About Washington Trust Bancorp

Washington Trust Bancorp, Inc. operates as the bank holding company for The Washington Trust Company, of Westerly that offers a full range of financial services, including commercial, residential and consumer lending, retail and commercial deposit products, and wealth management and trust services. Lending Activities The company classifies loans as commercial, residential real estate or consumer. The company's lending activities are conducted primarily in southern New England and, to a lesser extent, other states. The company offers a variety of commercial and retail lending products. Interest rates charged on loans may be fixed or variable and vary with the degree of risk, loan term, underwriting and servicing costs, loan amount and the extent of other banking relationships maintained with customers. Commercial Loans The commercial loan portfolio represented 48% of total loans as of December 31, 2023. In making commercial loans, the company may occasionally solicit the participation of other banks. The company also participates from time to time in commercial loans originated by other banks. In such cases, these loans are individually underwritten by it using standards similar to those employed for its self-originated loans. The company's participation in commercial loans originated by other banks also includes shared national credits. Commercial loans fall into two major 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. CRE loans frequently involve larger loan balances to single borrowers or groups of related borrowers. At December 31, 2023, CRE loans represented 78% of the total commercial loan portfolio and 37% of the total loan portfolio. 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 loan portfolio is also collateralized by real estate. C&I loans also include 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. Residential Real Estate Loans The residential real estate loan portfolio consists of mortgage and homeowner construction loans secured by one- to four-family residential properties and represented 46% of total loans as of December 31, 2023. Residential real estate loans are primarily originated by commissioned mortgage originator employees. Residential real estate loans are originated both for retention in the company's loan portfolio, as well as for sale to the secondary market. Loan sales to the secondary market provide funds for additional lending and other banking activities. Loans originated for sale to the secondary market are sold to investors, such as the Federal Home Loan Mortgage Corporation, Federal National Mortgage Association and other institutional investors. The company sells loans with servicing retained or released. Residential real estate loans are also originated for various investors in a broker capacity, including conventional mortgages and reverse mortgages. Also included in the residential real estate loan portfolio are mortgage loans purchased from and serviced by other financial institutions. These loans are individually evaluated at time of purchase to the company's underwriting standards and are secured by one- to four-family residential properties in southern New England and other states. As of December 31, 2023, purchased residential mortgages serviced by others were largely secured by properties located in Massachusetts and represented 2% of the total residential real estate loan portfolio and 1% of the total loan portfolio. Consumer Loans The consumer loan portfolio represented 6% of total loans as of December 31, 2023. Consumer loans include home equity loans and lines of credit and personal installment loans. Home equity lines and home equity loans represent 94% of the total consumer portfolio as of December 31, 2023. Also included in the consumer loan portfolio are purchased loans to individuals secured by general aviation aircraft. These loans were individually underwritten by the company at the time of purchase using standards similar to those employed for self-originated consumer loans. Deposit Activities Deposits represent the company's primary source of funds and are gathered primarily from the areas surrounding the company's branch network. The company offers a wide variety of deposit products with a range of interest rates and terms to consumer, commercial, non-profit and municipal deposit customers. The company's deposit accounts consist of noninterest-bearing demand deposits, interest-bearing demand deposits, NOW accounts, money market accounts, savings accounts and time deposits. A variety of retirement deposit accounts are offered to customers. Additional deposit services provided to customers include debit cards, ATMs, telephone banking, internet banking, mobile banking, remote deposit capture and other cash management services. Wholesale brokered deposits from out-of-market institutional sources are also utilized as part of the company's overall funding strategy. The company is a participant in the DDM program, the ICS program and the CDARS program. The company uses these deposit sweep services to place customer and client funds into interest-bearing demand accounts, money market accounts, and/or certificates of 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, the company receives reciprocal amounts of deposits from other participating banks. The company considers these reciprocal deposit balances to be in-market deposits as distinguished from traditional wholesale brokered deposits. Investment Security Activities The company may acquire, hold and transact in various types of investment securities in accordance with applicable federal regulations, state statutes and guidelines specified in its internal investment policy. As of December 31, 2023, the investment securities portfolio consisted of obligations of the U.S. government agencies and the U.S. government-sponsored enterprises, including mortgage-backed securities; individual name issuer trust preferred debt securities; and corporate bonds. Wholesale Funding Activities The bank is a member of the FHLB. The bank utilizes advances from the FHLB to meet short-term liquidity needs and also to fund loan growth and additions to the securities portfolio. As a member of the FHLB, the bank must own a minimum amount of FHLB stock, calculated periodically based primarily on its level of borrowings from the FHLB. Wealth Management Services The company provides a broad range of wealth management services to personal and institutional clients. These services include investment management; holistic financial planning services; personal trust and estate services, including services as trustee, personal representative and custodian; settlement of decedents' estates; and institutional trust services, including custody and fiduciary services. Wealth management services are provided through the company and its registered investment adviser subsidiary. 