• Washington Trust Bancorp, Inc.
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  • Washington Trust Announces Third Quarter Earnings; Restatement Announced for Period Ended June 30, 2007
    Company Release - 10/30/2007 17:05

    WESTERLY, R.I.--(BUSINESS WIRE)--

    Washington Trust Bancorp, Inc. (NASDAQ Global Market; symbol: WASH), parent company of The Washington Trust Company, today announced third quarter 2007 net income of $6.6 million, or 48 cents per diluted share, substantially the same as the amounts reported for the third quarter of 2006. The returns on average equity and average assets for the third quarter of 2007 were 14.99% and 1.10%, respectively, compared to 15.62% and 1.09%, respectively, for the third quarter of 2006.

        Highlights included:
    
        --  Wealth management assets surpassed $4 billion for the first
            time at September 30, 2007.
    
        --  Revenues from wealth management services are up by 11 percent
            over the third quarter of 2006.
    
        --  Commercial loan growth continued, with increases of 4 percent
            in the third quarter of 2007 and 16 percent from the balance
            at September 30, 2006.
    
        --  Asset quality remains good, with decreases in nonperforming
            assets and loan delinquencies during the quarter.
    
        --  We announced the restatement of our financial statements as of
            and for the period ending June 30, 2007 to correct the
            accounting treatment related to the sale of certain
            held-to-maturity investment securities conducted in the second
            quarter of 2007.
    

    "While many institutions have been negatively affected by turmoil in the capital markets, I'm pleased to report that Washington Trust posted solid quarterly earnings," stated John C. Warren, Washington Trust Chairman and CEO. "During these difficult times, Washington Trust has benefited from our diverse business model, consistent credit policies and underwriting standards, and strong brand. Commercial lending activity has been steady throughout the year and we were recently named the leading SBA lender in dollar volume of loans in Rhode Island. Our asset quality remains good.

    The momentum continued for our wealth management area, as assets under management surpassed $4.0 billion for the first time in our 207-year history. We have a superb team of wealth management professionals who have helped us become one of the premier wealth management firms for high net worth clients and institutions in the New England region.

    Unfortunately, a recent review of the accounting treatment of certain transactions relating to the planned early adoption of SFAS 159 has resulted in the need to restate our second quarter financial statements. We regret the error, but note that the corrected accounting treatment related to the sale of certain held-to-maturity securities had little impact on profitability in the third quarter."

    The Corporation has restated its previously reported operating results for the six-month period ended June 30, 2007 with a reduction in net income of $828 thousand, or 6 cents per diluted share. This restatement is solely related to accounting errors in connection with sales of certain held-to-maturity investment securities conducted in the second quarter of 2007. Including the effect of this restatement, net income for the nine months ended September 30, 2007 amounted to $18.0 million, down $815 thousand, or 4 percent, from the same period in 2006. The Corporation earned $1.32 per share on a diluted basis for the nine months ended September 30, 2007, compared to $1.37 per diluted share for the same period a year ago. Further information regarding this restatement is presented under the caption "Restatement of Previously Reported Results" later in this press release.

    For the nine months ended September 30, 2007, the returns on average equity and average assets were 13.74% and 1.01%, respectively, compared to 15.33% and 1.04%, respectively, for the comparable period in 2006.

    Net interest income totaled $15.3 million for the third quarter of 2007, up $383 thousand, or 3 percent, compared to the second quarter of 2007 and down $556 thousand, or 4 percent, from the third quarter a year ago. Net interest income for the three months ended September 30, 2006 included a catch-up for the delayed second quarter 2006 dividend on the Corporation's investment in Federal Home Loan Bank of Boston ("FHLBB") stock of approximately $450 thousand. Excluding the impact of the additional FHLBB dividend, net interest income for the third quarter of 2007 was down 0.7% from the same quarter in 2006. On a year to date basis, net interest income declined $1.4 million, or 3 percent, from the same period in 2006.

    The net interest margin (annualized tax-equivalent net interest income as a percentage of average earning assets) for the third quarter 2007 was 2.81%, up 5 basis points from the second quarter of 2007 and down 5 basis points from the third quarter of 2006. Excluding the 8 basis point impact of the additional FHLBB dividend recorded in the third quarter of 2006, net interest margin for the third quarter of 2007 was 3 basis points higher than the same period a year ago. The increase in net interest margin from the second quarter of 2007 was primarily attributable to seasonal growth in lower cost transactional account balances. For the nine months ended September 30, 2007 net interest margin was 2.79%, compared to 2.82% for the same period a year ago.

    Excluding net realized gains and losses on securities, noninterest income amounted to $11.9 million for the third quarter of 2007, up $702 thousand from the same quarter a year ago. On a year to date basis, noninterest income, excluding net realized securities gains and losses, increased $2.6 million, or 8 percent, from the same period in 2006. This increase was largely attributable to higher revenues from wealth management services. Wealth management revenues for the three and nine-month periods ended September 30, 2007 were up $712 thousand and $1.9 million, respectively. Wealth management assets under administration totaled $4.113 billion at September 30, 2007, up $165 million, or 4 percent, in the third quarter of 2007 and up $418 million, or 11 percent, from December 31, 2006. Financial market appreciation as well as successful business development efforts and customer cash flows have contributed to this growth.

    Included in noninterest income were net realized gains on sales of securities of $336 thousand and $459 thousand, respectively, for the nine month periods ended September 30, 2007 and 2006.

