UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

(Mark One)

[X] Quarterly report pursuant to Section 13 or l5 (d) of the Securities Exchange
           Act of 1934

                 For the quarterly period ended March 31, 2002

[ ] 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 000-24503


                           WASHINGTON BANKING COMPANY
             (Exact name of registrant as specified in its charter)

          Washington                                        91-1725825
 (State or other jurisdiction of                           (I.R.S. Employer
 incorporation or organization)                         Identification Number)

                              450 SW Bayshore Drive
                          Oak Harbor, Washington 98277
               (Address of principal executive offices) (Zip Code)

                                 (360) 679-3121
                (Issuer's telephone number, including area code)


              (Former name, former address and former fiscal year,
                          if changed since last report)

Indicate by check mark whether the issuer: (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 [X]   No [ ]

          The number of shares of the issuer's Common Stock outstanding
                         at May 10, 2002 was 4,055,250.


<PAGE>



                                Table of Contents
<TABLE>
<S>                                                                                                          <C>
                                                          PART I                                             Page
                                                                                                             ----
Item 1.       Financial Statements
                  Condensed Consolidated Statements of Financial Condition -
                       March 31, 2002 and December 31, 2001                                                    1

                  Condensed Consolidated Statements of Income -
                       Three Months Ended March 31, 2002 and 2001                                              2

                  Condensed Consolidated Statements of Shareholders' Equity -
                       Three Months Ended March 31, 2002                                                       3
                  Condensed Consolidated Statements of Comprehensive Income -
                       Three Months Ended March 31, 2002 and 2001                                              3

                  Condensed Consolidated Statements of Cash Flows -
                       Three Months Ended March 31, 2002 and 2001                                              4

                  Notes to Condensed Consolidated Financial Statements                                         5

Item 2.       Management's Discussion and Analysis of Financial Condition and Results of Operations            8
Item 3.       Quantitative and Qualitative Disclosures about Market Risk                                      18

                                                         PART II
Item 6.       Exhibits and Reports on Form 8-K                                                                19


                  Signatures
 </TABLE>





























                                        i
<PAGE>
                                     PART I
Item 1.  Financial Statements

                           WASHINGTON BANKING COMPANY
                                 AND SUBSIDIARY
            Condensed Consolidated Statements of Financial Condition
                      March 31, 2002 and December 31, 2001
                  (Dollars in thousands, except per share data)
<TABLE>
                                                                                 March 31,         December 31,
                                  Assets                                            2002               2001
                                                                               ---------------    ----------------
                                                                                 (unaudited)
<S>                                                                                 <C>                <C>
Cash and due from banks                                                      $        18,621    $        16,838
      ($2,834 and $1,508, respectively, are restricted)
Interest-earning deposits                                                                 75                427
Federal funds sold                                                                        --              2,500
                                                                               ---------------    ----------------
     Total cash and cash equivalents                                                  18,696             19,765
                                                                               ---------------    ----------------

Federal Home Loan Bank stock                                                           2,059              2,029
Deferred compensation plan                                                               231                132
Investment securities available for sale                                               4,644              4,145
Investment securities held to maturity                                                17,395             18,401
                                                                               ---------------    ----------------
     Total investment securities                                                      24,329             24,707
                                                                               ---------------    ----------------

Loans receivable, net                                                                396,591            373,198
Premises and equipment, net                                                           15,585             15,647
Other real estate owned                                                                  473                473
Deferred tax assets                                                                      824                812
Other assets                                                                           3,553              3,084
                                                                               ---------------    ----------------
              Total assets                                                   $       460,051    $       437,686
                                                                               ===============    ================

                   Liabilities and Shareholders' Equity
Liabilities:
     Deposits                                                                $       391,251    $       367,175
     Federal funds purchased                                                          12,500                 --
     Other borrowed funds                                                             17,500             32,500
     Deferred compensation plan                                                          231                132
     Other liabilities                                                                 2,443              2,902
                                                                               ---------------    ----------------
              Total liabilities                                                      423,925            402,709
                                                                               ---------------    ----------------
Shareholders' equity:
     Preferred stock, no par value.  Authorized 20,000 shares:
        no shares issued or outstanding                                                   --                 --
     Common stock, no par value.  Authorized 10,000,000 shares:
        issued and outstanding 4,055,250 and 4,055,250
        shares at March 31, 2002 and December 31, 2001, respectively                  16,124             16,124
     Retained earnings                                                                19,955             18,782
     Accumulated other comprehensive income, net                                          47                 71
                                                                               ---------------    ----------------
              Total shareholders' equity                                              36,126             34,977
Commitments and contingencies                                                  ---------------    ----------------
              Total liabilities and shareholders' equity                     $       460,051    $       437,686
                                                                               ===============    ================
</TABLE>
See accompanying notes to condensed consolidated financial statements.
                                        1
<PAGE>


                           WASHINGTON BANKING COMPANY
                                 AND SUBSIDIARY
                   Condensed Consolidated Statements of Income
             Three months ended March 31, 2002 and 2001 (unaudited)
                  (Dollars in thousands, except per share data)

<TABLE>

                                                                                  Three Months Ended March 31,
                                                                                    2002               2001
                                                                               ---------------    ----------------
<S>                                                                               <C>                <C>
Interest income:
     Interest and fees on loans                                              $        8,129     $        7,440
     Interest on taxable investment securities                                           82                130
     Interest on tax-exempt investment securities                                       192                201
     Other                                                                               34                 63
                                                                               ---------------    ----------------
              Total interest income                                                   8,437              7,834
Interest expense                                                                      2,582              3,758
                                                                               ---------------    ----------------
              Net interest income                                                     5,855              4,076
Provision for loan losses                                                              (989)              (405)
                                                                               ---------------    ----------------
              Net interest income after provision for loan losses                     4,866              3,671
Noninterest income:
     Service charges and fees                                                           429                404
     Other                                                                              828                527
                                                                               ---------------    ----------------
              Total noninterest income                                                1,257                931
Noninterest expense:
     Salaries and benefits                                                            2,319              2,121
     Occupancy                                                                          711                657
     Office supplies and printing                                                       120                124
     Data processing                                                                     88                 83
     Consulting and professional fees                                                    56                 55
     Other                                                                              632                464
                                                                               ---------------    ----------------
              Total noninterest expense                                               3,926              3,504
                                                                               ---------------    ----------------
              Income before income taxes                                              2,197              1,098
Provision for income taxes                                                             (760)              (297)
                                                                               ---------------    ----------------
              Net income                                                     $        1,437     $          801
                                                                               ===============    ================

