Washington Trust Announces Increased Second Quarter 2008 Earnings

Washington Trust Bancorp, Inc. (NASDAQ Global Select; symbol: WASH), parent company of The Washington Trust Company, today announced second quarter 2008 net income of $6.1 million, or 45 cents per diluted share; a 12.5 percent increase over the 40 cents per diluted share reported for the second quarter a year ago. The returns on average equity and average assets for the second quarter of 2008 were 12.88% and 0.92%, respectively, compared to 12.57% and 0.92%, respectively, for the same period in 2007. Second Quarter 2008 Overview: Net interest income increased by $1.3 million from the second quarter last year primarily due to higher earning-asset levels and lower deposit costs. The loan loss provision charged to earnings was $1.4 million, due largely to growth in the loan portfolio as well as an ongoing evaluation of credit quality and general economic conditions. Wealth Management revenues for the second quarter of 2008 were up by 2 percent from the same quarter a year ago. Wealth management assets under administration amounted to $3.9 billion at June 30, 2008, up $45 million in the second quarter and up $56 million from the June 30, 2007 balance. Net losses on securities for the second quarter of 2008 totaled $53 thousand as compared to net losses of $700 thousand in the same quarter last year. Noninterest expenses for the second quarter of 2008 were up by 2 percent compared to the same quarter last year. Commercial loan growth continued to be strong with an increase of $68.7 million in the quarter, representing the seventh consecutive quarter of growth. Commercial loans have increased $172.0 million, or 28 percent, from the balance at June 30, 2007. Nonperforming assets remain at manageable levels with a modest increase from $5.7 million, or 0.22% of total assets, at March 31, 2008 to $6.2 million, or 0.23% of total assets, at June 30, 2008. Net charge-offs were $161 thousand in the second quarter of 2008. Commenting on the quarter, John C. Warren, Chairman and Chief Executive Officer, said, "Washington Trust’s second quarter results were particularly noteworthy considering the deterioration of economic conditions and declines in the financial markets. In the face of these strong headwinds we have achieved solid earnings through active management and believe our disciplined credit culture is serving us well.” Net income for the six months ended June 30, 2008 amounted to $11.9 million, or 88 cents per diluted share, compared to the $11.5 million, or 84 cents per diluted share, for the same period in 2007. Results for the first half of 2007 included $1.1 million in debt prepayment charges, recorded in noninterest expense in the first quarter of 2007 as a result of prepayments of higher cost Federal Home Loan Bank of Boston ("FHLBB”) advances. There have been no debt prepayment penalty charges recognized in 2008. The returns on average equity and average assets for the first six months of 2008 were 12.55% and 0.91%, respectively, compared to 13.12% and 0.96%, respectively, for the same period in 2007. RESULTS OF OPERATIONS Net interest income for the second quarter of 2008 increased $1.1 million, or 7.5 percent, compared to the first quarter of 2008 and $1.3 million, or 8.6 percent, from the second quarter a year ago, due primarily to higher earning-asset levels and lower deposit costs. On a year to date basis, net interest income is up $1.5 million, or 5.0 percent, from 2007, due to growth in interest-earning assets. The net interest margin (annualized tax-equivalent net interest income as a percentage of average earning assets) for the second quarter of 2008 was 2.71%, up 12 basis points from the first quarter of 2008 and down 5 basis points from the second quarter of 2007. The increase in the margin on a linked quarter basis was largely attributable to lower deposit and funding costs. For the six months ended June 30, 2008 the net interest margin was 2.65% compared to 2.79% for the same period in 2007. The decline in net interest margin on a year to date basis reflects decreases in yields on prime-related commercial and consumer loans resulting from actions taken by the Federal Reserve to reduce short-term interest rates, with less commensurate reduction in deposit rates paid during the same period. For the quarters ended June 30, 2008 and 2007 net losses on securities amounted to $53 thousand and $700 thousand, respectively. Included in the second quarter 2008 net losses of $53 thousand were impairment charges of $1.1 million recognized on three preferred stock holdings and realized gains of $1.1 million on sales of equity securities. Net losses on securities for the second quarter of 2007 