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 that are not primarily derived from the value of assets. Subsidiaries The company also owns all of the outstanding common stock of Trust I and Trust II, special purpose finance entities formed with the sole purpose of issuing trust preferred debt securities and investing the proceeds in junior subordinated debentures of the Bancorp. The following is a description of the company's principal subsidiary: The Washington Trust Company, of Westerly The bank provides a full range of financial services, including commercial, residential and consumer lending, retail and commercial deposit products, and wealth management and trust services. The deposits of the bank are insured by the FDIC, subject to regulatory limits. The bank has a registered investment adviser subsidiary, WTA. The bank also has a mortgage banking subsidiary, WTMC, that is licensed to do business in Rhode Island, Massachusetts, Connecticut and New Hampshire. The bank has other subsidiaries whose primary functions are to provide servicing on passive investments, such as loans acquired from the bank and investment securities. In addition, the bank has a subsidiary that was formed for the purpose of holding, monitoring and disposing of certain foreclosed properties. Market Area The company's main office is located in Westerly in Washington County, Rhode Island. The company's primary deposit gathering area consists of the communities that are served by its branch network. As of December 31, 2023, the bank had branch offices located in southern Rhode Island (Washington County); the greater Providence area in Rhode Island; and southeastern Connecticut. The company provides commercial, residential and consumer lending services from its branch locations and other offices. The company has commercial lending offices at its main office, in the financial district of Providence, Rhode Island, in Warwick, Rhode Island, and in New Haven, Connecticut. The company has residential mortgage lending offices located in eastern Massachusetts (Sharon, Burlington, Braintree and Wellesley); in Glastonbury, Connecticut; and in Rhode Island (Westerly and Warwick). The company provides wealth management services from its offices located in Westerly, Narragansett and Providence, Rhode Island; Wellesley, Massachusetts; and New Haven, Connecticut. Supervision and Regulation As a bank holding company, the company is subject to regulation, supervision, and examination by the Board of Governors of the Federal Reserve System (Federal Reserve) under the Bank Holding Company Act of 1956, as amended (the BHCA), and the Rhode Island Department of Business Regulation, Division of Banking (the RI Division of Banking). Under the BHCA, as amended by the Dodd-Frank Wall Street Reform and Consumer Protection Act (the Dodd-Frank Act), the company is required to serve as a source of financial strength for the bank. In 2005, the company elected financial holding company status pursuant to the provisions of the Gramm-Leach-Bliley Act of 1999 (GLBA). In addition, the BHCA prohibits any company from acquiring control of a bank or bank holding company without first having obtained the approval of the Federal Reserve. The bank is subject to the regulation, supervision and examination by the FDIC, the RI Division of Banking and the Connecticut Department of Banking. The bank is also subject to various Rhode Island and Connecticut business and banking regulations and the regulations issued by the Consumer Financial Protection Bureau (CFPB) (as enforced by the FDIC). The Federal Reserve may also directly examine the subsidiaries of the company, including the bank. The deposit obligations of the bank are insured by the FDIC's Deposit Insurance Fund (DIF) up to $250,000 per depositor with respect to deposits held in the same right and capacity. The CRA requires the FDIC to evaluate the bank's performance in helping to meet the credit needs of the entire community it serves, including low- and moderate-income neighborhoods, consistent with its safe and sound banking operations, and to take this record into consideration when evaluating certain applications. The bank has achieved a rating of satisfactory on its most recent examination dated December 5, 2022. The company and the bank are subject to federal and state laws designed to protect consumers and prohibit unfair or deceptive business practices, including Equal Credit Opportunity Act, Fair Housing Act, Home Ownership Protection Act, Fair Credit Reporting Act, as amended by the FACT Act, the GLBA, the TILA, the CRA, the Home Mortgage Disclosure Act, Real Estate Settlement Procedures Act, National Flood Insurance Act and various state law counterparts. The FDIC examines the bank for compliance with CFPB rules and enforces CFPB rules with respect to the bank. The Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (the 'USA PATRIOT Act'), which amended the Bank Secrecy Act, together with the implementing regulations of various federal regulatory agencies, has caused financial institutions, such as the bank, to adopt and implement additional policies or amend existing policies and procedures with respect to, among other things, anti-money laundering compliance, suspicious activity, currency transaction reporting, customer identity verification, and customer risk analysis. Washington Trust Advisors, Inc. (WTA) is registered as an investment adviser under the Investment Advisers Act of 1940, as amended (the Advisers Act). The bank and WTA are each also subject to the Employee Retirement Income Security Act of 1974, as amended (ERISA), and related regulations, to the extent it is a fiduciary under ERISA with respect to some of its clients. ERISA and related provisions of the Internal Revenue Code of 1986, as amended (the Code) impose duties on persons who are fiduciaries under ERISA, and prohibits certain transactions involving the assets of each ERISA plan that is a client of the bank or WTA, as applicable, as well as certain transactions by the fiduciaries (and several other related parties) to such plans. WTMC is a mortgage banking subsidiary of the bank and licensed to do business in Rhode Island, Massachusetts, Connecticut and New Hampshire. WTMC is subject to the regulation, supervision and examination by the banking divisions in each of these states. History Washington Trust Bancorp, Inc. was founded in 1800. The company was incorporated in 1984 under the laws of the state of Rhode Island.