Net income per share, basic                                                  $         0.35     $         0.20
                                                                               ===============    ================
Net income per share, diluted                                                $         0.33     $         0.19
                                                                               ===============    ================

Average number of shares outstanding, basic                                       4,055,250          4,032,750
Average number of shares outstanding, diluted                                     4,296,426          4,226,103
</TABLE>
See accompanying notes to condensed consolidated financial statements.







                                        2
<PAGE>



                           WASHINGTON BANKING COMPANY
                                 AND SUBSIDIARY
            Condensed Consolidated Statements of Shareholders' Equity
                  Three months ended March 31, 2002 (unaudited)
                             (Dollars in thousands)



<TABLE>
                                                                                         Accumulated
                                                Common stock                                other               Total
                                          --------------------------    Retained        comprehensive       shareholders'
                                             Shares        Amount       earnings      income (loss), net       equity
                                          -------------  -----------   ------------   ------------------   ----------------
<S>                                          <C>           <C>           <C>                  <C>              <C>
Balances at December 31, 2001                 4,055    $    16,124   $    18,782    $          71        $      34,977
Net income                                       --             --         1,437               --                1,437

Net change in unrealized gain (loss)
     on securities available for sale            --             --            --              (24)                 (24)
Cash dividend, $0.065 per share                  --             --          (264)              --                 (264)
                                          -------------  -----------   ------------   ------------------   ----------------
Balances at March 31, 2002                    4,055    $    16,124   $    19,955    $          47        $      36,126
                                          =============  ===========   ============   ==================   ================
</TABLE>

See accompanying notes to condensed consolidated financial statements.








                           WASHINGTON BANKING COMPANY
                                 AND SUBSIDIARY
            Condensed Consolidated Statements of Comprehensive Income
             Three months ended March 31, 2002 and 2001 (unaudited)
                             (Dollars in thousands)



<TABLE>
                                                                                 Three Months Ended March 31,
                                                                                   2002                2001
                                                                              ---------------      --------------
<S>                                                                                <C>                    <C>
Net income                                                                  $       1,437        $         801
Increase (decrease) in unrealized gain (loss) on securities
     available for sale, net of tax $12 and $35, respectively                         (24)                  69
                                                                              ---------------      --------------
Comprehensive income                                                        $       1,413        $         870
                                                                              ===============      ==============
</TABLE>

      See accompanying notes to condensed consolidated financial statements.




                                        3
<PAGE>




                           WASHINGTON BANKING COMPANY
                                 AND SUBSIDIARY
                 Condensed Consolidated Statements of Cash Flows
             Three months ended March 31, 2002 and 2001 (unaudited)
                  (Dollars in thousands, except per share data)

<TABLE>

                                                                                 Three Months Ended March 31,
                                                                                   2002                2001
                                                                              ---------------      --------------
<S>                                                                               <C>                 <C>
Cash flows from operating activities:
     Net income                                                             $       1,437        $         801
     Adjustments to reconcile net income to net cash
       provided by operating activities:
         Federal Home Loan Bank stock dividends                                       (30)                 (13)
         Amortization of investment premiums, net                                     (29)                   8
         Provision for loan losses                                                    989                  405
         Depreciation of premises and equipment                                       318                  289
         Net gains on sale of premises and equipment and real estate                 (188)                  (8)
         Net (increase) decrease in other assets                                     (469)                  69
         Net decrease in other liabilities                                           (459)                (133)
                                                                              ---------------      --------------
                  Net cash provided by operating activities                         1,569                1,418
                                                                              ---------------      --------------

Cash flows from investing activities:
     Purchases of investment securities available for sale                           (500)                  --
     Maturities of investment securities available for sale                            --                  500
     Maturities of investment securities held to maturity                           1,000                  600
     Net increase in loans                                                        (24,382)             (22,822)
     Purchases of premises and equipment                                             (339)                (349)
     Proceeds from the sale of premises, equipment and real estate                    271                    8
                                                                              ---------------      --------------
                  Net cash used in investing activities                           (23,950)             (22,063)
                                                                              ---------------      --------------

Cash flows from financing activities:
     Net increase in deposits                                                      24,076               38,786
     Net decrease in other borrowed funds                                         (15,000)             (10,000)
     Net increase in federal funds purchased                                       12,500                   --
     Dividends paid on common stock                                                  (264)                (242)
                                                                              ---------------      --------------
                  Net cash provided by financing activities                        21,312               28,544
                                                                              ---------------      --------------
                  Net increase (decrease) in cash and cash equivalents             (1,069)               7,899
Cash and cash equivalents at beginning of period                                   19,765               17,179
                                                                              ---------------      --------------
Cash and cash equivalents at end of period                                  $      18,696        $      25,078
                                                                              ===============      ==============

Supplemental information:
     Cash paid for interest                                                 $       2,611        $       3,689
     Cash paid for taxes                                                              425                  150
</TABLE>

See accompanying notes to condensed consolidated financial statements.


                                        4
<PAGE>

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Three months ended March 31, 2002 and 2001 (unaudited)
(Dollars in thousands, except per share data)


(1) Description of Business and Summary of Significant Accounting Policies

  (a) Description of Business

Washington Banking Company ("WBCO"), a Washington State bank holding company was
formed on April 30, 1996.  Whidbey Island Bank ("WIB" or "Bank"),  the principal
subsidiary  of  WBCO,  is a  Washington  state-chartered  commercial  bank.  The
business  of the  Bank,  which  is  focused  in the  northern  area  of  Western
Washington,  consists  primarily of attracting  deposits from the general public
and originating  loans.  Although the Bank has a diversified  loan portfolio,  a
substantial  portion of its borrowers' ability to repay their loans is dependent
upon the economic  conditions  affecting this area related to the  agricultural,
forestry and manufacturing  industries,  and the large military base presence in
Oak Harbor, Washington.