included approximately $1.3 million of net losses on sales of certain U.S. Government sponsored agency and mortgage-backed securities, $195 thousand of gains from certain debt and equity securities that were called prior to their maturity by the issuers, and $397 thousand of gains resulting from the Corporation’s annual contribution of appreciated equity securities to the Corporation’s charitable foundation. For the first six months of 2008, net losses on securities amounted to $98 thousand as compared to net gains of $336 thousand for the same period in 2007. Excluding net gains and losses on securities, noninterest income amounted to $12.2 million for the second quarter of 2008, up $389 thousand, or 3 percent, from the same period a year ago. Wealth management revenues for the second quarter of 2008 were up $157 thousand, or 2 percent, from the second quarter of 2007. For the first half of 2008, noninterest income on this basis totaled $23.3 million, up $1.3 million, or 6 percent, from the first half of 2007. Wealth management revenues for the six months ended June 30, 2008 increased by $545 thousand, or 4 percent, from the same period in 2007. Wealth management assets under administration totaled $3.924 billion at June 30, 2008, down $90.8 million, or 2 percent, from December 31, 2007 and up $55.9 million, or 1 percent, from June 30, 2007. The decline in assets under administration in the first six months of 2008 was primarily due to lower valuations in the equity markets. Noninterest expenses amounted to $18.1 million for the second quarter of 2008, up $294 thousand from the same quarter a year ago. Included in noninterest expenses in the second quarter of 2007 was $520 thousand representing the cost of the Corporation’s contribution of appreciated equity securities to its charitable foundation. Washington Trust expects to make its annual contribution to the foundation later this year. For the six months ended June 30, 2008, noninterest expenses totaled $35.2 million, up $327 thousand, or 1 percent, from the same period in 2007. Excluding first quarter 2007 debt prepayment penalties and the second quarter 2007 charitable contribution, noninterest expenses for the first six months of 2008 increased $1.9 million, or 6 percent, from the same period in 2007. Approximately 40 percent of the 2008 increase, on this basis, represents costs attributable to our wealth management business, an increase in FDIC deposit insurance costs and to operating expenses related to a de novo branch opened in June 2007. Income tax expense amounted to $2.8 million and $5.5 million, respectively, for the three and six months ended June 30, 2008, as compared to $2.5 million and $5.2 million, respectively, for the same periods in 2007. The Corporation’s effective tax rate for the three and six months ended June 30, 2008 was 31.6% and 31.7%, respectively, as compared to 31.4% for each of the same periods last year. ASSET QUALITY Nonperforming assets (nonaccrual loans and property acquired through foreclosure) amounted to $6.2 million, or 0.23% of total assets, at June 30, 2008, compared to $4.3 million, or 0.17% of total assets, at December 31, 2007 and $3.0 million, or 0.12% of total assets, at June 30, 2007. There were no properties acquired through foreclosure on the balance sheet at June 30, 2008, December 31, 2007 and June 30, 2007. Nonaccrual loans as a percent of total loans stood at 0.36% at June 30, 2008 compared to 0.27% of total loans at December 31, 2007 and 0.20% of total loans at June 30, 2007. The increase in nonaccrual loans was largely due to certain commercial loan relationships moving into the non-accruing loan classification. Total 30 day+ delinquencies amounted to $15.0 million, or 0.88% of total loans, at June 30, 2008, up $8.0 million in the first six months of 2008 and up $5.9 million from the balance a year earlier. Commercial loans represent $12.4 million, or 83%, of total delinquencies at June 30, 2008. Washington Trust has never offered a subprime residential loan program. Total residential mortgage and consumer loan 30 day+ delinquencies increased modestly in the first half of 2008 to $2.6 million, or 0.29% of these loans, at June 30, 2008, compared to $2.3 million, or 0.26%, at December 31, 2007. Total 90 day+ delinquencies in the residential mortgage portfolio amounted to $408 thousand (two loans) at June 30, 2008. There were no consumer loans in the 90 day+ delinquency category at June 30, 2008. Total nonaccrual loans, which include the 90 day+ delinquencies, amounted to $1.1 million and $170 thousand in the residential mortgage and consumer loan categories, respectively, at June 30, 2008. The Corporation’s loan loss provision charged to earnings amounted to $1.4 million and $1.850 million, respectively, for the three and six months ended June 30, 2008, compared to $300 thousand and $600 thousand for the same periods in 2007. The provision for loan losses was based on management’s assessment of various factors affecting the loan portfolio, including, among others, growth in the portfolio, ongoing evaluation of credit quality and general economic conditions. Net charge-offs amounted to $161 thousand and $164 thousand, respectively, for the quarter and first six months of 2008, as compared to net charge-offs of $333 thousand and $167 thousand for the same periods in 2007. The Corporation will continue to assess the adequacy of its allowance for loan losses in accordance with its established policies. The allowance for loan losses was $22.0 million, or 1.29% of total loans, at June 30, 2008, compared to $20.3 million, or 1.29% of total loans, at December 31, 2007, and $19.3 million, or 1.30% of total loans, at June 30, 2007. FINANCIAL CONDITION Total assets were $2.733 billion at June 30, 2008, up $193.0 million from December 31, 2007. Total loans grew by $132.0 million, or 8.4 percent, during the first six months of 2008 and amounted to $1.7 billion. Commercial loans rose by $68.7 million, or 9.5 percent, in the second quarter of 2008 and by $114.7 million, or 16.9 percent, in the first six months of 2008. Residential loans increased by $30.5 million, or 5.3 percent, in the second quarter of 2008, including purchases of $30.8 million. On a year to date basis, residential loans increased by $8.7 million, or 1.4 percent. Consumer loans increased by $7.9 million, or 2.7 percent, in the second quarter of 2008 and by $8.6 million, or 2.9 percent, in the first six months of 2008. The investment securities portfolio totaled $790.1 million at June 30, 2008, up $38.3 million from December 31, 2007. This increase includes an increase of $60.9 million in mortgage-backed securities during the second quarter of 2008. At June 30, 2008, the fair value of mortgage-backed securities amounted to $586.1 million. All of the Corporation’s mortgage-backed securities are issued by U.S. Government or U.S. Government-sponsored agencies. Total deposits decreased by $36.7 million in the first six months of 2008. Excluding brokered certificates of deposit, in-market deposits fell by $20.6 million, or 1.4 percent, from the balance at December 31, 2007. Runoff occurred in money market and time deposits, while demand deposits and NOW account balances rose by $18.1 million in the first half of 2008. FHLBB advances totaled $845.3 million at June 30, 2008, up $228.9 million from the balance at December 31, 2007. Total shareholders’ equity amounted to $186.4 million at June 30, 2008, compared to $186.5 million at December 31, 2007. Book value per share as of June 30, 2008 and December 31, 2007 amounted to $13.91 and $13.97, respectively. The Corporation’s capital ratios at June 30, 2008 place the Corporation in the "well-capitalized” category according to regulatory standards. As previously reported, in April 2008, the Corporation sponsored the creation of Washington Preferred Capital Trust ("Washington Preferred”). Washington Preferred is a newly formed Delaware statutory trust created for the sole purpose of issuing trust preferred securities and investing the proceeds in junior subordinated debentures of the Corporation. In April 2008, Washington Preferred issued $10,000,000 of trust preferred securities in a private placement to two institutional investors. The proceeds of the trust preferred securities, along with the proceeds of $310,000 from the issuance of common securities by Washington Preferred to the Corporation, were used to purchase $10,310,000 of the Corporation's floating rate junior subordinated debentures. Like the trust preferred securities, the junior subordinated debentures mature in June 2038 and bear interest at a rate equal to the three-month LIBOR rate plus 3.50%. In April 2008, the Corporation also entered into a five-year interest rate swap contract with a notional amount of $10,000,000. Under the terms of this contract, Washington Trust will pay a fixed rate of 6.97% and receive a rate equal to three-month LIBOR plus 3.50%. DIVIDENDS DECLARED The Board of Directors declared a quarterly dividend of 21 cents per share for the quarter ended June 30, 2008, an increase of one cent per share from the most recent quarterly dividend rate. The dividend was paid on July 11, 2008 to shareholders of record on June 30, 2008. This represents the 16th consecutive year with a dividend increase for Washington Trust shareholders. CONFERENCE CALL Washington Trust Chairman and Chief Executive Officer John C. Warren, and David V. Devault, Executive