    Noninterest expenses amounted to $17.3 million for the third quarter of 2007, up $701 thousand, or 4 percent, from the same quarter a year ago. For the nine months ended September 30, 2007, noninterest expenses totaled $52.2 million, up $2.6 million, or 5 percent, from the same period in 2006. Included in this increase was $1.1 million in debt prepayment penalties that were incurred in the first quarter of 2007 as a result of prepayments of higher cost FHLBB advances. Excluding the debt prepayment penalty expense, noninterest expenses for the nine months ended September 30, 2007 increased $1.5 million, or 3 percent, over the same nine-month period last year.

    Total assets were $2.432 billion at September 30, 2007, up $32.6 million from December 31, 2006. Total loans grew $54.5 million, or 4 percent, during the nine months ended September 30, 2007 and amounted to $1.5 billion. Commercial loans increased $62.6 million, or 11 percent, residential loans declined by $9.9 million, or 2 percent, and consumer loans increased by $1.7 million, or 1 percent, during the nine months ended September 30, 2007. The investment securities portfolio totaled $688.7 million at September 30, 2007, down $15.1 million from December 31, 2006. Included in the investment securities portfolio at September 30, 2007 were mortgage-backed securities with a fair value of $366.0 million. All of the Corporation's mortgage-backed securities are issued by U.S. Government sponsored agencies.

    Total deposits decreased by $22.1 million from December 31, 2006. Excluding brokered certificates of deposit, in-market deposits were up $21.9 million, or 3 percent, during the nine months ended September 30, 2007. Declines in demand and savings deposits were offset by increases in money market accounts and consumer and commercial certificates of deposit. FHLBB advances totaled $502.3 million at September 30, 2007, up $27.7 million from December 31, 2006. Other borrowings increased $21.7 million in the nine months ended September 30, 2007, mainly due to an increase in securities sold under repurchase agreements.

    During the third quarter of 2007, the Corporation recognized a liability of $5.9 million, with a corresponding increase in goodwill, related to the acquisition of Weston Financial Group, Inc. in August 2005. This amount represents the 2007 obligation under the terms of the acquisition agreement, which provides for a contingent payment earn-out in each year during the three-year period ending December 31, 2008.

    Asset quality remains good, with nonperforming assets (nonaccrual loans and property acquired though foreclosure) amounting to $2.7 million, or 0.11% of total assets, at September 30, 2007, compared to $2.7 million, or 0.11% of total assets, at December 31, 2006, and $2.6 million, or 0.11% of total assets, a year ago. There are no assets acquired through foreclosure on the balance sheet at September 30, 2007.

    Total 30 day+ delinquencies declined by $3.2 million during the third quarter of 2007 with a $5.0 million decrease in the commercial category, a $1.6 million increase in the residential mortgage category and a $213 thousand increase in the consumer loan category. Total 30 day+ delinquencies amounted to $5.9 million, or 0.39% of total loans, at September 30, 2007, compared to $7.2 million, or 0.49% of total loans, at December 31, 2006, and $4.0 million, or 0.28% of total loans, at September 30, 2006. The Corporation has never offered a sub-prime or Alt-A residential mortgage loan program. Total residential mortgage and consumer loan 30 day+ delinquencies amounted to $3.6 million, or 0.42% of these loans, at September 30, 2007, compared to $1.4 million, or 0.16% of these loans, at December 31, 2006. Total 90 day+ delinquencies in the residential mortgage and consumer loans portfolios amounted to $302 thousand (one loan) and $76 thousand (two loans), respectively, as of September 30, 2007. Total nonaccrual loans, which include the 90 day+ delinquencies, amounted to $731 thousand and $262 thousand in the residential mortgage and consumer loan categories, respectively, at September 30, 2007.

    The allowance for loan losses was $19.5 million, or 1.29% of total loans, at September 30, 2007, compared to $18.9 million, or 1.29% of total loans, at December 31, 2006, and $18.6 million, or 1.31% of total loans, at September 30, 2006. Net charge-offs amounted to $322 thousand for the nine months ended September 30, 2007, compared to net charge-offs of $173 thousand for the same period a year ago. The Corporation's loan loss provision charged to earnings amounted to $300 thousand and $900 thousand, respectively, for the three and nine months ended September 30, 2007, consistent with the amounts recorded in 2006.

    Total shareholders' equity amounted to $177.9 million at September 30, 2007, compared to $173.1 million at December 31, 2006. Under the Corporation's 2006 Stock Repurchase Plan, 185,400 shares were repurchased at a total cost of $4.8 million during the nine months ended September 30, 2007, including 35,700 shares in the third quarter. Book value per share as of September 30, 2007 and December 31, 2006 amounted to $13.33 and $12.89, respectively.

    Restatement of Previously Reported Results:

    In February 2007, Statement of Financial Accounting Standards No. 159, "The Fair Value Option for Financial Assets and Liabilities" ("SFAS 159"), was issued. SFAS 159 generally permits the measurement of selected eligible financial instruments at fair value at specified election dates. For companies with a December 31 fiscal year, SFAS 159 permits early adoption retroactive to January 1, 2007, with the requirement that the early adoption election be made within 120 days of the beginning of the fiscal year of adoption, subject to certain other requirements. For Washington Trust, the early adoption election could have been made no later than April 30, 2007.

    Based on our assessment of the provisions of SFAS 159, on April 12, 2007 we decided to implement early adoption of SFAS 159 and, in connection with this, we selected the fair value option for certain U.S. Government sponsored agency and mortgage-backed securities with lower coupons and slower prepayment characteristics in the held-to-maturity portfolio totaling approximately $61.9 million. A portfolio restructuring plan was also undertaken to reduce interest rate risk and improve net interest margin, which included the sale of these securities. On Friday April 13, 2007 we executed sale trades for these securities. At the time of the sales transactions the historical amortized cost basis of the sold securities exceeded the total sales price by $1.7 million.