Effective  June 23, 1998,  WBCO sold  1,380,000  shares of its common stock at a
price of $12 per share, resulting in net proceeds to the Company of $14,893.

  (b) Basis of Presentation

The accompanying interim condensed consolidated financial statements include the
accounts  of WBCO and the  Bank  (together,  "the  Company").  The  accompanying
interim condensed consolidated financial statements have been prepared,  without
audit,  pursuant to the rules and  regulations  of the  Securities  and Exchange
Commission.  Accordingly,  they  do  not  include  all of  the  information  and
footnotes  required by generally  accepted  accounting  principles  for complete
financial statements.  These condensed  consolidated financial statements should
be read in conjunction with the December 31, 2001 audited consolidated financial
statements  and notes thereto  included in the  Company's  Annual Report on Form
10-K. In management's  opinion, all adjustments  (consisting of normal recurring
adjustments)  considered  necessary for a fair  presentation have been included.
Operating  results for the three months ended March 31, 2002 are not necessarily
indicative of the results that may be expected for the year ending  December 31,
2002.  In  preparing  the  consolidated  financial  statements,   estimates  and
assumptions  that affect the reported amounts of assets,  liabilities,  revenues
and expenses are required. Actual results could differ from those estimates.

  (c) Recently Issued Accounting Pronouncements

On October 3, 2001, the Financial  Accounting  Standards  Board ("FASB")  issued
Statement of Financial  Accounting  Standards ("SFAS") 144,  "Accounting for the
Impairment  or  Disposal  of  Long-Lived   Assets,"  which  addresses  financial
accounting  and reporting for the  impairment or disposal of long-lived  assets.
While SFAS 144 supersedes SFAS 121, "Accounting for the Impairment of Long-Lived
Assets and for  Long-Lived  Assets to Be  Disposed  Of," it retains  many of the
fundamental  provisions  in that SFAS 144 also  supersedes  the  accounting  and
reporting   provisions  of  APB  Opinion  No.  30,  "Reporting  the  Results  of
Operations--Reporting  the Effects of  Disposal of a Segment of a Business,  and
Extraordinary,  Unusual and Infrequently Occurring Events and Transactions," for
the disposal of a segment of a business.  However, it retains the requirement in
Opinion No. 30 to report  separately  discontinued  operations  and extends that
reporting to a component of an entity that either has been disposed of (by sale,
abandonment,  or in a distribution to owners) or is classified as held for sale.
The Company  adopted the provisions of SFAS 144 on January 1, 2002 and it had no
material effect on its results of operations or financial position.



                                        5
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Three months ended March 31, 2002 and 2001 (unaudited)
(Dollars in thousands, except per share data)

In June  2001,  the FASB  issued  SFAS 143,  "Accounting  for  Asset  Retirement
Obligations," which addresses financial accounting and reporting for obligations
associated with the retirement of tangible  long-lived assets and the associated
asset retirement  costs. The standard  applies to legal  obligations  associated
with the  retirement  of  long-lived  assets that  result from the  acquisition,
construction,  development  and (or) normal use of the asset.  SFAS 143 requires
that the fair  value  of a  liability  for an  asset  retirement  obligation  be
recognized  in the period in which it is  incurred if a  reasonable  estimate of
fair value can be made. The fair value of the liability is added to the carrying
amount  of  the  associated  asset  and  this  additional   carrying  amount  is
depreciated over the life of the asset.

The liability is accreted at the end of each period through charges to operating
expense.  If the obligation is settled for other than the carrying amount of the
liability, the Company will recognize a gain or loss on settlement.  The Company
is required and plans to adopt the provisions of SFAS 143 for the quarter ending
March 31,  2003.  The  Company is  currently  evaluating  the  impact  that this
statement  will have on their  financial  position  and  results of  operations,
however, they do not expect such impact to be material

In July  2001,  FASB  issued  SFAS 141,  "Business  Combinations"  and SFAS 142,
"Goodwill and Other Intangible Assets." SFAS 141 requires business  combinations
initiated  after June 30, 2001 to be accounted for using the purchase  method of
accounting,  and broadens the criteria for recording  intangible assets separate
from goodwill.  Recorded goodwill and intangibles will be evaluated against this
new criteria and may result in certain intangibles being subsumed into goodwill,
or  alternatively,  amounts  initially  recorded as goodwill  may be  separately
identified  and recognized  apart from goodwill.  SFAS 142 requires the use of a
nonamortization   approach  to  account  for  purchased   goodwill  and  certain
intangibles.   Under  this  nonamortization   approach,   goodwill  and  certain
intangibles  will not be amortized into results of operations,  but instead will
be reviewed for impairment and written down and charged to results of operations
only in the  periods  in which  the  recorded  value  of  goodwill  and  certain
intangibles is more than this fair value.  The Company adopted the provisions of
SFAS 142 on  January  1, 2002 and it had no  material  effect on its  results of
operations or financial position.

























                                        6
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Three months ended March 31, 2002 and 2001 (unaudited)
(Dollars in thousands, except per share data)

(2)   Earnings Per Share

The following  illustrates the reconciliation of the numerators and denominators
of the basic and diluted earnings per share ("EPS") computations:
<TABLE>
                                                                      Three Months Ended March 31, 2002
                                                           ---------------------------------------------------------
                                                                                   Weighted             Per share
                                                              Income            average shares           amount
                                                           --------------    ---------------------    --------------
<S>                                                          <C>                  <C>                     <C>
       Basic EPS
       Income available to common shareholders           $    1,437                4,055,250        $      0.35
       Effect of dilutive securities: stock options              --                  241,176               (.02)
                                                           --------------    ---------------------    --------------
       Diluted EPS                                       $    1,437                4,296,426        $      0.33
                                                           ==============    =====================    ==============


                                                                      Three Months Ended March 31, 2001
                                                           ---------------------------------------------------------
                                                                                   Weighted             Per share
                                                              Income            average shares           amount
                                                           --------------    ---------------------    --------------
       Basic EPS
       Income available to common shareholders           $      801                4,032,750        $      0.20
       Effect of dilutive securities: stock options              --                  193,353               (.01)
                                                           --------------    ---------------------    --------------
       Diluted EPS                                       $      801                4,226,103        $      0.19
                                                           ==============    =====================    ==============
</TABLE>


At March 31, 2002 and 2001 there were  options to  purchase  453,237 and 429,300
shares of common  stock  outstanding,  respectively,  of which 34,500 and 98,550
were  antidilutive  and therefore not included in the computation of diluted net
income per share.


