• Washington Trust Bancorp, Inc.
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  • Washington Trust Announces Third Quarter 2008 Earnings
    Company Release - 10/20/2008 17:16

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

    Washington Trust Bancorp, Inc. (NASDAQ Global Select; symbol: WASH), parent company of The Washington Trust Company, today announced third quarter 2008 net income of $6.0 million, or 44 cents per diluted share, compared to third quarter 2007 net income of $6.6 million, or 48 cents per diluted share. For the nine months ended September 30, 2008, net income amounted to $18.0 million, or $1.32 per diluted share, substantially the same as the amounts reported for the nine months ended September 30, 2007.

        Third Quarter 2008 Highlights:
    
        --  Return on average equity for the third quarter and first nine
            months of 2008 was 12.94% and 12.68%, respectively.
    
        --  Commercial loan growth continued at a firm pace for the eighth
            consecutive quarter, amounting to $46.8 million in the third
            quarter. Commercial loans have increased $191.8 million, or
            30 percent, from the balance at September 30, 2007.
    
        --  The loan loss provision charged to earnings in the third
            quarter was $1.1 million, an increase of $800 thousand from
            the third quarter of 2007, largely due to growth in the loan
            portfolio as well as an ongoing evaluation of credit quality
            and general economic conditions.
    
        --  Nonperforming assets remain at manageable levels at
            $6.8 million, or 0.25% of total assets, at September 30, 2008.
    
        --  Impairment charges of $982 thousand ($669 thousand after tax;
            5 cents per diluted share) were recognized on FHLMC and FNMA
            perpetual preferred stock holdings deemed to be
            other-than-temporarily impaired.
    
        --  An income tax benefit of $841 thousand (6 cents per diluted
            share) was recognized based on an increase in the net deferred
            tax assets resulting from a recent change in a state corporate
            income tax rate and calculation method.
    
        --  The Corporation remains well-capitalized with a total risk
            based-capital ratio of 10.43% at September 30, 2008. On
            October 2nd the Corporation announced the issuance of
            $50 million in a private placement of its Common Stock. The
            net proceeds of approximately $47 million were received on
            October 7th.
    

    Commenting on the quarter, John C. Warren, Chairman and Chief Executive Officer, said, "Despite the economic recession and the upheaval in the credit and financial markets, Washington Trust recorded another quarter with solid performance. These are challenging times, and we will remain focused and disciplined as we move forward."

    RESULTS OF OPERATIONS

    Net interest income for the third quarter of 2008 increased $437 thousand, or 3 percent, from the second quarter of 2008 and $1.3 million, or 9 percent, from the third quarter a year ago. The increase from the second quarter reflects higher earning-asset levels, while the increase from a year ago reflects growth in interest-earning assets and lower deposit costs.

    The net interest margin (annualized tax-equivalent net interest income as a percentage of average earning assets) for the third quarter of 2008 was 2.62%, down 9 basis points from the second quarter of 2008 and down 19 basis points from the third quarter of 2007. The decline in net interest margin reflects decreases in yields on variable rate 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. Approximately 5 basis points of the net interest margin decline from the second quarter of 2008 to the third quarter was attributable to several additional factors including the cost of temporarily maintaining lower yielding short-term assets for balance sheet management purposes, a lower amount of loan fee income recognized, and a reduction in the dividend yield earned on the Corporation's investment in Federal Home Loan Bank of Boston stock.

    Noninterest income for the third quarter of 2008 declined $1.6 million, or 13 percent, from the second quarter and $1.3 million, or 11 percent, from the third quarter of 2007. The decline in noninterest income was largely due to the recognition of $982 thousand in write-downs on FHLMC and FNMA perpetual preferred stock holdings deemed to be other-than-temporarily impaired in the third quarter of 2008. The impairment charges were included in net losses on securities in the Consolidated Statements of Income. There were no net gains or losses on securities in the third quarter of 2007.

