annual Report”), based on information currently known to us and recent developments since the date of the Annual Report filing. The matters discussed below should be read in conjunction with the risks described in Part I. Item 1A. “Risk Factors” of our Annual Report. However, the risks and uncertainties that we face are not limited to those described below and those set forth in the Annual Report. Additional risks and uncertainties not presently known to us or that we currently believe to be immaterial may also adversely affect our business and the trading price of the Corporation’s common stock.

Adverse developments affecting the financial services industry, such as actual events or concerns involving liquidity, defaults, or non-performance by financial institutions or transactional counterparties, could adversely affect our financial condition and results of operations.

Actual events involving limited liquidity, defaults, non-performance or other adverse developments that affect financial institutions, transactional counterparties or other companies in the financial services industry or the financial services industry generally, or concerns or rumors about any events of these kinds or other similar risks, have in the past and may in the future lead to market-wide liquidity problems. For example, on May 1, 2023, First Republic Bank went into receivership and its deposits and substantially all of its assets were acquired by JPMorgan Chase Bank, National Association. Similarly, on March 10, 2023, Silicon Valley Bank went into receivership, and on March 12, 2023, Signature Bank went into receivership.

Inflation and rapid increases in interest rates have led to a decline in the trading value of previously issued government securities with interest rates below current market interest rates. Although the Treasury, FDIC and Federal Reserve have announced a program to provide up to $25 billion of loans to financial institutions secured by certain of such government

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securities held by financial institutions to mitigate the risk of potential losses on the sale of such instruments, widespread demands for customer withdrawals or other liquidity needs of financial institutions for immediate liquidity may exceed the capacity of such program. Additionally, there is no guarantee that the Treasury, FDIC and Federal Reserve will provide access to uninsured funds in the future in the event of the closure of other banks or financial institutions, or that they would do so in a timely fashion.

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

The following table summarizes repurchases of the Corporation’s shares of common stock in the first quarter of 2023:



	Issuer Purchases of Equity Securities
Period	(a) Total number of shares purchased	(b) Average price paid per share	(c) Total number of shares purchased as part of publicly announced plans	(d) Maximum number of shares that may yet be purchased under plans
January 1 - 31, 2023	27,021	$42.37	27,021	822,979
February 1 - 28, 2023	172,979	43.91	172,979	650,000
March 1 - 31, 2023	—	—	—	650,000
Total	200,000	$43.70	200,000	650,000

See Note 10 for additional information regarding the 2023 Repurchase Program.

Item 6. Exhibits

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


Exhibit Number
31.1			Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 - Filed herewith.
31.2			Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 - Filed herewith.
32.1			Certifications of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 - Furnished herewith. (1 )
101			The following materials from Washington Trust Bancorp, Inc.’s Quarterly Report on Form 10-Q for the period ended March 31, 2023 formatted in Inline XBRL: (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Income, (iii) the Consolidated Statements of Comprehensive Income (Loss), (iv) the Consolidated Statements of Changes in Shareholders’ Equity, (v) the Consolidated Statements of Cash Flows, and (vi) related Notes to these consolidated financial statements.
104			The cover page from the Corporation’s Quarterly Report on Form 10-Q for the period ended March 31, 2023 has been formatted in Inline XBRL and contained in Exhibit 101.

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

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Signatures

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

WASHINGTON TRUST BANCORP, INC.

(Registrant)

Date:

May 4, 2023

By:

/s/ Edward O. Handy III

Edward O. Handy III

Chairman and Chief Executive Officer

(principal executive officer)

Date:

May 4, 2023

By:

/s/ Ronald S. Ohsberg

Ronald S. Ohsberg

Senior Executive Vice President, Chief Financial Officer and Treasurer

(principal financial officer)

Date:

May 4, 2023

By:

/s/ Maria N. Janes

Maria N. Janes

Executive Vice President, Chief Accounting Officer and Controller

(principal accounting officer)

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