(3)   Subsequent Event

On April 25, 2002, the Board of Directors declared a cash dividend of $0.065 per
share to shareholders of record as of May 9, 2002 and payable on May 24, 2002.















                                        7
<PAGE>

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

--------------------------------------------------------------------------------
Note   Regarding   Forward-Looking   Statements:   This   Form   10-Q   includes
forward-looking   statements,   which  management  believes  are  a  benefit  to
shareholders.   These   forward-looking   statements   describe  the   Company's
management's  expectations  regarding  future  events and  developments  such as
future operating results, growth in loans and deposits, continued success of the
Company's  style of banking  and the  strength of the local  economy.  The words
"will,"  "believe,"  "expect,"  "should,"  "anticipate"  and  words  of  similar
construction are intended in part to help identify  forward-looking  statements.
Future events are difficult to predict, and the expectations described below are
necessarily  subject to risk and  uncertainty  that may cause actual  results to
differ  materially  and adversely.  In addition to  discussions  about risks and
uncertainties set forth from time to time in the Company's filings with the SEC,
factors  that  may  cause  actual  results  to  differ   materially  from  those
contemplated  by such  forward-looking  statements  include,  among others,  the
following possibilities: (1) local and national general and economic conditions,
including the impact of the events of September 11, 2001 and any further similar
events,  are less  favorable  than expected or have a more direct and pronounced
effect on the Company than expected and adversely  affect the Company's  ability
to continue its internal growth at historical  rates and maintain the quality of
its earning assets;  (2) changes in interest rates reduce interest  margins more
than expected and negatively  affect  funding  sources;  (3) projected  business
increases following strategic expansion or opening or acquiring new branches are
lower than expected;  (4) costs or  difficulties  related to the  integration of
acquisitions are greater than expected; (5) competitive pressure among financial
institutions increases significantly; (6) legislation or regulatory requirements
or changes adversely affect the banking and financial  services sector;  and (7)
the Company's ability to realize the efficiencies it expects to receive from its
investment in personnel and infrastructure.
--------------------------------------------------------------------------------

Overview

Washington   Banking   Company  is  a  registered  bank  holding  company  whose
wholly-owned subsidiary,  Whidbey Island Bank, conducts a full-service community
commercial banking business. The Bank is a Washington state- chartered bank. Its
deposits are insured by the FDIC.  Headquartered  in Oak Harbor,  the  Company's
primary market area is located in  northwestern  Washington  between Seattle and
the Canadian border.  The region has experienced  strong  population  growth and
economic  diversification  over the past several years. WBCO's business includes
commercial loan, real estate loan and construction loan portfolios.  The Company
is  active  in  the   consumer   banking   field  and   provides   personal  and
consumer-oriented  loan  programs.  WBCO also  provides  a wide range of deposit
services for individuals and businesses  including checking and savings accounts
as well as money market accounts, certificates of deposit, individual retirement
accounts,  safe deposit boxes and other consumer and business related  financial
services.  WBCO also offers nondeposit  investment products for sale through the
Bank's subsidiary, WIB Financial Services, Inc.

During 2001, the Company continued its strategy of growth and market penetration
while  turning its focus  toward  improving  earnings.  Management  believes the
increased  market  share  reflects  the  Company's  reputation  for  focusing on
customer  service and  satisfaction.  The Company's  primary  objectives  are to
improve operating efficiencies and profitability, increase market penetration in
areas currently served, and continue an expansion strategy in appropriate market
areas.




                                        8
<PAGE>

Continuing the strategy of expanding into appropriate  market areas, the Company
is in the process of constructing  two buildings.  One building will house a new
branch  in  Stanwood  (Snohomish  County)  and  the  second  building  is  being
constructed  to relocate the Company's  Camano Island  branch  (Island  County).
Management  believes these locations will enhance  customer service by providing
easier branch access and more convenient availability of services. Additionally,
the Company is reviewing potential sites and assessing the feasibility of a loan
production office in the Smokey Point/ Arlington area of Snohomish County.

Consideration was given to the acquisition of certain assets of a bank branch in
Bellingham  (Whatcom county).  Following the completion of a feasibility  review
during first quarter 2002,  plans for that  acquisition  were  discarded and the
Company is  considering  other options for  branching in the  Fairhaven  area of
Bellingham.

The Company sold its vacated North Whidbey  branch  property and recorded a gain
on sale of assets of $187,000 during the first quarter 2002.


Financial Condition

Total Assets.  Total assets  increased to $460.1  million at March 31, 2002 from
$437.7 million at December 31, 2001, an increase of 5.1%. This increase resulted
primarily  from  growth  in  the  loan  portfolio,  funded  by  deposit  growth,
investment maturities and borrowings.

Loans.  Net loans totaled  $396.6 million at March 31, 2002, an increase of 6.3%
from $373.2  million at December 31, 2001.  The Company  increased its allowance
for loan losses to $5.0  million at March 31, 2002  representing  1.25% of total
loans, from $4.3 million or 1.14% at December 31, 2001, in response to softening
in the economy.  See  "Lending  Activities - Provision  and  Allowance  for Loan
Losses," below.

Total Investment Securities.  Total investment securities were $24.1 million and
$24.6 million at March 31, 2002 and December 2001,  respectively,  a decrease of
1.9% due to the maturity of  investments.  The  availability of excess funds for
long-term investment purchases was significantly reduced by the need for funding
the strong loan demand.