    Excluding net gains and losses on securities, noninterest income amounted to $11.6 million for the third quarter of 2008, down $640 thousand, or 5 percent, from the second quarter and down $278 thousand, or 2 percent, from the third quarter a year ago. Wealth management revenues declined $459 thousand on a linked quarter basis and were essentially flat with the third quarter of 2007. Second quarter 2008 amounts included seasonal tax preparation fee revenues of $335 thousand. The remaining decline in wealth management revenues on a linked quarter basis was generally attributable to the decline in assets under administration. Wealth management assets under administration totaled $3.625 billion at September 30, 2008, down $299.1 million, or 8 percent, in the third quarter of 2008. Assets under administration were down $389.9 million, or 10 percent, from December 31, 2007 and down $401.4 million, or 10 percent, from September 30, 2007. The decline in assets under administration was primarily due to lower valuations in the financial markets.

    Noninterest expenses amounted to $18.5 million for the third quarter of 2008, up $417 thousand, or 2 percent, from the second quarter and up $1.2 million, or 7 percent, from the third quarter a year ago. The increase in noninterest expenses on a linked quarter basis includes a seasonal increase of $259 thousand in merchant processing expenses. Approximately 40 percent of the increase from a year ago represents costs attributable to our wealth management business and an increase in FDIC deposit insurance costs. Washington Trust expects to make its annual contribution to its charitable foundation in the fourth quarter of this year. The cost of this contribution is expected to be approximately $450 thousand. Washington Trust made its 2007 annual contribution in the second quarter of that year.

    Income tax expense amounted to $1.6 million for the three months ended September 30, 2008, as compared to $3.0 million for the same period in 2007. In third quarter of 2008, an income tax benefit of $841 thousand was recognized based on an increase in net deferred tax assets resulting from a recent change in a state corporate income tax rate and calculation method. Excluding this income tax benefit, the Corporation's effective tax rate for the third quarter of 2008 was 32.2%, as compared to 31.6% for the second quarter and 31.3% for the third quarter of last year. The Corporation currently expects the fourth quarter effective tax rate to be approximately 31.8%.

    ASSET QUALITY

    Nonperforming assets (nonaccrual loans and property acquired through foreclosure) amounted to $6.8 million, or 0.25% of total assets, at September 30, 2008, compared to $6.2 million, or 0.23% of total assets, at June 30, 2008 and $4.3 million, or 0.17% of total assets, at December 31, 2007. Properties acquired through foreclosure amounted to $113 thousand at September 30, 2008. There were no properties acquired through foreclosure on the balance at June 30, 2008 and December 31, 2007.

    Nonaccrual loans as a percent of total loans stood at 0.38% at September 30, 2008 compared to 0.36% of total loans at June 30, 2008 and 0.27% of total loans at December 31, 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 $11.2 million, or 0.63% of total loans, at September 30, 2008, down $3.8 million in the third quarter and up $4.2 million in the first nine months of 2008. The decline in 30 day+ delinquencies in the third quarter was primarily due to one commercial mortgage relationship of $3.5 million which was brought current by the borrower. Commercial loans represent $9.0 million, or 80%, of total delinquencies at September 30, 2008.

    Washington Trust has never offered a subprime residential loan program. Total residential mortgage and consumer loan 30 day+ delinquencies decreased modestly in the third quarter and first nine months of 2008 and amounted to $2.2 million, or 0.24% of these loans, at September 30, 2008. Total 90 day+ delinquencies in the residential mortgage and consumer loan categories amounted to $188 thousand (three loans) and $48 thousand (one loan), respectively, at September 30, 2008. Total nonaccrual loans, which include the 90 day+ delinquencies, amounted to $962 thousand and $208 thousand in the residential mortgage and consumer loan categories, respectively, at September 30, 2008.

    The Corporation's loan loss provision charged to earnings amounted to $1.1 million for the third quarter of 2008, compared to $1.4 million for the second quarter of 2008 and $300 thousand for the third quarter of 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 $432 thousand in the third quarter of 2008, as compared to net charge-offs of $161 thousand in the second quarter and $155 thousand for the third quarter of 2007. Included in the third quarter 2008 amount was $385 thousand of commercial loan net charge-offs.

    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 $22.6 million, or 1.28% of total loans, at September 30, 2008, compared to $22.0 million, or 1.29% of total loans, at June 30, 2008 and $20.3 million, or 1.29% of total loans, at December 31, 2007.

    FINANCIAL CONDITION

    Total loans grew by $63.4 million, or 4 percent, in the third quarter and by $195.4 million, or 12 percent, in the first nine months of 2008. Commercial loans rose by $46.8 million, or 6 percent, in the third quarter of 2008 and by $161.6 million, or 24 percent, in the first nine months of 2008. In the third quarter of 2008, residential loans increased by $10 million, or 2 percent, and consumer loans grew by $6.6 million, or 2 percent.

