ITEM 1.  FINANCIAL STATEMENTS

		Three months								Nine months
Periods ended September 30,		2014				2013				2014				2013
Interest income:
Interest and fees on loans			$27,239				$26,096				$78,997				$76,832
Interest on securities:	Taxable	2,397				2,582				8,038				8,003
	Nontaxable	519				629				1,658				1,935
Dividends on Federal Home Loan Bank stock		140				36				420				113
Other interest income		36				47				99				99
Total interest and dividend income		30,331				29,390				89,212				86,982
Interest expense:
Deposits		3,317				3,064				9,406				9,354
Federal Home Loan Bank advances		1,832				2,693				5,831				8,109
Junior subordinated debentures		241				241				723				1,243
Other interest expense		3				4				10				12
Total interest expense		5,393				6,002				15,970				18,718
Net interest income		24,938				23,388				73,242				68,264
Provision for loan losses		600				700				1,350				2,000
Net interest income after provision for loan losses		24,338				22,688				71,892				66,264
Noninterest income:
Wealth management revenues		8,374				7,629				24,969				23,015
Merchant processing fees		—				3,359				1,291				7,949
Net gains on loan sales and commissions on loans originated for others		1,742				3,883				4,688				11,534
Service charges on deposit accounts		881				855				2,459				2,436
Card interchange fees		804				731				2,264				2,013
Income from bank-owned life insurance		468				464				1,354				1,392
Net gains on interest rate swap contracts		339				54				562				225
Equity in earnings (losses) of unconsolidated subsidiaries		(63		)		(47		)		(213		)		(65		)
Net gain on sale of business line		—				—				6,265				—
Other income		580				472				1,670				1,233
Noninterest income, excluding other-than-temporary impairment losses		13,125				17,400				45,309				49,732
Total other-than-temporary impairment losses on securities		—				—				—				(613		)
Portion of loss recognized in other comprehensive income (before tax)		—				—				—				(2,159		)
Net impairment losses recognized in earnings		—				—				—				(2,772		)
Total noninterest income		13,125				17,400				45,309				46,960
Noninterest expense:
Salaries and employee benefits		14,516				14,640				43,845				45,624
Net occupancy		1,557				1,404				4,672				4,282
Equipment		1,211				1,222				3,682				3,658
Merchant processing costs		—				2,862				1,050				6,746
Outsourced services		1,138				878				3,197				2,590
Legal, audit and professional fees		494				529				1,710				1,691
FDIC deposit insurance costs		442				448				1,295				1,330
Advertising and promotion		368				312				1,140				1,143
Amortization of intangibles		161				170				489				516
Foreclosed property costs		27				38				48				222
Debt prepayment penalties		—				1,125				6,294				1,125
Other expenses		2,133				1,920				6,365				5,810
Total noninterest expense		22,047				25,548				73,787				74,737
Income before income taxes		15,416				14,540				43,414				38,487
Income tax expense		4,878				4,580				13,781				12,123
Net income			$10,538				$9,960				$29,633				$26,364
Weighted average common shares outstanding - basic		16,714				16,563				16,673				16,473
Weighted average common shares outstanding - diluted		16,855				16,696				16,832				16,600
Per share information:	Basic earnings per common share		$0.63				$0.60				$1.77				$1.59
	Diluted earnings per common share		$0.62				$0.59				$1.75				$1.58
	Cash dividends declared per share		$0.32				$0.26				$0.90				$0.76

CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Washington Trust Bancorp, Inc. (the “Bancorp”) is a publicly-owned registered bank holding company and financial holding company.  The Bancorp owns all of the outstanding common stock of The Washington Trust Company (the “Bank”), a Rhode Island chartered commercial bank founded in 1800.  Through its subsidiaries, the Bancorp offers a complete product line of financial services including commercial, residential and consumer lending, retail and commercial deposit products, and wealth management services through its offices in Rhode Island, eastern Massachusetts and Connecticut.

The consolidated financial statements include the accounts of the Bancorp and its subsidiaries (collectively, the “Corporation” or “Washington Trust”).  All significant intercompany transactions have been eliminated.

The accounting and reporting policies of the Corporation conform to accounting principles generally accepted in the United States of America (“GAAP”) and to general practices of the banking industry.  In preparing the financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the balance sheet and revenues and expenses for the period.  Actual results could differ from those estimates.  Material estimates that are particularly susceptible to change are the determination of the allowance for loan losses, the review of goodwill and other intangible assets for impairment and the assessment of investment securities for impairment.

The unaudited consolidated financial statements of the Corporation presented herein have been prepared pursuant to the rules of the Securities and Exchange Commission (“SEC”) for quarterly reports on Form 10-Q and do not include all of the information and note disclosures required by GAAP. In the opinion of management, all adjustments (consisting of normal recurring adjustments) and disclosures considered necessary for the fair presentation of the accompanying consolidated financial statements have been included. Interim results are not necessarily reflective 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, 2013 .

Investments - Equity Method and Joint Ventures - Topic 323

Accounting Standards Update No. 2014-01, “Accounting for Investments in Qualified Affordable Housing Projects” (“ASU 2014-01”), was issued in January 2014 and permits a reporting entity to make an accounting policy election to account for investments in qualified affordable housing projects using the proportional amortization method if certain conditions are met. The amendments are expected to enable more entities to record the amortization of the investment in income tax expense together with the tax credits and other tax benefits generated from the partnership. ASU 2014-01 is effective retrospectively for public business entities for annual and interim reporting periods beginning after December 15, 2014. Early adoption is permitted. The adoption of ASU 2014-01 is not expected to have a material impact on the Corporation’s consolidated financial statements.

Receivables - Troubled Debt Restructurings by Creditors - Topic 310

Accounting Standards Update No. 2014-04, “Reclassifications of Residential Real Estate Collateralized Consumer Mortgage Loans upon Foreclosure” (“ASU 2014-04”), was issued in January 2014 and clarifies when banks and similar institutions (creditors) should reclassify mortgage loans collateralized by residential real estate properties from the loan portfolio to other real estate owned (“OREO”). ASU 2014-04 is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2014. An entity can elect either a modified retrospective or prospective transition method, and early adoption is permitted. The adoption of ASU 2014-04 is not expected to have a material impact on the Corporation’s consolidated financial statements.

Revenue from Contracts with Customers - Topic 606

Accounting Standards Update No. 2014-09, “Revenue from Contracts with Customers” (“ASU 2014-09”), was issued in May 2014 and provides a revenue recognition framework for any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of non-financial assets unless those contracts are within the scope of other accounting standards. ASU 2014-09 is effective for annual periods beginning after December 15, 2016, including interim periods within that reporting period with early adoption not permitted. The standard permits the use of either the retrospective or cumulative effect transition method. The Corporation is currently evaluating the impact that ASU 2014-09 will have on the its consolidated financial statements and related disclosures. The Corporation has not yet selected a transition method nor has it determined the effect of ASU 2014-09 on its ongoing financial reporting.

The Bank maintains certain average reserve balances to meet the requirements of the Board of Governors of the Federal Reserve System (“FRB”).  Some or all of these reserve requirements may be satisfied with vault cash. Reserve balances amounted to $8.1 million at September 30, 2014 and $6.7 million at December 31, 2013 and were included in cash and due from banks in the Consolidated Balance Sheets.

As of September 30, 2014 and December 31, 2013 , cash and due from banks included interest-bearing deposits in other banks of $50.6 million and $51.8 million , respectively.

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