Vice President, Secretary, Treasurer, and Chief Financial Officer, will host a conference call on Tuesday, July 22, 2008 at 8:30 a.m. (Eastern Time) to discuss the Corporation’s second quarter results. This call is being webcast by SNL IR Solutions and can be accessed through the Investor Relations section of the Washington Trust website, www.washtrust.com. A replay of the call will be posted in this same location on the website shortly after the conclusion of the call. You may also listen to a replay by dialing (877) 344-7529 and entering Conference ID #: 420625. The replay will be available until 11:59 p.m. on July 29, 2008. BACKGROUND Washington Trust Bancorp, Inc. is the parent of The Washington Trust Company, a Rhode Island state-chartered bank founded in 1800. Washington Trust offers personal banking, business banking and wealth management services through its offices in Rhode Island, Massachusetts and southeastern Connecticut. Washington Trust Bancorp, Inc.’s common stock trades on the Nasdaq Global Select® under the symbol WASH. Investor information is available on the Corporation’s web site: www.washtrust.com. FORWARD-LOOKING STATEMENTS This press release contains certain statements that may be considered "forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements, other than statements of historical facts, including statements regarding our strategy, effectiveness of investment programs, evaluations of future interest rate trends and liquidity, expectations as to growth in assets, deposits and results of operations, success of acquisitions, future operations, market position, financial position, and prospects, plans, goals and objectives of management are forward-looking statements. The actual results, performance or achievements of the Corporation could differ materially from those projected in the forward-looking statements as a result of, among other factors, changes in general national or regional economic conditions, reductions in net interest income resulting from interest rate volatility as well as changes in the balance and mix of loans and deposits, reductions in the market value of wealth management assets under administration, reductions in loan demand, changes in loan collectibility, default and charge-off rates, changes in the size and nature of the Corporation’s competition, changes in legislation or regulation and accounting principles, policies and guidelines, and changes in the assumptions used in making such forward-looking statements. In addition, the factors described under "Risk Factors” in Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2007, as filed with the Securities and Exchange Commission, may result in these differences. You should carefully review all of these factors, and you should be aware that there may be other factors that could cause these differences. The Corporation assumes no obligation to update forward-looking statements or update the reasons actual results, performance or achievements could differ materially from those provided in the forward-looking statements, except as required by law. Washington Trust Bancorp, Inc. and Subsidiaries CONSOLIDATED BALANCE SHEETS   (unaudited) (Dollars in thousands) June 30,   December 31,       2008       2007   Assets: Cash and noninterest-bearing balances due from banks $ 39,800 $ 30,817 Interest-bearing balances due from banks 575 1,973 Federal funds sold and securities purchased under resale agreements 4,959 7,600 Other short-term investments 1,236 722 Mortgage loans held for sale 2,711 1,981 Securities available for sale, at fair value; amortized cost $799,938 in 2008 and $750,583 in 2007 790,064 751,778 Federal Home Loan Bank stock, at cost 42,008 31,725 Loans: Commercial and other 795,013 680,266 Residential real estate 608,351 599,671 Consumer     302,286       293,715   Total loans 1,705,650 1,573,652 Less allowance for loan losses     21,963       20,277   Net loans 1,683,687 1,553,375 Premises and equipment, net 25,170 25,420 Accrued interest receivable 10,617 11,427 Investment in bank-owned life insurance 42,262 41,363 Goodwill 50,479 50,479 Identifiable intangible assets, net 10,781 11,433 Other assets     28,640       19,847   Total assets   $ 2,732,989     $ 2,539,940     Liabilities: Deposits: Demand deposits $ 187,865 $ 175,542 NOW accounts 170,733 164,944 Money market accounts 305,860 321,600 Savings accounts 177,490 176,278 Time deposits     767,594       807,841   Total deposits 1,609,542 1,646,205 Dividends payable 2,819 2,677 Federal Home Loan Bank advances 845,291 616,417 Junior subordinated debentures 32,991 22,681 Other borrowings 26,484 32,560 Accrued expenses and other liabilities     29,440       32,887   Total liabilities     2,546,567       