    The investment securities portfolio amounted to $753.5 million at September 30, 2008, down by $36.6 million in the third quarter of 2008, largely due to a decrease of $20.1 million in mortgage-backed securities. The fair value of mortgage-backed securities amounted to $566.0 million at September 30, 2008. All of the Corporation's mortgage-backed securities are issued by U.S. Government agencies or U.S. Government-sponsored enterprises. At September 30, 2008, the net unrealized losses on the investment securities portfolio amounted to $18.1 million and included gross unrealized losses of $22.8 million. Approximately 54% of the gross unrealized losses on the investment securities portfolio were concentrated in variable rate trust preferred securities issued by financial services companies. These trust preferred securities holdings consist of seven individual name issuers in the financial industry, including, where applicable, the impact of mergers and acquisitions of issuers subsequent to original purchase, and two pooled trust preferred securities in the form of collateralized debt obligations. The pooled trust preferred holdings consist of trust preferred obligations of banking industry companies and, to a lesser extent, insurance industry companies. For both of its pooled trust preferred holdings, Washington Trust's investment is senior to one or more subordinated tranches that have first loss exposure. The respective tranche of the pooled trust preferred securities held by the Corporation continues to accrue and make payments as expected, and have investment grade credit ratings.

    Total deposits increased by $127.7 million in the third quarter and increased by $91.0 million in the first nine months of 2008. Excluding out of market brokered certificates of deposit, in-market deposits grew by $53.5 million, or 4 percent, in the third quarter and $32.9 million, or 2 percent, from the balance at December 31, 2007. In-market deposit growth in the third quarter of 2008 reflects increases in certificate of deposit balances, while NOW, savings and money market account balances declined. Federal Home Loan Bank advances totaled $747.4 million at September 30, 2008, down $97.9 million in the third quarter and up $131.0 million from the balance at December 31, 2007. During the third quarter of 2008, the Corporation recognized a liability of $5.6 million, with a corresponding increase in goodwill, related to the acquisition of Weston Financial Group, Inc. in August 2005. This represents amounts earned 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.

    As previously reported on October 2, 2008, the Corporation announced that it had entered into a purchase agreement with select institutional investors pursuant to which it raised $50 million in a private placement of its own common stock. Net proceeds were approximately $47 million after deducting offering-related fees and expenses. The closing took place on October 7, 2008. The Corporation issued a total of 2.5 million shares of common stock at a price of $20 per share in the private placement. The Corporation has agreed to file, within 30 days of the closing, a registration statement with the Securities and Exchange Commission to register these shares for resale. Approximately $65 thousand in legal costs were incurred in the third quarter in connection with this matter and recorded in noninterest expenses. The Corporation expects to incur and record additional noninterest expenses of approximately $250 thousand in the fourth quarter of 2008. Washington Trust intends to use the net proceeds from the capital raise for general corporate purposes and to support strategic growth initiatives in its commercial and wealth management business lines.

    DIVIDENDS DECLARED

    The Board of Directors declared a quarterly dividend of 21 cents per share for the quarter ended September 30, 2008. The dividend was paid on October 10, 2008 to shareholders of record on September 30, 2008.

    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, October 21, 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 #: 423534. The replay will be available until 9:00 a.m. on October 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(R) Market 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, changes in the value of securities and other assets, 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)                      September 30, December 31,
                                                    2008         2007
    ----------------------------------------------------------------------
    Assets:
    Cash and noninterest-bearing balances due
     from banks                                      $27,099      $30,817
    Interest-bearing balances due from banks             588        1,973
    Federal funds sold and securities purchased
     under resale agreements                          21,857        7,600
    Other short-term investments                         864          722
    Mortgage loans held for sale                       1,073        1,981
    Securities available for sale, at fair
     value;
     amortized cost $771,537 in 2008 and
      $750,583 in 2007                               753,456      751,778
    Federal Home Loan Bank stock, at cost             42,008       31,725
    Loans:
     Commercial and other                            841,838      680,266
     Residential real estate                         618,329      599,671
     Consumer                                        308,874      293,715
    ----------------------------------------------------------------------
     Total loans                                   1,769,041    1,573,652
     Less allowance for loan losses                   22,631       20,277
    ----------------------------------------------------------------------
     Net loans                                     1,746,410    1,553,375
    Premises and equipment, net                       24,314       25,420
    Accrued interest receivable                       10,980       11,427
    Investment in bank-owned life insurance           42,714       41,363
    Goodwill                                          56,117       50,479
    Identifiable intangible assets, net               10,461       11,433
    Other assets                                      29,941       19,847
    ----------------------------------------------------------------------
     Total assets                                 $2,767,882   $2,539,940
    ======================================================================
    