    On Monday April 16, 2007 additional information became available regarding clarifications of the interpretation of the application of SFAS 159 by applicable regulatory and accounting industry bodies that led us to conclude that the application of SFAS 159 to our transactions might be inconsistent with the intent and spirit of SFAS 159. Consequently, we decided not to early-adopt SFAS 159. In connection with that decision, we were able to promptly execute purchase trade transactions for the identical securities prior to the sales settlement date for approximately $49.9 million of the $61.9 million total, with the intent that, in substance, the sale transaction would be offset for these securities. The reacquired securities were retained in the held-to-maturity portfolio at the original pre-sale amortized cost and a $1.4 million loss on the sale of the reacquired securities was not recognized. The sale and reacquisition of the $49.9 million in held-to-maturity securities as well as certain other transactions conducted in connection with the portfolio restructuring strategy were similarly treated in an offset manner and these transaction amounts were incorrectly omitted from the consolidated statement of cash flows for the period ended June 30, 2007; the correction for these other transactions had no effect on net income. For the reacquired securities, the reacquisition price exceeded the selling price by $153 thousand and an expense of this amount was recognized in other noninterest expense in the second quarter of 2007. Also in the second quarter of 2007, a realized securities loss in the amount of $261 thousand was recognized on the securities that were sold but not reacquired. We discussed the accounting treatment described above with our independent registered public accounting firm in connection with its quarterly review process.

    Based on a recent review of these transactions, in consultation with our independent registered public accounting firm, we now have determined that the offsetting of the April 13, 2007 sales and subsequent reacquisition of identical securities was incorrect and that the sale transactions should have been recognized with a $1.4 million realized securities loss and corresponding reduction in the carrying value of the reacquired securities. For the quarter ended June 30, 2007, the accounting corrections for these transactions, including recognition of the realized loss on the sales transactions and other related changes, result in an after-tax reduction in net income of $828 thousand, or 6 cents per diluted share, from $6.3 million, or 46 cents per diluted share, to $5.5 million, or 40 cents per diluted share. For the six-month period ended June 30, 2007 the accounting corrections result in a reduction in net income from $12.3 million, or 90 cents per diluted share, to $11.5 million, or 84 cents per diluted share.

    Also, we now have determined that the remaining held-to-maturity portfolio should have been reclassified to the available-for-sale category. This reclassification has been recognized as of April 13, 2007. Accordingly, the effect on the June 30, 2007 consolidated balance sheet was to reclassify the portfolio of held-to-maturity securities to the available-for-sale category, which resulted in a $1.6 million reduction in shareholders' equity. The Corporation will not be able to classify securities in the held-to-maturity category for a period of two years from the April 13, 2007 sales date as a result of this action. The Corporation and its subsidiary bank remain well-capitalized by all regulatory capital measurements.

    The correction to reduce the cost basis of the reacquired securities results in a change to the accretion of discount for these securities, which is recognized in interest income until their maturity dates. The resulting additional amount of accretion income recognized on these securities was $79 thousand in each of the quarters ended June 30, 2007 and September 30, 2007.

    A summary of the changes to amounts previously reported by the Corporation accompanies this press release. The Corporation will file an amended Form 10-Q for the quarter ended June 30, 2007 reflecting the necessary adjustments with the Securities and Exchange Commission as soon as practicable. The Corporation will also file an amended Form 10-Q for the quarter ended March 31, 2007 with the Securities and Exchange Commission as soon as practicable to add a subsequent event footnote to disclose the April 2007 transactions and related matters described above.

    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 Wednesday, October 31, 2007 at 8:30 a.m. (Eastern Time) to discuss the Corporation's third quarter results. This call is being webcast by VCall 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) 660-6853, and entering Account #: 286 and Conference ID #: 254761. The replay will be available until 11:59 p.m. on November 30, 2007.

    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 Market(R) under the symbol WASH. Investor information is available on the Corporation's web site: www.washtrust.com.

    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, our expected restatement of our historical financial statements, 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, changes in interest rates, reductions in the market value of wealth management assets under administration, reductions in loan demand, reductions in deposit levels necessitating increased borrowing to fund loans and investments, changes in loan 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, the finalization of the financial accounting related to the restatement; unanticipated consequences of the restatement; our ability to coordinate and complete the restatement and file our amended Quarterly Report on Form 10-Q for the period ended June 30, 2007; the review and audit by our independent auditor of our 2007 financial statements; the consequences of the reclassification of the held-to-maturity securities portfolio to the available-for-sale category; the financial impact of the foregoing; and changes in the assumptions used in making such forward-looking statements. 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
                        FINANCIAL SUMMARY (unaudited)
    
                                              Three Months Ended
                                     -------------------------------------
                                                   Restated
                                     September 30, June 30,  September 30,
    (Dollars and shares in
     thousands, except per share
     amounts)                            2007        2007        2006
                                     ------------- --------- -------------
    
    Operating Results
    --------------------------------
    Net interest income                   $15,310   $14,927       $15,866
    Provision for loan losses                 300       300           300
    Net losses on sales of
     securities                                 -      (700)         (365)
    Other noninterest income               11,850    11,823        11,148
    Noninterest expenses                   17,312    17,760        16,611
    Income tax expense                      2,992     2,508         3,160
    Net income                              6,556     5,482         6,578
    
    Per Share
    --------------------------------
    Basic earnings                          $0.49     $0.41         $0.49
    Diluted earnings                        $0.48     $0.40         $0.48
    Dividends declared                      $0.20     $0.20         $0.19
    