2,353,427     Shareholders’ Equity: Common stock of $.0625 par value; authorized 30,000,000 shares; issued 13,503,876 shares in 2008 and 13,492,110 shares in 2007 844 843 Paid-in capital 34,852 34,874 Retained earnings 160,593 154,647 Accumulated other comprehensive loss (7,098 ) (239 ) Treasury stock, at cost; 105,677 shares in 2008 and 137,652 in 2007     (2,769 )     (3,612 ) Total shareholders’ equity     186,422       186,513   Total liabilities and shareholders’ equity   $ 2,732,989     $ 2,539,940   Washington Trust Bancorp, Inc. and Subsidiaries CONSOLIDATED STATEMENTS OF INCOME   (Dollars and shares in thousands, except per share amounts)   (unaudited) Three Months   Six Months Periods ended June 30,     2008       2007       2008       2007 Interest income:     Interest and fees on loans $ 24,406 $ 24,414 $ 49,376 $ 48,348 Interest on securities: Taxable 8,302 7,839 16,718 15,631 Nontaxable 786 759 1,566 1,427 Dividends on corporate stock and Federal Home Loan Bank stock 489 685 1,109 1,403 Other interest income     50       184       190       375 Total interest income     34,033       33,881       68,959       67,184 Interest expense: Deposits 9,248 13,215 21,147 26,192 Federal Home Loan Bank advances 7,794 5,112 15,093 10,080 Junior subordinated debentures 509 338 847 676 Other interest expense     275       289       589       439 Total interest expense     17,826       18,954       37,676       37,387 Net interest income 16,207 14,927 31,283 29,797 Provision for loan losses     1,400       300       1,850       600 Net interest income after provision for loan losses     14,807       14,627       29,433       29,197 Noninterest income: Wealth management services: Trust and investment advisory fees 5,321 5,252 10,663 10,290 Mutual fund fees 1,445 1,352 2,786 2,614 Financial planning, commissions and other service fees     884       889       1,459       1,459 Wealth management services 7,650 7,493 14,908 14,363 Service charges on deposit accounts 1,208 1,220 2,368 2,345 Merchant processing fees 1,914 1,829 3,186 3,033 Income from bank-owned life insurance 453 399 900 790 Net gains on loan sales and commissions on loans originated for others 433 510 924 774 Net (losses) gains on securities (53 ) (700 ) (98 ) 336 Other income     554       372       1,015       730 Total noninterest income     12,159       11,123       23,203       22,371 Noninterest expense: Salaries and employee benefits 10,411 10,285 20,754 20,097 Net occupancy 1,064 1,038 2,202 2,055 Equipment 977 861 1,921 1,693 Merchant processing costs 1,598 1,558 2,666 2,577 Outsourced services 742 535 1,378 1,054 Advertising and promotion 467 572 853 1,001 Legal, audit and professional fees 430 404 973 854 Amortization of intangibles 326 348 652 716 Debt prepayment penalties - - - 1,067 Other expenses     2,039       2,159       3,797       3,755 Total noninterest expense     18,054       17,760       35,196       34,869 Income before income taxes 8,912 7,990 17,440 16,699 Income tax expense     2,817       2,508       5,529       5,242 Net income   $ 6,095     $ 5,482     $ 11,911     $ 11,457   Weighted average shares outstanding - basic 13,381.1 13,339.6 13,369.6 13,375.7 Weighted average shares outstanding - diluted 13,567.0 13,616.4 13,550.9 13,667.6 Per share information: Basic earnings per share $ 0.45 $ 0.41 $ 0.89 $ 0.86 Diluted earnings per share $ 0.45 $ 0.40 $ 0.88 $ 0.84 Cash dividends declared per share $ 0.21 $ 0.20 $ 0.41 $ 0.40 Washington Trust Bancorp, Inc. and Subsidiaries SELECTED FINANCIAL HIGHLIGHTS (unaudited)     At or for the Quarters Ended June 30, Mar. 31, Dec. 31, Sept. 30, June 30, (Dollars in thousands, except per share amounts)   2008     2008     2007     2007     2007   Financial Data Total assets $ 2,732,989 $ 2,564,387 $ 2,539,940 $ 2,431,762 $ 2,393,882 Total loans 1,705,650 1,598,582 1,573,652 1,514,493 1,489,174 Total securities 790,064 747,053 751,778 688,709 676,204 Total deposits 1,609,542 1,635,025 1,646,205 1,655,887 1,669,089 Total shareholders’ equity 186,422 191,219 186,513 177,897 171,188 Net income 6,095 5,816 5,787 6,556 5,482   Per Share Data Basic earnings per share $ 0.45 $ 0.44 $ 0.43 $ 0.49 $ 0.41 Diluted earnings per share $ 0.45 $ 0.43 $ 0.43 $ 0.48 $ 0.40 Dividends declared per share $ 0.21 $ 0.20 $ 0.20 $ 0.20 $ 0.20 Book value per share $ 13.91 $ 14.30 $ 13.97 $ 13.33 $ 12.87 Tangible book value per share $ 9.34 $ 9.70 $ 9.33 $ 8.66 $ 8.61 Market value per share $ 19.70 $ 24.82 $ 25.23 $ 26.97 $ 25.21   Key Ratios Return on average assets 0.92 % 0.90 % 0.94 % 1.10 % 0.92 % Return on average equity 12.88 % 12.22 % 12.73 % 14.99 % 12.57 %   Capital Ratios Tier 1 risk-based capital 9.44 % 9.23 % 9.10 % 9.11 % 9.40 % Total risk-based