    Liabilities:
    Deposits:
     Demand deposits                                $187,839     $175,542
     NOW accounts                                    164,829      164,944
     Money market accounts                           298,106      321,600
     Savings accounts                                171,856      176,278
     Time deposits                                   914,621      807,841
    ----------------------------------------------------------------------
     Total deposits                                1,737,251    1,646,205
    Dividends payable                                  2,824        2,677
    Federal Home Loan Bank advances                  747,430      616,417
    Junior subordinated debentures                    32,991       22,681
    Other borrowings                                  30,439       32,560
    Accrued expenses and other liabilities            32,185       32,887
    ----------------------------------------------------------------------
     Total liabilities                             2,583,120    2,353,427
    ----------------------------------------------------------------------
    
    Shareholders' Equity:
    Common stock of $.0625 par value;
     authorized 30,000,000 shares;
     issued 13,518,868 shares in 2008 and
      13,492,110 shares in 2007                          845          843
    Paid-in capital                                   35,184       34,874
    Retained earnings                                163,809      154,647
    Accumulated other comprehensive loss             (12,570)        (239)
    Treasury stock, at cost; 95,635 shares in
     2008 and 137,652 in 2007                         (2,506)      (3,612)
    ----------------------------------------------------------------------
     Total shareholders' equity                      184,762      186,513
    ----------------------------------------------------------------------
     Total liabilities and shareholders' equity   $2,767,882   $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       Nine Months
    Periods ended September 30,        2008      2007     2008      2007
    ----------------------------------------------------------------------
    Interest income:
     Interest and fees on loans       $25,520   $25,032  $74,896   $73,380
     Interest on securities:
       Taxable                          8,504     7,565   25,222    23,196
       Nontaxable                         778       781    2,344     2,208
     Dividends on corporate stock
      and Federal Home Loan Bank
      stock                               407       669    1,516     2,072
     Other interest income                128       275      318       650
    ----------------------------------------------------------------------
     Total interest income             35,337    34,322  104,296   101,506
    ----------------------------------------------------------------------
    Interest expense:
     Deposits                           9,884    13,140   31,031    39,332
     Federal Home Loan Bank advances    8,011     5,243   23,104    15,323
     Junior subordinated debentures       524       338    1,371     1,014
     Other interest expense               274       291      863       730
    ----------------------------------------------------------------------
     Total interest expense            18,693    19,012   56,369    56,399
    ----------------------------------------------------------------------
    Net interest income                16,644    15,310   47,927    45,107
    Provision for loan losses           1,100       300    2,950       900
    ----------------------------------------------------------------------
    Net interest income after
     provision for loan losses         15,544    15,010   44,977    44,207
    ----------------------------------------------------------------------
    Noninterest income:
     Wealth management services:
      Trust and investment advisory
       fees                             5,238     5,336   15,901    15,626
       Mutual fund fees                 1,383     1,386    4,169     4,000
       Financial planning,
        commissions and other
        service fees                      570       456    2,029     1,915
    ----------------------------------------------------------------------
         Wealth management services     7,191     7,178   22,099    21,541
     Service charges on deposit
      accounts                          1,215     1,214    3,583     3,559
     Merchant processing fees           2,221     2,252    5,407     5,285
     Income from bank-owned life
      insurance                           452       376    1,352     1,166
     Net gains on loan sales and
      commissions on loans
      originated for others               239       431    1,163     1,205
     Net (losses) gains on
      securities                         (982)        -   (1,080)      336
     Other income                         254       399    1,269     1,129
    ----------------------------------------------------------------------
     Total noninterest income          10,590    11,850   33,793    34,221
    ----------------------------------------------------------------------
    Noninterest expense:
     Salaries and employee benefits    10,580    10,098   31,334    30,195
     Net occupancy                      1,123     1,021    3,325     3,076
     Equipment                            956       871    2,877     2,564
     Merchant processing costs          1,857     1,916    4,523     4,493
     Outsourced services                  700       556    2,078     1,610
     Advertising and promotion            376       466    1,229     1,467
     Legal, audit and professional
      fees                                626       444    1,599     1,298
     Amortization of intangibles          320       341      972     1,057
     Debt prepayment penalties              -         -        -     1,067
     Other expenses                     1,933     1,599    5,730     5,354
    ----------------------------------------------------------------------
     Total noninterest expense         18,471    17,312   53,667    52,181
    ----------------------------------------------------------------------
    Income before income taxes          7,663     9,548   25,103    26,247
    Income tax expense                  1,623     2,992    7,152     8,234
    ----------------------------------------------------------------------
     Net income                        $6,040    $6,556  $17,951   $18,013
    ======================================================================
    