    Weighted Average Shares
     Outstanding
    --------------------------------
           Basic                         13,323.6  13,339.6      13,436.6
           Diluted                       13,564.1  13,616.4      13,726.3
    
    Key Ratios
    --------------------------------
    Return on average assets                 1.10%     0.92%         1.09%
    Return on average equity                14.99%    12.57%        15.62%
    Interest rate spread (taxable
     equivalent basis)                       2.42%     2.39%         2.51%
    Net interest margin (taxable
     equivalent basis)                       2.81%     2.76%         2.86%
    
    Allowance for Loan Losses
    --------------------------------
    Balance at beginning of period        $19,327   $19,360       $18,480
    Provision charged to earnings             300       300           300
    Net charge-offs                          (155)     (333)         (135)
                                     ------------- --------- -------------
    Balance at end of period              $19,472   $19,327       $18,645
                                     ------------- --------- -------------
    
    Washington Trust Bancorp, Inc. and Subsidiaries
                        FINANCIAL SUMMARY (unaudited)
    
                                                    Nine Months Ended
                                               ---------------------------
                                               September 30, September 30,
    (Dollars and shares in thousands, except
     per share amounts)                            2007          2006
                                               ------------- -------------
    
    Operating Results
    ------------------------------------------
    Net interest income                             $45,107       $46,498
    Provision for loan losses                           900           900
    Net realized gains on securities                    336           459
    Other noninterest income                         33,885        31,291
    Noninterest expenses                             52,181        49,595
    Income tax expense                                8,234         8,925
    Net income                                       18,013        18,828
    
    Per Share
    ------------------------------------------
    Basic earnings                                    $1.35         $1.40
    Diluted earnings                                  $1.32         $1.37
    Dividends declared                                $0.60         $0.57
    
    Weighted Average Shares Outstanding
    ------------------------------------------
           Basic                                   13,358.1      13,414.6
           Diluted                                 13,612.7      13,708.2
    
    Key Ratios
    ------------------------------------------
    Return on average assets                           1.01%         1.04%
    Return on average equity                          13.74%        15.33%
    Interest rate spread (taxable equivalent
     basis)                                            2.42%         2.49%
    Net interest margin (taxable equivalent
     basis)                                            2.79%         2.82%
    
    Allowance for Loan Losses
    ------------------------------------------
    Balance at beginning of period                  $18,894       $17,918
    Provision charged to earnings                       900           900
    Net charge-offs                                    (322)         (173)
                                               ------------- -------------
    Balance at end of period                        $19,472       $18,645
                                               ------------- -------------
    
    
    
    
                                               Three Months   Nine Months
                                                   Ended         Ended
    (Dollars and shares in thousands, except   September 30, September 30,
     per share amounts)                             2007          2007
                                               ------------- -------------
    
    Wealth Management Assets Under
     Administration
    ------------------------------------------
    Balance at beginning of period               $3,948,390    $3,694,813
    Net market appreciation and income              122,424       284,149
    Net customer cash flows                          42,104       133,956
                                               ------------- -------------
    Balance at end of period                     $4,112,918    $4,112,918
                                               ------------- -------------
    
    Washington Trust Bancorp, Inc. and Subsidiaries
                        FINANCIAL SUMMARY (unaudited)
    
    (Dollars and shares in
     thousands, except per share
     amounts)                     September 30, December 31, September 30,
    Period-End Balance Sheet          2007          2006         2006
    ----------------------------- ------------- ------------ -------------
    Assets                           $2,431,762   $2,399,165    $2,403,266
    Total securities                    688,709      703,851       741,350
    Loans:
           Commercial and other:
             Mortgages                  276,995      282,019       274,635
             Construction and
              development                48,899       32,233        29,653
             Other                      324,129      273,145       257,026
                                  ------------- ------------ -------------
           Total commercial and
            other                       650,023      587,397       561,314
           Residential real
            estate:
             Mortgages                  566,776      577,522       572,399
             Homeowner
              construction               12,040       11,149        14,973
                                  ------------- ------------ -------------
           Total residential real
            estate                      578,816      588,671       587,372
           Consumer:
             Home equity lines          139,732      145,676       147,897
             Home equity loans           99,798       93,947        90,711
             Other                       46,124       44,295        41,190
                                  ------------- ------------ -------------
           Total consumer               285,654      283,918       279,798
                                  ------------- ------------ -------------
           Total loans                1,514,493    1,459,986     1,428,484
    Deposits:
           Demand deposits              182,830      186,533       189,329
           NOW accounts                 172,378      175,479       172,317
           Money market accounts        312,257      286,998       295,431
           Savings accounts             189,157      205,998       193,029
           Time deposits                799,265      822,989       850,080
                                  ------------- ------------ -------------
           Total deposits             1,655,887    1,677,997     1,700,186
    Brokered deposits included in
     time deposits                      130,017      175,618       186,184
    Federal Home Loan Bank
     advances                           502,265      474,561       464,148
    Shareholders' equity                177,897      173,056       172,420
    
    Capital Ratios
    -----------------------------
    Tier 1 risk-based capital             9.11%        9.57%         9.55%
    Total risk-based capital             10.43%       10.96%        10.96%
    Tier 1 leverage ratio                 6.11%        6.01%         5.81%
    
    Share Information
    -----------------------------
    Shares outstanding at end of
     period                            13,350.5     13,429.7      13,445.1
    Book value per share                 $13.33       $12.89        $12.82
    Tangible book value per share         $8.66        $8.61         $8.53
    Market value per share               $26.97       $27.89        $26.51
    