capital 10.69 % 10.49 % 10.39 % 10.43 % 10.73 % Tier 1 leverage ratio 6.32 % 5.93 % 6.09 % 6.11 % 6.16 %   Average Yields (taxable equivalent basis) Assets Residential real estate loans 5.55 % 5.55 % 5.41 % 5.35 % 5.31 % Commercial and other loans 6.51 % 6.95 % 7.39 % 7.62 % 7.64 % Consumer loans 5.48 % 6.18 % 6.74 % 7.01 % 6.98 % Total loans 5.98 % 6.28 % 6.51 % 6.62 % 6.59 % Short-term investments, federal funds sold and other 1.64 % 2.69 % 4.72 % 5.10 % 4.36 % Taxable debt securities 4.86 % 5.06 % 5.19 % 5.16 % 5.17 % Nontaxable debt securities 5.67 % 5.68 % 5.59 % 5.61 % 5.65 % Corporate stocks and FHLBB stock 4.46 % 5.89 % 7.00 % 7.03 % 7.15 % Total securities 4.87 % 5.11 % 5.33 % 5.31 % 5.32 % Total interest-earning assets 5.60 % 5.89 % 6.12 % 6.20 % 6.16 % Liabilities NOW accounts 0.19 % 0.19 % 0.20 % 0.17 % 0.15 % Money market accounts 1.79 % 3.13 % 3.93 % 3.90 % 3.92 % Savings accounts 0.50 % 1.00 % 1.32 % 1.32 % 1.35 % Time deposits 3.88 % 4.38 % 4.55 % 4.60 % 4.61 % FHLBB advances 4.15 % 4.37 % 4.56 % 4.44 % 4.35 % Junior subordinated debentures 6.34 % 5.99 % 5.91 % 5.91 % 5.98 % Other 4.60 % 4.32 % 4.36 % 4.47 % 4.51 % Total interest-bearing liabilities 3.18 % 3.63 % 3.85 % 3.78 % 3.77 %   Interest rate spread (taxable equivalent basis) 2.42 % 2.26 % 2.27 % 2.42 % 2.39 % Net interest margin (taxable equivalent basis) 2.71 % 2.59 % 2.65 % 2.81 % 2.76 % Washington Trust Bancorp, Inc. and Subsidiaries SELECTED FINANCIAL HIGHLIGHTS (unaudited)       At or for the Quarters Ended   June 30,   Mar. 31,   Dec. 31,   Sept. 30,   June 30, (Dollars in thousands)     2008     2008       2007       2007       2007 Wealth Management Assets Under Administration Balance at beginning of period $ 3,878,746 $ 4,014,352 $ 4,025,877 $ 3,867,674 $ 3,715,987 Net investment (depreciation) appreciation & income 10,420 (201,915 ) (11,751 ) 122,424 113,656 Net customer cash flows     34,429     66,309       226       35,779       38,031 Balance at end of period   $ 3,923,595   $ 3,878,746     $ 4,014,352     $ 4,025,877     $ 3,867,674   Period End Balances Loans Commercial: Mortgages $ 361,623 $ 309,684 $ 278,821 $ 276,995 $ 265,560 Construction and development 60,606 62,489 60,361 48,899 43,755   Other     372,784     354,142       341,084       324,129       313,673 Total commercial 795,013 726,315 680,266 650,023 622,988 Residential: Mortgages 593,995 565,031 588,628 566,776 572,321   Homeowner construction     14,356     12,861       11,043       12,040       11,071 Total residential real estate 608,351 577,892 599,671 578,816 583,392 Consumer: Home equity lines 152,339 146,471 144,429 139,732 139,256 Home equity loans 94,316 96,883 99,827 99,798 97,253   Other     55,631     51,021       49,459       46,124       46,285   Total consumer     302,286     294,375       293,715       285,654       282,794   Total loans   $ 1,705,650   $ 1,598,582     $ 1,573,652     $ 1,514,493     $ 1,489,174 Deposits Demand deposits $ 187,865 $ 165,822 $ 175,542 $ 182,830 $ 177,210 NOW accounts 170,733 174,146 164,944 172,378 174,715 Money market accounts 305,860 327,562 321,600 312,257 290,046 Savings accounts 177,490 177,110 176,278 189,157 196,105 Time deposits     767,594     790,385       807,841       799,265       831,013 Total deposits   $ 1,609,542   $ 1,635,025     $ 1,646,205     $ 1,655,887     $ 1,669,089   Brokered deposits included in time deposits $ 113,725 $ 126,972 $ 129,798 $ 130,017 $ 159,297   Securities Available for Sale Amortized Unrealized Unrealized Fair (Dollars in thousands)       Cost   Gains   Losses   Value At June 30, 2008 U.S. Treasury obligations and obligations of U.S. government-sponsored agencies $ 82,002 $ 2,448 $ – $ 84,450 Mortgage-backed securities issued by U.S. government and government-sponsored agencies 588,967 2,445 (5,298 ) 586,114 States and political subdivisions 81,645 81 (1,465 ) 80,261 Trust preferred securities 37,985 – (7,627 ) 30,358 Corporate bonds 1,746 – (13 ) 1,733 Common and preferred stocks         7,593       337       (782 )     7,148 Total securities available for sale       $ 799,938     $ 5,311     $ (15,185 )   $ 790,064   At December 31, 2007 U.S. Treasury obligations and obligations of U.S. government-sponsored agencies $ 136,721 $ 2,888 $ (10 ) $ 139,599 Mortgage-backed securities issued by U.S. government and government-sponsored agencies 469,197 2,899 (2,708 ) 469,388 States and political subdivisions 80,634 499 (239 ) 80,894 Trust preferred securities 37,995 – (3,541 ) 34,454 Corporate bonds 13,940 161 – 14,101 Common and preferred stocks         12,096       2,974       (1,728 )     13,342 Total securities available for sale       $ 750,583     $ 9,421     $ (8,226 )   $ 751,778 Washington Trust Bancorp, Inc. and