Premises and Equipment. Premises and equipment, net, were $15.6 million at March
31, 2002 and  December  31, 2001.  The balance  remained  fairly flat due to the
construction  of the  Stanwood  and Camano  Island  branch  offices  and related
furniture and fixtures, offset by the sale of the North Whidbey branch property.

Deposits.  Deposits  grew 6.6% to $391.3  million at March 31,  2002 from $367.2
million at December 31, 2001.

Average  noninterest-bearing  deposits  increased  25.5%, at March 31, 2002 from
March  31,  2001,  while  average  interest-bearing  deposits  increased  13.1%,
compared to the like period a year ago. See " - Deposits," below.

Shareholders' Equity. The Company's shareholders' equity increased 3.3% to $36.1
million at March 31, 2002 from $35.0 million at December 31, 2001.  The increase
reflects  earnings  offset by the payment of cash  dividends and the decrease in
unrealized gain on available-for-sale  securities,  net of tax, during the first
three months of 2002.







                                        9
<PAGE>
Consolidated  Average  Balance  Sheet and  Analysis of Net  Interest  Income and
Expense

The  following  table sets forth at the dates  indicated  the  Company's
consolidated  average  balance  sheet and  analysis of net  interest  income and
expense:
<TABLE>
                                  Three Months Ended March 31, 2002          Three Months Ended March 31, 2001
                                 Average       Interest     Average          Average      Interest      Average
(Dollars in thousands)           balance      earned/paid  yield (1)         balance     earned/paid   yield (1)
                                -----------   -----------  -----------     ------------  ------------ ------------
           Assets
<S>                              <C>            <C>          <C>            <C>            <C>          <C>
Loans (2)                      $  389,600    $   8,129        8.35%       $  311,108    $   7,440        9.57%
Federal funds sold                    869            3        1.38%            2,674           28        4.19%
Interest-earning cash                 291            1        1.37%            1,910           22        4.61%
Investments:
     Taxable                        7,908          112        5.67%            9,511          144        6.06%
     Non-taxable (3)               16,394          257        6.27%           17,130          269        6.28%
Deferred comp plan                    201           --          --                59           --         --
                                -----------   -----------  -----------     ------------  ------------ ------------
Interest-earning assets           415,263        8,502        8.19%          342,392        7,903        9.23%
Noninterest-earning assets         31,257                                     30,800
                                -----------                                ------------
     Total assets              $  446,520                                 $  373,192
                                ===========                                ============

       Liabilities and Shareholders' equity
Deposits:
     Interest demand and
      money market             $  128,933    $     548        1.70%       $  102,828    $     902        3.51%
     Savings                       28,365          106        1.49%           24,728          165        2.67%
     CDs                          173,921        1,759        4.05%          165,173        2,623        6.35%
                                -----------   -----------  -----------     ------------  ------------ ------------
Interest-bearing deposits         331,219        2,413        2.91%          292,729        3,690        5.04%
Federal funds purchased             5,339           25        1.87%            2,807           42        5.99%
Other interest-bearing
liabilites                         21,853          144        2.64%            1,233           26        8.43%
                                -----------   -----------  -----------     ------------  ------------ ------------
Interest-bearing liabilities      358,411        2,582        2.88%          296,769        3,758        5.06%
Noninterest-bearing deposits       50,620                                     40,334
Other noninterest-bearing
liabilities                         2,000                                      1,954
                                -----------                                ------------
Total liabilities                 411,031                                    339,057
Shareholders' equity               35,489                                     34,135
                                -----------                                ------------
     Total liabilities and
     shareholders' equity      $  446,520                                 $  373,192
                                ===========                                ============

Net interest income (3)                      $   5,920                                  $   4,145
                                              ===========                                ============
Net interest spread (1)                                       5.31%                                      4.17%
                                                           ===========                                ============
Net interest margin (1)                                       5.70%                                      4.84%
                                                           ===========                                ============

(1)  Annualized
(2)  Includes loan fees of $280 and $106 for the three months ended March 31, 2002 and 2001, respectively.
(3)  Interest  income  on  non-taxable  investments  is  presented  on  a  fully taxable-equivalent  basis  using  the  federal
     statutory  rate  of  34%. These adjustments were $65 and $68 for the three months ended March 30, 2002 and 2001,respectively.
</TABLE>

                                       10
<PAGE>

Results of Operations

The  Company's  results of  operations  are  dependent  to a large degree on net
interest income. Interest income and cost of funds are affected significantly by
general economic conditions,  particularly changes in market interest rates, and
by government  policies and the actions of regulatory  authorities.  The Company
also generates noninterest income generally through service charges and fees and
other  sources.   The  Company's   noninterest  expenses  consist  primarily  of
compensation and employee benefit expense, and occupancy expense.

Net Income.  Net income for the first  quarter of 2002  increased  79.4% to $1.4
million or $0.33 per diluted share,  from $801,000,  or $0.19 per diluted share,
for the first  quarter of 2001.  The increase was  primarily due to net interest
income and gain on sale of assets of $187,000 from the sale of the vacated North
Whidbey branch property.

Net Interest Income. Net interest income for the first quarter of 2002 increased
43.6% to $5.9  million  from $4.1  million  for the first  quarter of 2001.  The
increase in net  interest  income is largely  due to the  overall  growth of the
Company.

Average  interest-earning  assets  for the  first  quarter  increased  to $415.3
million at March 31,  2002,  compared  to $342.4  million at March 31,  2001,  a
growth of 21.3%, while the average yield on interest-earning assets decreased to
8.19% compared to 9.23% in first quarter of the prior year.

The average  yield on loans  decreased to 8.35% for the quarter  ended March 31,
2002 from 9.57% for the quarter ended March 31, 2001.

The average cost of interest-bearing  liabilities decreased in the first quarter
of 2002 to 2.88%  from  5.06% for the  quarter  ended  March 31,  2001.  Average
interest-bearing  liabilities  for the quarter  increased  to $358.4  million at
March 31, 2002 compared to $296.8 million at March 31, 2001, a growth of 20.8%.