    Credit Quality
    -----------------------------
    Nonaccrual loans:
           Commercial:
             Mortgages                   $1,099         $981          $436
             Construction and
              development                     -            -             -
             Other                          581          831           608
           Residential real
            estate                          731          721         1,004
           Consumer                         262          190           132
                                  ------------- ------------ -------------
           Total nonaccrual loans        $2,673       $2,723        $2,180
    Other real estate owned, net              -            -           402
    Nonperforming assets to total
     assets                               0.11%        0.11%         0.11%
    Nonaccrual loans to total
     loans                                0.18%        0.19%         0.15%
    Allowance for loan losses to
     nonaccrual loans                   728.47%      693.87%       855.28%
    Allowance for loan losses to
     total loans                          1.29%        1.29%         1.31%
    
    Assets Under Administration
    -----------------------------
    Market value                     $4,112,918   $3,694,813    $3,550,965
    
    Washington Trust Bancorp, Inc. and Subsidiaries
                         CONSOLIDATED BALANCE SHEETS
    
                                                       (unaudited)
    (Dollars in thousands)                      September 30, December 31,
                                                    2007         2006
    ------------------------------------------- ------------- ------------
    Assets:
    Cash and due from banks                          $31,521      $54,337
    Federal funds sold                                21,975       16,425
    Other short-term investments                       1,516        1,147
    Mortgage loans held for sale                       2,095        2,148
    Securities:
     Available for sale, at fair value;
      amortized cost $691,836 in 2007 and
      $525,966 in 2006                               688,709      526,396
     Held to maturity, at cost; fair value
      $175,369 in 2006                                     -      177,455
    ------------------------------------------- ------------- ------------
     Total securities                                688,709      703,851
    Federal Home Loan Bank stock, at cost             28,727       28,727
    Loans:
      Commercial and other                           650,023      587,397
      Residential real estate                        578,816      588,671
      Consumer                                       285,654      283,918
    ------------------------------------------- ------------- ------------
      Total loans                                  1,514,493    1,459,986
     Less allowance for loan losses                   19,472       18,894
    ------------------------------------------- ------------- ------------
     Net loans                                     1,495,021    1,441,092
    Premises and equipment, net                       25,790       24,307
    Accrued interest receivable                       12,030       11,268
    Investment in bank-owned life insurance           40,936       39,770
    Goodwill                                          50,479       44,558
    Identifiable intangible assets, net               11,759       12,816
    Other assets                                      21,204       18,719
    ------------------------------------------- ------------- ------------
     Total assets                                 $2,431,762   $2,399,165
    ------------------------------------------- ------------- ------------
    
    Liabilities:
    Deposits:
     Demand deposits                                $182,830     $186,533
     NOW accounts                                    172,378      175,479
     Money market accounts                           312,257      286,998
     Savings accounts                                189,157      205,998
     Time deposits                                   799,265      822,989
    ------------------------------------------- ------------- ------------
     Total deposits                                1,655,887    1,677,997
    Dividends payable                                  2,676        2,556
    Federal Home Loan Bank advances                  502,265      474,561
    Junior subordinated debentures                    22,681       22,681
    Other borrowings                                  36,403       14,684
    Accrued expenses and other liabilities            33,953       33,630
    ------------------------------------------- ------------- ------------
     Total liabilities                             2,253,865    2,226,109
    ------------------------------------------- ------------- ------------
    
    Shareholders' Equity:
    Common stock of $.0625 par value;
     authorized 30,000,000 shares;
      issued 13,492,110 shares in 2007 and 2006          843          843
    Paid-in capital                                   34,821       35,893
    Retained earnings                                151,537      141,548
    Accumulated other comprehensive loss              (5,587)      (3,515)
    Treasury stock, at cost; 141,646 shares in
     2007 and 62,432 in 2006                          (3,717)      (1,713)
    ------------------------------------------- ------------- ------------
     Total shareholders' equity                      177,897      173,056
    ------------------------------------------- ------------- ------------
     Total liabilities and shareholders' equity   $2,431,762   $2,399,165
    ------------------------------------------- ------------- ------------
    
    Washington Trust Bancorp, Inc. and Subsidiaries
                      CONSOLIDATED STATEMENTS OF INCOME
    