    Weighted average shares
     outstanding - basic             13,409.5  13,323.6 13,383.0  13,358.1
    Weighted average shares
     outstanding - diluted           13,588.3  13,564.1 13,564.5  13,612.7
    Per share information:
     Basic earnings per share           $0.45     $0.49    $1.34     $1.35
     Diluted earnings per share         $0.44     $0.48    $1.32     $1.32
     Cash dividends declared per
      share                             $0.21     $0.20    $0.62     $0.60
    
    Washington Trust Bancorp, Inc. and Subsidiaries
                  SELECTED FINANCIAL HIGHLIGHTS (unaudited)
    
                                 At or for the Quarters Ended
    ----------------------------------------------------------------------
                    Sept. 30,   June 30,   Mar. 31,   Dec. 31,  Sept. 30,
    (Dollars in
     thousands,
     except per
     share amounts)    2008       2008       2008       2007       2007
    ----------------------------------------------------------------------
    Financial Data
    ---------------
    Total assets    $2,767,882 $2,732,989 $2,564,387 $2,539,940 $2,431,762
    Total loans      1,769,041  1,705,650  1,598,582  1,573,652  1,514,493
    Total
     securities        753,456    790,064    747,053    751,778    688,709
    Total deposits   1,737,251  1,609,542  1,635,025  1,646,205  1,655,887
    Total
     shareholders'
     equity            184,762    186,422    191,219    186,513    177,897
    Net income           6,040      6,095      5,816      5,787      6,556
    
    Per Share Data
    ---------------
    Basic earnings
     per share           $0.45      $0.45      $0.44      $0.43      $0.49
    Diluted
     earnings per
     share               $0.44      $0.45      $0.43      $0.43      $0.48
    Dividends
     declared per
     share               $0.21      $0.21      $0.20      $0.20      $0.20
    Book value per
     share              $13.76     $13.91     $14.30     $13.97     $13.33
    Tangible book
     value per
     share               $8.80      $9.34      $9.70      $9.33      $8.66
    Market value
     per share          $26.60     $19.70     $24.82     $25.23     $26.97
    
    Key Ratios
    ---------------
    Return on
     average assets      0.88%      0.92%      0.90%      0.94%      1.10%
    Return on
     average
     tangible
     assets              0.90%      0.94%      0.92%      0.96%      1.12%
    Return on
     average equity     12.94%     12.88%     12.22%     12.73%     14.99%
    Return on
     average
     tangible
     equity             19.25%     19.07%     18.09%     19.32%     22.16%
    
    Capital Ratios
    ---------------
    Tier 1 risk-
     based capital       9.18%      9.44%      9.23%      9.10%      9.11%
    Total risk-
     based capital      10.43%     10.69%     10.49%     10.39%     10.43%
    Tier 1 leverage
     ratio               6.09%      6.32%      5.93%      6.09%      6.11%
    Tangible equity
     to tangible
     assets              4.38%      4.68%      5.18%      5.03%      4.88%
    