The overall  result of these changes was an increase in the net interest  spread
to 5.31% for the quarter  ended March 31, 2002 from 4.17% for the quarter  ended
March 31, 2001.  Net interest  margin (net  interest  income  divided by average
interest-earning  assets)  increased to 5.70% in the first  quarter of 2002 from
4.84% in the first quarter of 2001.


Noninterest  Income.  Noninterest  income increased  $326,000,  or 35.0%, in the
first quarter of 2002 compared to the same period in 2001,  primarily due to the
gain on sale of  assets  from  the  sale of the  vacated  North  Whidbey  branch
property.


Noninterest  Expense.  Noninterest expense increased $422,000,  or 12.0%, in the
first quarter of 2002.  Two major  components of noninterest  expense,  employee
compensation  and  occupancy,  increased  9.3% and 8.2%,  respectively,  for the
quarter  compared with the like period in 2001.  These increases were mainly due
to additional costs for salaries and employee benefits,  occupancy expense,  and
other  operating  expense  reflecting the growth of the Company.  The efficiency
ratio  (noninterest  expense  divided  by the sum of net  interest  income  plus
noninterest  income less  non-recurring  gains) improved to 55.20% for the first
quarter 2002 compared to 69.98% for the like period in 2001.


Income Taxes.  For the first quarter of 2002, the Company recorded an income tax
provision of $760,000.  The overall effective tax rate was approximately 34% and
27%,  respectively,  for the three  months  ended March 31,  2002 and 2001.  The
higher tax rate is in  anticipation  of the Company's  increased tax base due to
the decrease in tax-exempt interest income as a percentage of income.
                                       11
<PAGE>



Lending Activities

Loan  Portfolio  Composition.  The Company  originates  a wide  variety of loans
including  commercial,  real estate and consumer loans. The following table sets
forth the  Company's  loan  portfolio  composition  by type of loan at the dates
indicated:

<TABLE>

                                               March 31, 2002                    December 31, 2001
                                       -------------------------------     -------------------------------
(Dollars in thousands)                    Balance        % of total           Balance        % of total
                                       ---------------  --------------     ---------------  --------------
<S>                                        <C>              <C>               <C>               <C>
Commercial                            $     116,724          29.1%        $    109,867           29.1%
Real estate mortgages:
  One-to-four family residential             42,282          10.5%              42,850           11.4%
  Five-or-more family
    residential and commercial               76,894          19.1%              65,782           17.4%
                                       ---------------  --------------     -------------------------------
     Total real estate mortgages            119,176          29.6%             108,632           28.8%

Real estate construction                     22,750           5.7%              26,917            7.1%
Consumer                                    142,900          35.6%             132,067           35.0%
                                       ---------------  --------------     -------------------------------
  Subtotal                                  401,550         100.0%             377,483          100.0%
                                                        ==============                      ==============
Less: allowance for loan losses              (5,020)                            (4,308)
Deferred loan fees, net                          61                                 23
                                       ---------------                     ---------------
Loans, net                            $     396,591                       $    373,198
                                       ===============                     ===============
</TABLE>

Total loans, net, increased to $396.6 million at March 31, 2002,  representing a
6.3% increase from year-end 2001.  Total  commercial,  real estate  mortgage and
consumer loans increased 6.2%,  9.7% and 8.2%,  respectively,  at March 31, 2002
from year-end 2001, while real estate  construction loans decreased 15.5%. These
changes reflect seasonal trends and the Company's growth from its various market
areas and diversified customer base.





















                                       12
<PAGE>

Nonperforming  Assets.

The following  table sets forth an analysis of the  composition of the Company's
nonperforming assets at the dates indicated:
<TABLE>

    (Dollars in thousands)                                           March 31, 2002           December 31, 2001
                                                                  ----------------------    -----------------------
<S>                                                                         <C>                       <C>
    Nonaccrual loans                                            $            1,857        $            2,094
    Restructured loans                                                          --                        --
                                                                  ----------------------    -----------------------
     Total nonperforming loans                                               1,857                     2,094
    Real estate owned                                                          473                       473
                                                                  ----------------------    -----------------------
     Total nonperforming assets                                 $            2,330        $            2,567
                                                                  ======================    =======================

    Accruing loans past due >= 90 days                          $               --                  $    --
    Potential problem loans                                                     --                       --
    Allowance for loan losses                                                5,020                     4,308

    Nonperforming loans to loans                                              0.46%                    0.55%
    Allowance for loan losses to loans                                        1.25%                    1.14%
    Allowance for loan losses to nonperforming loans                        270.33%                  205.73%
    Nonperforming assets to total assets                                      0.51%                    0.59%
</TABLE>


Nonperforming loans decreased to $1.9 million, or 0.46% of total loans, at March
31, 2002 from $2.1 million,  or 0.55% of total loans,  at December 31, 2001. The
current loan loss reserve of $5.0 million  represents  270.33% of  nonperforming
loans as compared to 205.73% of  nonperforming  loans at December 31, 2001.  The
loan loss reserve is 1.25% of total loans at March 31, 2002 as compared to 1.14%
at December 31, 2001.


Provision  and Allowance  for Loan Losses.  The Company  recorded a $1.0 million
provision for loan losses for the first quarter of 2002,  compared with $405,000
for the like period a year ago.  Management  determined  that this  increase was
warranted due to the growth of the loan portfolio and the possibility of further
softening in the regional  economy.  There were $277,000 in net loan charge-offs
during the first quarter of 2002, compared to $65,000 in net charge-offs for the
like period  last year.  In addition  to some  timing  issues,  the  increase in
charge-offs is attributed to an aggressive stance on consumer  delinquencies and
a tightening of the Bank's consumer lending standards.

The allowance for loan losses is  maintained at a level  considered  adequate by
management  to  provide  for  anticipated  loan  losses  based  on  management's
assessment  of various  factors  affecting the loan  portfolio.  This includes a
review of problem loans, general business and economic conditions,  seasoning of
the loan portfolio,  bank regulatory examination results and finding of internal
credit  examiners,  loss experience and an overall  evaluation of the quality of
the underlying  collateral.  The allowance is reviewed  quarterly by management.
The  allowance is increased by provisions  charged to operations  and reduced by
loans charged off, net of recoveries.