    (Dollars and shares in thousands,
     except per share amounts)                     (unaudited)
                                         Three Months       Nine Months
    Periods ended September 30,         2007     2006      2007     2006
    --------------------------------- -------- --------- -------- --------
    Interest income:
     Interest and fees on loans        $25,032  $23,430   $73,380  $68,457
     Interest on securities:
       Taxable                           7,565    8,493    23,196   25,553
       Nontaxable                          781      405     2,208    1,104
     Dividends on corporate stock and
      Federal Home Loan Bank stock         669    1,197     2,072    2,124
     Interest on federal funds sold
      and other short-term
      investments                          275      252       650      517
    --------------------------------- -------- --------- -------- --------
     Total interest income              34,322   33,777   101,506   97,755
    --------------------------------- -------- --------- -------- --------
    Interest expense:
     Deposits                           13,140   12,473    39,332   33,872
     Federal Home Loan Bank advances     5,243    5,011    15,323   16,115
     Junior subordinated debentures        338      338     1,014    1,014
     Other                                 291       89       730      256
    --------------------------------- -------- --------- -------- --------
     Total interest expense             19,012   17,911    56,399   51,257
    --------------------------------- -------- --------- -------- --------
    Net interest income                 15,310   15,866    45,107   46,498
    Provision for loan losses              300      300       900      900
    --------------------------------- -------- --------- -------- --------
    Net interest income after
     provision for loan losses          15,010   15,566    44,207   45,598
    --------------------------------- -------- --------- -------- --------
    Noninterest income:
     Wealth management services:
       Trust and investment advisory
        fees                             5,336    4,727    15,626   14,036
       Mutual fund fees                  1,386    1,229     4,000    3,573
       Financial planning,
        commissions and other service
        fees                               456      509     1,915    2,033
    --------------------------------- -------- --------- -------- --------
         Wealth management services      7,178    6,465    21,541   19,642
     Service charges on deposit
      accounts                           1,214    1,312     3,559    3,667
     Merchant processing fees            2,252    2,125     5,285    4,828
     Income from bank-owned life
      insurance                            376      389     1,166    1,014
     Net gains on loan sales and
      commissions on loans originated
      for others                           431      417     1,205    1,029
     Net realized (losses) gains on
      securities                             -     (365)      336      459
     Other income                          399      440     1,129    1,111
    --------------------------------- -------- --------- -------- --------
     Total noninterest income           11,850   10,783    34,221   31,750
    --------------------------------- -------- --------- -------- --------
    Noninterest expense:
     Salaries and employee benefits     10,098    9,651    30,195   29,100
     Net occupancy                       1,021      934     3,076    2,906
     Equipment                             871      872     2,564    2,552
     Merchant processing costs           1,916    1,796     4,493    4,090
     Outsourced services                   556      490     1,610    1,504
     Advertising and promotion             466      371     1,467    1,489
     Legal, audit and professional
      fees                                 444      563     1,298    1,342
     Amortization of intangibles           341      398     1,057    1,209
     Debt prepayment penalties               -        -     1,067        -
     Other                               1,599    1,536     5,354    5,403
    --------------------------------- -------- --------- -------- --------
     Total noninterest expense          17,312   16,611    52,181   49,595
    --------------------------------- -------- --------- -------- --------
    Income before income taxes           9,548    9,738    26,247   27,753
    Income tax expense                   2,992    3,160     8,234    8,925
    --------------------------------- -------- --------- -------- --------
     Net income                         $6,556   $6,578   $18,013  $18,828
    --------------------------------- -------- --------- -------- --------
    
    Weighted average shares
     outstanding - basic              13,323.6 13,436.6  13,358.1 13,414.6
    Weighted average shares
     outstanding - diluted            13,564.1 13,726.3  13,612.7 13,708.2
    Per share information:
     Basic earnings per share            $0.49    $0.49     $1.35    $1.40
     Diluted earnings per share          $0.48    $0.48     $1.32    $1.37
     Cash dividends declared per
      share                              $0.20    $0.19     $0.60    $0.57
    
    Washington Trust Bancorp, Inc. and Subsidiaries
               CONSOLIDATED AVERAGE BALANCE SHEETS (unaudited)
    
    
    Three months
     ended September
     30,                        2007                       2006
                      Average            Yield/  Average            Yield/
    (Dollars in
     thousands)       Balance   Interest  Rate   Balance   Interest  Rate
    ---------------- ---------- -------- ------ ---------- -------- ------
    Assets:
    Residential real
     estate loans      $584,223   $7,886  5.35%   $588,488   $7,596  5.12%
    Commercial and
     other loans        635,435   12,203  7.62%    564,804   10,990  7.72%
    Consumer loans      282,472    4,988  7.01%    278,864    4,898  6.97%
    ---------------- ---------- -------- ------ ---------- -------- ------
     Total loans      1,502,130   25,077  6.62%  1,432,156   23,484  6.51%
    Federal funds
     sold and
      other short-
       term
       investments       21,375      275  5.10%     20,132      252  4.96%
    Taxable debt
     securities         582,152    7,565  5.16%    706,319    8,493  4.77%
    Nontaxable debt
     securities          80,998    1,145  5.61%     42,842      622  5.76%
    Corporate stocks
     and FHLBB stock     42,129      748  7.03%     48,704    1,289 10.50%
    ---------------- ---------- -------- ------ ---------- -------- ------
     Total
      securities        726,654    9,733  5.31%    817,997   10,656  5.17%
    ---------------- ---------- -------- ------ ---------- -------- ------
     Total interest-
      earning assets  2,228,784   34,810  6.20%  2,250,153   34,140  6.02%
    Non interest-
     earning assets     161,578                    160,883
    ---------------- ---------- -------- ------ ---------- -------- ------
     Total assets     2,390,362                 $2,411,036
    ---------------- ---------- -------- ------ ---------- -------- ------
    Liabilities and
     Shareholders'
     Equity:
    NOW accounts       $166,271      $70  0.17%   $174,740      $78  0.18%
    Money market
     accounts           300,329    2,950  3.90%    281,559    2,584  3.64%
    Savings accounts    194,439      646  1.32%    191,232      327  0.68%
    Time deposits       817,379    9,474  4.60%    868,487    9,484  4.33%
    FHLBB advances      468,384    5,243  4.44%    480,033    5,011  4.14%
    Junior
     subordinated
     debentures          22,681      338  5.91%     22,681      338  5.91%
    Other                25,857      291  4.47%      7,624       89  4.66%
    ---------------- ---------- -------- ------ ---------- -------- ------
     Total interest-
      bearing
      liabilities     1,995,340   19,012  3.78%  2,026,356   17,911  3.51%
    Demand deposits     188,495                    192,626
    Other
     liabilities         31,640                     23,589
    Shareholders'
     equity             174,887                    168,465
    ---------------- ---------- -------- ------ ---------- -------- ------
      Total
       liabilities
       and
       shareholders'
       equity        $2,390,362                 $2,411,036
    ---------------- ---------- -------- ------ ---------- -------- ------
      Net interest
       income (FTE)              $15,798                    $16,229
    ---------------- ---------- -------- ------ ---------- -------- ------
    Interest rate
     spread                               2.42%                      2.51%
    Net interest
     margin                               2.81%                      2.86%
    