Subsidiaries SELECTED FINANCIAL HIGHLIGHTS (unaudited)       At or for the Quarters Ended   June 30,   Mar. 31,   Dec. 31,   Sept. 30,   June 30, (Dollars in thousands)     2008       2008       2007       2007       2007   Asset Quality Data Allowance for Loan Losses Balance at beginning of period $ 20,724 $ 20,277 $ 19,472 $ 19,327 $ 19,360 Provision charged to earnings 1,400 450 1,000 300 300 Charge-offs (219 ) (106 ) (225 ) (182 ) (346 ) Recoveries     58       103       30       27       13   Balance at end of period   $ 21,963     $ 20,724     $ 20,277     $ 19,472     $ 19,327     Past Due Loans Loans 30–59 Days Past Due Commercial categories $ 6,682 $ 2,240 $ 1,450 $ 726 $ 5,123 Residential mortgages 1,624 475 1,620 2,744 883 Consumer loans     476       43       73       282       92   Loans 30–59 days past due   $ 8,782     $ 2,758     $ 3,143     $ 3,752     $ 6,098     Loans 60–89 Days Past Due Commercial categories $ 2,091 $ 3,715 $ 1,313 $ 166 $ 443 Residential mortgages 1 344 39 220 512 Consumer loans     87       22       38       –       –   Loans 60-89 days past due   $ 2,179     $ 4,081     $ 1,390     $ 386     $ 955     Loans 90 Days or more Past Due Commercial categories $ 3,625 $ 3,088 $ 1,963 $ 1,347 $ 1,658 Residential mortgages 408 441 441 302 302 Consumer loans     –       36       86       76       53   Loans 90 days or more past due   $ 4,033     $ 3,565     $ 2,490     $ 1,725     $ 2,013     Total Past Due Loans Commercial categories $ 12,398 $ 9,043 $ 4,726 $ 2,239 $ 7,224 Residential mortgages 2,033 1,260 2,100 3,266 1,697 Consumer loans     563       101       197       358       145   Total past due loans   $ 14,994     $ 10,404     $ 7,023     $ 5,863     $ 9,066     Nonperforming Assets Commercial mortgages $ 1,991 $ 1,300 $ 1,094 $ 1,099 $ 1,385 Commercial construction and development – – – – – Other commercial 2,948 3,081 1,781 581 645 Residential real estate 1,072 1,111 1,158 731 698 Consumer     170       208       271       262       241   Total nonaccrual loans $ 6,181 $ 5,700 $ 4,304 $ 2,673 $ 2,969 Other real estate owned, net     –       –       -       -       -   Total nonperforming assets   $ 6,181     $ 5,700     $ 4,304     $ 2,673     $ 2,969     Total past due loans to total loans 0.88 % 0.65 % 0.45 % 0.39 % 0.61 % Nonperforming assets to total assets 0.23 % 0.22 % 0.17 % 0.11 % 0.12 % Nonaccrual loans to total loans 0.36 % 0.36 % 0.27 % 0.18 % 0.20 % Allowance for loan losses to nonaccrual loans 355.33 % 363.58 % 471.12 % 728.47 % 650.96 % Allowance for loan losses to total loans 1.29 % 1.30 % 1.29 % 1.29 % 1.30 % Washington Trust Bancorp, Inc. and Subsidiaries SELECTED FINANCIAL HIGHLIGHTS (unaudited)       Six Months Ended   June 30,   June 30, (Dollars and shares in thousands, except per share amounts)     2008       2007     Operating Results Net interest income $ 31,283 $ 29,797 Provision for loan losses 1,850 600 Net (losses) gains on securities (98 ) 336 Other noninterest income 23,301 22,035 Noninterest expenses 35,196 34,869 Income tax expense 5,529 5,242 Net income 11,911 11,457   Basic earnings per share $ 0.89 $ 0.86 Diluted earnings per share $ 0.88 $ 0.84 Dividends declared per share $ 0.41 $ 0.40   Weighted average shares outstanding - basic 13,369.6 13,375.7 Weighted average shares outstanding - diluted 13,550.9 13,667.6 Shares outstanding at end of period 13,398.2 13,305.1   Key Ratios Return on average assets 0.91 % 0.96 % Return on average equity 12.55 % 13.12 % Interest rate spread (taxable equivalent basis) 2.34 % 2.43 % Net interest margin (taxable equivalent basis) 2.65 % 2.79 %   Allowance for Loan Losses Balance at beginning of period $ 20,277 $ 18,894 Provision charged to earnings 1,850 600 Charge-offs (326 ) (370 ) Recoveries     162       203   Balance at end of period   $ 21,963     $ 19,327     Net charge-offs to average loans .01 % .01 %   Wealth Management Assets Under Administration Balance at beginning of period $ 4,014,352 $ 3,609,180 Net investment (depreciation) appreciation and income (191,495 ) 161,725 Net customer cash flows     100,738       96,769   Balance at end of period   $ 3,923,595     $ 3,867,674   The following tables present average balance and interest rate information. Tax-exempt income is converted to a fully taxable equivalent basis using the statutory federal income tax rate. For dividends on corporate stocks, the 70% federal dividends received deduction is also used in the calculation of tax equivalency. Unrealized gains (losses) on available for sale securities are excluded from the average balance and yield calculations. Nonaccrual and renegotiated loans, as well as interest earned on these loans (to the extent recognized in the Consolidated Statements