                                       13
<PAGE>

The following  table sets forth the changes in the Company's  allowance for loan
losses at the dates  indicated.  The  allocation  is based on an  evaluation  of
defined loan problems,  historical  ratios of loan losses and other factors that
may affect future loan losses in the categories of loans shown:

<TABLE>

                                                 Three Months Ended March 31,
(Dollars in thousands)                           2002                     2001
                                          -----------------        -----------------
<S>                                            <C>                      <C>
Balance at beginning of period          $       4,308            $       2,664
Charge-offs:
      Commercial                                  (28)                     (26)
      Real estate                                  --                      (15)
      Consumer                                   (296)                     (62)
                                          -----------------        -----------------
      Total charge-offs                 $        (324)           $        (103)
Recoveries:
      Commercial                                    1                       31
      Real estate                                  --                       --
      Consumer                                     46                        7
                                          -----------------        -----------------
      Total recoveries                  $          47            $          38
                                          -----------------        -----------------
Net charge-offs                                  (277)                     (65)
Provision for loan losses                         989                      405
                                          -----------------        -----------------
Balance at end of period                $       5,020            $       3,004
                                          =================        =================

Net charge-offs to average loans                 0.07%                    0.02%
</TABLE>

While  management  believes  that it uses  the  best  information  available  to
determine the  allowance for loan losses,  unforeseen  market  conditions  could
result in adjustments to the allowance for loan losses,  and net income could be
significantly   affected,   if  circumstances   differ  substantially  from  the
assumptions used in making the final determination.  Management anticipates that
normal  growth of the loan  portfolio,  coupled with credit  weakness that could
occur as a result of a  slowdown  in the local  economy  may  require  continued
increases in the  provisions  to the  allowance  for loan losses during the year
2002.





















                                       14
<PAGE>


Deposits

The Company provides a range of deposit services, including  noninterest-bearing
checking accounts,  interest-bearing checking and savings accounts, money market
accounts and  certificates  of deposit  ("CDs").  These accounts  generally earn
interest at rates established by management based on competitive  market factors
and  management's  desire to increase or decrease certain types or maturities of
deposits. The Company does not pay brokerage commissions to attract deposits. It
strives  to  establish   customer   relations   to  attract  core   deposits  in
noninterest-bearing transactional accounts and thus reduce its costs of funds.

The  following  table sets forth the average  balances  outstanding  and average
interest rates for each major category of deposits:

<TABLE>
                                                 Three Months Ended March 31,
                                     ------------------------------------------------------
                                                2002                      2001
                                      ------------------------- --------------------------
                                        Average     Average        Average     Average
(Dollars in thousands)                  balance       rate         balance       rate
                                      ------------------------- --------------------------
<S>                                    <C>           <C>         <C>            <C>
Interest-bearing demand and
   money market deposits             $  128,933       1.70%    $  102,828        3.51%
Savings deposits                         28,365       1.49%        24,728        2.67%
CDs                                     173,921       4.05%       165,173        6.35%
                                      ------------------------- --------------------------
     Total interest-bearing deposits    331,219       2.91%       292,729        5.04%
Demand and other
   noninterest-bearing deposits          50,620                    40,334
                                      -------------             --------------
     Total average deposits          $  381,839                $  333,063
                                      =============             ==============
</TABLE>


Liquidity and Sources of Funds

Sources of Funds.  The Company's  sources of funds are customer  deposits,  loan
repayments,  current  earnings,  cash and demand  balances due from other banks,
federal funds sold,  short-term  investments and investment securities available
for  sale.  These  funds  are  used  to make  loans  and to  support  continuing
operations.  The Bank relies primarily upon customer deposits and investments to
provide  liquidity.  The Company will mainly use such funds to make loans and to
purchase  securities,  the  majority of which are issued by  federal,  state and
local governments.  Additional funds are available through  established  Federal
Home Loan Bank  ("FHLB")  lines of credit,  which the Company  expects to use to
supplement funding sources.  Management is also investigating  other appropriate
funding sources to help finance  banking  operations and to maintain a favorable
liquidity position and proper  asset/liability  mix. Due to the Company's strong
asset growth,  capital ratios are trending downward resulting in a change to the
Company's status for regulatory  purposes from the  "well-capitalized"  level to
the  "adequately-capitalized"  level.  Consequently,  management  is  evaluating
potential  capital  raising  alternatives  such as trust  preferred  securities,
issuance of common stock, and other sources.






                                       15
<PAGE>


Deposits.  Total deposits  increased 6.6%, to $391.3 million,  at March 31, 2002
from $367.2  million at December  31,  2001.  The  Company,  by policy,  has not
accepted brokered  deposits.  It has made a concerted effort to attract deposits
in the market area it serves through competitive pricing and delivery of quality
service.  Historically, the Company has been able to retain a significant amount
of its deposits as they mature.

The Company's  deposits are expected to fluctuate  according to the level of the
Company's  deposit  market  share,   economic  conditions  and  normal  seasonal
variations,  among other  things.  Certificates  of deposit are the only deposit
group that has stated  maturity dates. At March 31, 2002, the Company had $174.9
million in CDs of which approximately $168.1 million, or 96.1%, are scheduled to
mature within one year.  Uncertain market and economic conditions may cause some
customers to choose to move funds into core deposit  accounts or withdraw funds,
rather than renew CDs as they mature.  However,  based on prior experience,  the
Company  anticipates  that a substantial  portion of outstanding  CDs will renew
upon maturity.


Borrowings.  At March 31, 2002 the Company  had a $69.0  million  line of credit
with the FHLB, of which $12.5 million was advanced in overnight  borrowings  and
$17.5 million in other advances, and lines of credit with financial institutions
in the amount of $13.0 million,  with no advances on these lines of credit as of
that date.