    Washington Trust Bancorp, Inc. and Subsidiaries
               CONSOLIDATED AVERAGE BALANCE SHEETS (unaudited)
    
    
    Nine months
     ended September
     30,                        2007                       2006
                      Average            Yield/  Average            Yield/
    (Dollars in
     thousands)       Balance   Interest  Rate   Balance   Interest  Rate
    ---------------- ---------- -------- ------ ---------- -------- ------
    Assets:
    Residential real
     estate loans      $588,808  $23,471  5.33%   $589,635  $22,505  5.10%
    Commercial and
     other loans        612,886   35,306  7.70%    563,284   32,294  7.67%
    Consumer loans      282,154   14,724  6.98%    272,960   13,819  6.77%
    ---------------- ---------- -------- ------ ---------- -------- ------
     Total loans      1,483,848   73,501  6.62%  1,425,879   68,618  6.43%
    Federal funds
     sold and
      other short-
       term
       investments       17,302      650  5.03%     14,416      517  4.79%
    Taxable debt
     securities         604,303   23,196  5.13%    727,175   25,553  4.70%
    Nontaxable debt
     securities          76,578    3,238  5.65%     39,254    1,697  5.78%
    Corporate stocks
     and FHLBB stock     42,796    2,310  7.21%     49,723    2,393  6.44%
    ---------------- ---------- -------- ------ ---------- -------- ------
     Total
      securities        740,979   29,394  5.30%    830,568   30,160  4.86%
    ---------------- ---------- -------- ------ ---------- -------- ------
     Total interest-
      earning assets  2,224,827  102,895  6.18%  2,256,447   98,778  5.85%
    Non interest-
     earning assets     163,803                    155,006
    ---------------- ---------- -------- ------ ---------- -------- ------
     Total assets    $2,388,630                 $2,411,453
    ---------------- ---------- -------- ------ ---------- -------- ------
    Liabilities and
     Shareholders'
     Equity:
    NOW accounts       $168,217     $202  0.16%   $174,156     $225  0.17%
    Money market
     accounts           295,876    8,630  3.90%    247,979    6,026  3.25%
    Savings accounts    198,845    2,017  1.36%    197,035      888  0.60%
    Time deposits       828,976   28,483  4.59%    863,831   26,733  4.14%
    FHLBB advances      468,956   15,323  4.37%    527,108   16,115  4.09%
    Junior
     subordinated
     debentures          22,681    1,014  5.98%     22,681    1,014  5.98%
    Other                21,521      730  4.53%      7,331      256  4.67%
    ---------------- ---------- -------- ------ ---------- -------- ------
     Total interest-
      bearing
      liabilities     2,005,072   56,399  3.76%  2,040,121   51,257  3.36%
    Demand deposits     177,713                    185,088
    Other
     liabilities         31,072                     22,517
    Shareholders'
     equity             174,773                    163,727
    ---------------- ---------- -------- ------ ---------- -------- ------
      Total
       liabilities
       and
       shareholders'
       equity        $2,388,630                 $2,411,453
    ---------------- ---------- -------- ------ ---------- -------- ------
      Net interest
       income (FTE)              $46,496                    $47,521
    ---------------- ---------- -------- ------ ---------- -------- ------
    Interest rate
     spread                               2.42%                      2.49%
    Net interest
     margin                               2.79%                      2.82%
    
    Washington Trust Bancorp, Inc. and Subsidiaries
            Restatement of Previously Reported Results (unaudited)
    
                                                   June 30, 2007
                                          --------------------------------
    (Dollars in thousands, except per        As                    As
     share amounts)                        Reported  Adjustment  Adjusted
                                          ---------- ---------- ----------
    Period-End Balance Sheet
    -------------------------------------
    Available for sale securities          $525,688  $150,516    $676,204
    Held to maturity securities             154,171  (154,171)          -
    Total securities                        679,859    (3,655)    676,204
    Other assets                             21,063     1,237      22,300
    Total assets                          2,396,300    (2,418)  2,393,882
    Retained earnings                       148,485      (828)    147,657
    Accumulated other comprehensive loss     (6,519)   (1,590)     (8,109)
    Shareholders' equity                    173,606    (2,418)    171,188
    
    Share Information
    -------------------------------------
    Book value per share                     $13.05    ($0.18)     $12.87
    Tangible book value per share             $8.79    ($0.18)      $8.61
    
    Capital Ratios
    -------------------------------------
    Tier 1 risk-based capital                  9.46%    (0.06%)      9.40%
    Total risk-based capital                  10.79%    (0.06%)     10.73%
    Tier 1 leverage ratio                      6.20%    (0.04%)      6.16%
    
    Washington Trust Bancorp, Inc. and Subsidiaries
            Restatement of Previously Reported Results (unaudited)
    
                                          Three Months Ended June 30, 2007
                                          --------------------------------
    (Dollars in thousands, except per        As                    As
     share amounts)                        Reported  Adjustment  Adjusted
                                          ---------- ---------- ----------
    Operating Results
    -------------------------------------
    Interest income on taxable securities    $7,709      $130      $7,839
    Interest expense on FHLB advances         5,063        49       5,112
    Net interest income                      14,846        81      14,927
    Net realized gains (losses) on
     securities                                 705    (1,405)       (700)
    Other noninterest expense                 2,274      (115)      2,159
    Income before taxes                       9,199    (1,209)      7,990
    Income tax expense                        2,889      (381)      2,508
    Net income                                6,310      (828)      5,482
    