of Income) are included in amounts presented for loans. Washington Trust Bancorp, Inc. and Subsidiaries CONSOLIDATED AVERAGE BALANCE SHEETS (unaudited)     Three months ended June 30,   2008     2007   Average     Yield/   Average     Yield/ (Dollars in thousands)   Balance   Interest   Rate   Balance   Interest   Rate Assets Residential real estate loans $ 598,274 $ 8,257 5.55 % $ 590,226 $ 7,812 5.31 % Commercial and other loans 749,468 12,135 6.51 % 615,606 11,730 7.64 % Consumer loans     297,802     4,059   5.48 %     282,408     4,911   6.98 % Total loans 1,645,544 24,451 5.98 % 1,488,240 24,453 6.59 % Short-term investments, federal funds sold and other 12,214 50 1.64 % 16,951 184 4.36 % Taxable debt securities 687,461 8,302 4.86 % 608,223 7,839 5.17 % Nontaxable debt securities 81,649 1,152 5.67 % 78,964 1,112 5.65 % Corporate stocks and FHLBB stock     49,169     546   4.46 %     42,806     763   7.15 % Total securities     830,493     10,050   4.87 %     746,944     9,898   5.32 % Total interest-earning assets 2,476,037 34,501 5.60 % 2,235,184 34,351 6.16 % Non interest-earning assets     165,806             158,903         Total assets   $ 2,641,843           $ 2,394,087         Liabilities and Shareholders’ Equity NOW accounts $ 167,755 $ 81 0.19 % $ 168,742 $ 64 0.15 % Money market accounts 315,075 1,399 1.79 % 293,245 2,869 3.92 % Savings accounts 174,897 218 0.50 % 196,647 661 1.35 % Time deposits 782,825 7,550 3.88 % 837,223 9,621 4.61 % FHLBB advances 755,455 7,794 4.15 % 471,026 5,112 4.35 % Junior subordinated debentures 32,311 509 6.34 % 22,681 338 5.98 % Other     24,016     275   4.60 %     25,764     289   4.51 % Total interest-bearing liabilities 2,252,334 17,826 3.18 % 2,015,328 18,954 3.77 % Demand deposits 171,613 173,473 Other liabilities 28,607 30,852 Shareholders’ equity     189,289             174,434         Total liabilities and shareholders’ equity   $ 2,641,843           $ 2,394,087         Net interest income (FTE)       $ 16,675           $ 15,397     Interest rate spread 2.42 % 2.39 % Net interest margin 2.71 % 2.76 % Interest income amounts presented in the preceding table include the following adjustments for taxable equivalency: (Dollars in thousands)       Three months ended June 30,   2008   2007 Commercial and other loans $45 $39 Nontaxable debt securities 366 353 Corporate stocks   57   78 Total   $468   $470 Washington Trust Bancorp, Inc. and Subsidiaries CONSOLIDATED AVERAGE BALANCE SHEETS (unaudited)     Six months ended June 30,   2008     2007   Average     Yield/   Average     Yield/ (Dollars in thousands)   Balance   Interest   Rate   Balance   Interest   Rate Assets Residential real estate loans $ 599,919 $ 16,554 5.55 % $ 591,138 $ 15,585 5.32 % Commercial and other loans 728,270 24,356 6.73 % 601,425 23,102 7.75 % Consumer loans     295,301     8,556   5.83 %     281,992     9,736   6.96 % Total loans 1,623,490 49,466 6.13 % 1,474,555 48,423 6.62 % Short-term investments, federal funds sold and other 16,600 190 2.30 % 15,231 375 4.97 % Taxable debt securities 678,081 16,718 4.96 % 615,562 15,631 5.12 % Nontaxable debt securities 81,337 2,295 5.67 % 74,332 2,090 5.67 % Corporate stocks and FHLBB stock     48,014     1,232   5.16 %     43,136     1,563   7.30 % Total securities     824,032     20,435   4.99 %     748,261     19,659   5.30 % Total interest-earning assets 2,447,522 69,901 5.74 % 2,222,816 68,082 6.18 % Non interest-earning assets     167,258             164,934         Total assets   $ 2,614,780           $ 2,387,750         Liabilities and Shareholders’ Equity NOW accounts $ 165,132 $ 159 0.19 % $ 169,206 $ 132 0.16 % Money market accounts 321,476 3,951 2.47 % 293,613 5,680 3.90 % Savings accounts 174,815 650 0.75 % 201,086 1,371 1.38 % Time deposits 797,296 16,387 4.13 % 834,870 19,009 4.59 % FHLBB advances 713,786 15,093 4.25 % 469,246 10,080 4.33 % Junior subordinated debentures 27,496 847 6.20 % 22,681 676 6.01 % Other     26,631     589   4.45 %     19,316     439   4.58 % Total interest-bearing liabilities 2,226,632 37,676 3.40 % 2,010,018 37,387 3.75 % Demand deposits 168,773 172,232 Other liabilities 29,571 30,786 Shareholders’ equity     189,804             174,714         Total liabilities and shareholders’ equity   $ 2,614,780           $ 2,387,750         Net interest income (FTE)       $ 32,225           $ 30,695     Interest rate spread 2.34 % 2.43 % Net interest margin 2.65 % 2.79 % Interest income amounts presented in the preceding table include the following adjustments for taxable equivalency: (Dollars in thousands)       Six months ended June 30,   2008   2007 Commercial and other loans $90 $75 Nontaxable debt securities 729 663 Corporate stocks   123   160 Total   $942   $898