Investments.  The Company's total portfolio of investment  securities  decreased
1.9% to $24.1 million at March 31, 2002 from $24.6 million at December 31, 2001.
The investment  portfolio  consists of government agency  securities,  municipal
securities,  FHLB stock, and corporate obligations. No investment exceeds 10% of
the shareholders'  equity. The following table summarizes the amortized cost and
recorded  and  market  values  of  securities  in  the  Company's  portfolio  by
contractual maturity groups:

<TABLE>
                                                         March 31, 2002
                                     --------------------------------------------------------
 (Dollars in thousands)                Amortized cost      Market value      Recorded value
                                      -----------------  -----------------  -----------------
 Amounts maturing:
<S>                                         <C>                <C>                <C>
 Within one year                     $       7,000      $       7,063      $       7,026
 One to five years                          10,069             10,369             10,114
 Six to ten years                            6,089              6,191              6,089
 Over ten years                                869                888                869
                                      -----------------  -----------------  -----------------
        Total                        $      24,027      $      24,511      $      24,098
                                      =================  =================  =================
</TABLE>

At  March  31,  2002,   the  investment   portfolio   consisted  of  (a)  72.18%
held-to-maturity investments at carrying value, down from 74.88% at December 31,
2001,  and (b) 27.82%  available-for-sale  securities at carrying  value up from
25.12%  at  December  31,  2001.   The  Company   expects  in  the  future  that
available-for-sale  securities  would increase as a percent of total  investment
securities at carrying value.






                                       16
<PAGE>


Capital and Capital Ratios

The Company's  shareholders' equity increased to $36.1 million at March 31, 2002
from $35.0  million at December 31, 2001.  This increase is due to net income of
$1.4 million  offset by the payment of cash dividends of $264,000 and a decrease
in unrealized  gain on  available-for-sale  securities  of $24,000,  net of tax,
during the three months ended March 31, 2002.  Total assets  increased to $460.1
million at March 31, 2002 from $437.7  million at December 31, 2001, an increase
of 5.1%.  Shareholders'  equity  to total  assets  was  7.9% at March  31,  2002
compared to 8.0% at December 31, 2001.

Banking  regulations  require  bank  holding  companies  and banks to maintain a
minimum  leverage  ratio of core capital to adjusted  average total assets of at
least 4%. In  addition,  banking  regulators  have  adopted  risk-based  capital
guidelines,  under which risk percentages are assigned to various  categories of
assets and off-balance  sheet items to calculate a risk-adjusted  capital ratio.
Tier I capital generally consists of common shareholders' equity (which does not
include  unrealized  gains and losses on securities),  less goodwill and certain
identifiable intangible assets, while Tier II capital includes the allowance for
loan losses and subordinated debt both subject to certain limitations.

The  FDIC  established  the  qualifications  necessary  to  be  classified  as a
"well-capitalized"  bank,  primarily for  assignment of FDIC  insurance  premium
rates. As the following table indicates,  the Company (on a consolidated  basis)
and the Bank did not qualify as "well  capitalized"  at March 31, 2002,  but did
exceed the minimum "adequately capitalized" requirements:

<TABLE>
                                               FDIC Requirements                        Company Ratios
                                   ------------------------------------------    -----------------------------
                                       Adequately-               Well-             March 31,        December
                                       capitalized            capitalized            2002           31, 2001
                                   ---------------------    -----------------   --------------    ------------
<S>                                         <C>                   <C>               <C>             <C>
Total risk-based capital ratio               8%                    10%               9.57%           9.64%
Tier 1 risk-based capital ratio              4%                     6%               8.40%           8.57%
Leverage ratio                               4%                     5%               8.04%           8.03%
</TABLE>


There can be no assurance  that  additional  capital will not be required in the
near future due to greater-than-expected growth, or otherwise.


Capital Expenditures and Commitments

The Company had no material capital  expenditures or commitments for the quarter
ended March 31, 2002.


Significant Accounting Policies

See "Notes to Condensed Consolidated Financial Statements."



                                       17
<PAGE>

2002 Anticipated Financial Performance

In February  2002, the Company  announced  targets for 2002 including 20% to 25%
earnings growth,  15% to 20% loan growth,  10% to 15% deposit growth,  ROE of at
least 13%, and an efficiency ratio in the low sixties. The Company believes that
these goals can be attained  through  continuing  its basic banking  strategy of
building core deposits and building a conservative loan portfolio.



Item 3. Quantitative and Qualitative Disclosures about Market Risk

A number  of  measures  are used to  monitor  and  manage  interest  rate  risk,
including income simulations and interest sensitivity (gap) analyses.  An income
simulation  model is the primary tool used to assess the direction and magnitude
of changes in net interest income  resulting from changes in interest rates. Key
assumptions in the model include prepayment speeds on  mortgage-related  assets,
cash flows and  maturities  of other  investment  securities,  loan and  deposit
volumes,  and pricing.  These  assumptions  are  inherently  uncertain and, as a
result,  the model cannot  precisely  estimate net interest  income or precisely
predict the impact of higher or lower  interest  rates on net  interest  income.
Actual results will differ from simulated  results due to timing,  magnitude and
frequency of interest rate changes,  changes in market conditions and management
strategies,  among other factors.  At March 31, 2002, based on the measures used
to monitor and manage  interest rate risk,  there had not been a material change
in the Company's  interest  rate risk since  December 31, 2001.  For  additional
information, refer to the Company's Form 10-K for year ended December 31, 2001.















                                       18
<PAGE>


                                     PART II


Item 6.  Exhibits and Reports on Form 8-K

(a)      Exhibits

         None

(b)      Reports on Form 8-K

         None

                                   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 BANKING COMPANY



Date: May 13, 2002                                 By   /s/  Michal D. Cann
                                                         -------------------

                                                         Michal D. Cann
                                                          President and
                                                    Chief Executive Officer


Date: May 13, 2002                                 By   /s/ Phyllis A. Hawkins
                                                        ----------------------

                                                       Phyllis A. Hawkins
                                                    Senior Vice President and
                                                    Chief Financial Officer
























                                       19