    Share Information
    -------------------------------------
    Basic earnings                            $0.47    ($0.06)      $0.41
    Diluted earnings                          $0.46    ($0.06)      $0.40
    
    Key Ratios
    -------------------------------------
    Return on average assets                   1.06%    (0.14%)      0.92%
    Return on average equity                  14.37%    (1.80%)     12.57%
    Interest rate spread (taxable
     equivalent basis)                         2.38%     0.01%       2.39%
    Net interest margin (taxable
     equivalent basis)                         2.75%     0.01%       2.76%
    
    Average Balances
    -------------------------------------
    Federal funds sold and other short-
     term investments                       $17,028      ($77)    $16,951
    Taxable debt securities                 605,538     2,685     608,223
    Total securities                        744,336     2,608     746,944
    Total interest-earning assets         2,232,576     2,608   2,235,184
    Non interest-earning assets             159,111      (208)    158,903
    Total assets                          2,391,687     2,400   2,394,087
    FHLB advances                           467,411     3,615     471,026
    Total interest-bearing liabilities    2,011,713     3,615   2,015,328
    Other liabilities                        30,863       (11)     30,852
    Shareholders' equity                    175,638    (1,204)    174,434
    Total liabilities and shareholders'
     equity                               2,391,687     2,400   2,394,087
    
    Washington Trust Bancorp, Inc. and Subsidiaries
            Restatement of Previously Reported Results (unaudited)
    
                                           Six Months Ended June 30, 2007
                                          --------------------------------
    (Dollars in thousands, except per        As                    As
     share amounts)                        Reported  Adjustment  Adjusted
                                          ---------- ---------- ----------
    Operating Results
    -------------------------------------
    Interest income on taxable securities   $15,501      $130     $15,631
    Interest expense on FHLB advances        10,031        49      10,080
    Net interest income                      29,716        81      29,797
    Net realized gains on securities          1,741    (1,405)        336
    Other noninterest expense                 3,870      (115)      3,755
    Income before taxes                      17,908    (1,209)     16,699
    Income tax expense                        5,623      (381)      5,242
    Net income                               12,285      (828)     11,457
    
    Share Information
    -------------------------------------
    Basic earnings                            $0.92    ($0.06)      $0.86
    Diluted earnings                          $0.90    ($0.06)      $0.84
    
    Key Ratios
    -------------------------------------
    Return on average assets                   1.03%    (0.07%)      0.96%
    Return on average equity                  14.01%    (0.89%)     13.12%
    Interest rate spread (taxable
     equivalent basis)                         2.42%     0.01%       2.43%
    Net interest margin (taxable
     equivalent basis)                         2.78%     0.01%       2.79%
    
    Average Balances
    -------------------------------------
    Federal funds sold and other short-
     term investments                       $15,271      ($40)    $15,231
    Taxable debt securities                 614,211     1,351     615,562
    Total securities                        746,950     1,311     748,261
    Total interest-earning assets         2,221,505     1,311   2,222,816
    Non interest-earning assets             165,038      (104)    164,934
    Total assets                          2,386,543     1,207   2,387,750
    FHLB advances                           467,429     1,817     469,246
    Total interest-bearing liabilities    2,008,201     1,817   2,010,018
    Other liabilities                        30,791        (5)     30,786
    Shareholders' equity                    175,319      (605)    174,714
    Total liabilities and shareholders'
     equity                               2,386,543     1,207   2,387,750
    
    Washington Trust Bancorp, Inc. and Subsidiaries
            Restatement of Previously Reported Results (unaudited)
    
                                            Six Months Ended June 30, 2007
                                            ------------------------------
                                               As                   As
    (Dollars in thousands)                   Reported Adjustment  Adjusted
                                            --------- ---------- ---------
    Operating Results
    ---------------------------------------
    Net cash provided by operating
     activities                               $9,434       $118    $9,552
    Purchases of:
     Mortgage-backed securities available
      for sale                               (29,065)   (84,584) (113,649)
     Other investment securities available
      for sale                               (18,865)   (15,031)  (33,896)
     Mortgage-backed securities held to
      maturity                                     -          -         -
     Other investment securities held to
      maturity                               (16,011)     3,129   (12,882)
    Proceeds from sale of:
     Mortgage-backed securities available
      for sale                                     -     47,938    47,938
     Other investment securities available
      for sale                                 9,438          -     9,438
     Mortgage-backed securities held to
      maturity                                 1,954     36,547    38,501
     Other investment securities held to
      maturity                                 9,815     11,883    21,698
    Maturities and principal payments of:
     Mortgage-backed securities available
      for sale                                29,542      3,041    32,583
     Other investment securities available
      for sale                                 5,982        450     6,432
     Mortgage-backed securities held to
      maturity                                 6,232     (3,041)    3,191
     Other investment securities held to
      maturity                                20,940       (450)   20,490
    Net cash used in investing activities    (19,376)      (118)  (19,494)
    Proceeds from Federal Home Loan Bank
     advances                                344,719     47,000   391,719
    Repayment of Federal Home Loan Bank
     advances                               (350,433)   (47,000) (397,433)
    Net cash provided by financing
     activities                               (3,951)         -    (3,951)
    Net decrease in cash and cash and cash
     equivalents                             (13,893)         -   (13,893)
    

    Source: Washington Trust Bancorp, Inc.


    Contact: Washington Trust Bancorp, Inc. Elizabeth B. Eckel, 401-348-1309 Senior Vice President, Marketing ebeckel@washtrust.com