    Average Yields
     (taxable
     equivalent
     basis)
    ---------------
    Assets
    Residential
     real estate
     loans               5.54%      5.55%      5.55%      5.41%      5.35%
    Commercial and
     other loans         6.28%      6.51%      6.95%      7.39%      7.62%
    Consumer loans       5.38%      5.48%      6.18%      6.74%      7.01%
     Total loans         5.86%      5.98%      6.28%      6.51%      6.62%
    Short-term
     investments,
     federal funds
     sold
     and other           1.63%      1.64%      2.69%      4.72%      5.10%
    Taxable debt
     securities          4.85%      4.86%      5.06%      5.19%      5.16%
    Nontaxable debt
     securities          5.63%      5.67%      5.68%      5.59%      5.61%
    Corporate
     stocks and
     FHLBB stock         3.58%      4.46%      5.89%      7.00%      7.03%
     Total
      securities         4.74%      4.87%      5.11%      5.33%      5.31%
     Total
      interest-
      earning
      assets             5.49%      5.60%      5.89%      6.12%      6.20%
    Liabilities
    NOW accounts         0.18%      0.19%      0.19%      0.20%      0.17%
    Money market
     accounts            1.79%      1.79%      3.13%      3.93%      3.90%
    Savings
     accounts            0.47%      0.50%      1.00%      1.32%      1.32%
    Time deposits        3.68%      3.88%      4.38%      4.55%      4.60%
    FHLBB advances       4.20%      4.15%      4.37%      4.56%      4.44%
    Junior
     subordinated
     debentures          6.31%      6.34%      5.99%      5.91%      5.91%
    Other                4.68%      4.60%      4.32%      4.36%      4.47%
     Total
      interest-
      bearing
      liabilities        3.16%      3.18%      3.63%      3.85%      3.78%
    
    Interest rate
     spread
     (taxable
     equivalent
     basis)              2.33%      2.42%      2.26%      2.27%      2.42%
    Net interest
     margin
     (taxable
     equivalent
     basis)              2.62%      2.71%      2.59%      2.65%      2.81%
    
    Washington Trust Bancorp, Inc. and Subsidiaries
                  SELECTED FINANCIAL HIGHLIGHTS (unaudited)
    
    
                                          At or for the Quarters Ended
    ----------------------------------------------------------------------
                                       Sept.30,    June 30,   Mar. 31,
    (Dollars in thousands)               2008        2008       2008
    ----------------------------------------------------------------------
    Wealth Management Assets Under
     Administration
    ---------------------------------
    Balance at beginning of period    $3,923,595  $3,878,746 $4,014,352
    Net investment (depreciation)
     appreciation & income              (321,488)     10,420   (201,915)
    Net customer cash flows               22,395      34,429     66,309
    ----------------------------------------------------------------------
    Balance at end of period          $3,624,502  $3,923,595 $3,878,746
    ======================================================================
    
    Period End Balances
    ---------------------------------
    Loans
     Commercial:        Mortgages       $394,085    $361,623   $309,684
                        Construction
                         and
                         development      51,592      60,606     62,489
                        Other            396,161     372,784    354,142
    ----------------------------------------------------------------------
                        Total
                         commercial      841,838     795,013    726,315
     Residential:       Mortgages        604,205     593,995    565,031
                        Homeowner
                         construction     14,124      14,356     12,861
    ----------------------------------------------------------------------
                        Total
                         residential
                         real estate     618,329     608,351    577,892
                        Home equity
     Consumer:           lines           158,837     152,339    146,471
                        Home equity
                         loans            93,690      94,316     96,883
                        Other             56,347      55,631     51,021
    ----------------------------------------------------------------------
                        Total
                         consumer        308,874     302,286    294,375
    ----------------------------------------------------------------------
                        Total loans   $1,769,041  $1,705,650 $1,598,582
    ======================================================================
    Deposits
     Demand deposits                    $187,839    $187,865   $165,822
     NOW accounts                        164,829     170,733    174,146
     Money market accounts               298,106     305,860    327,562
     Savings accounts                    171,856     177,490    177,110
     Time deposits                       914,621     767,594    790,385
    ----------------------------------------------------------------------
     Total deposits                   $1,737,251  $1,609,542 $1,635,025
    ======================================================================
    
    Out of market brokered
     certificates of deposits
     included in time deposits          $187,925    $113,725   $126,972
    
    In-market deposits, excluding out
     of market brokered
     certificates of deposit          $1,549,326  $1,495,817 $1,508,053
    
    
                                              At or for the Quarters Ended
    ----------------------------------------------------------------------
                                                     Dec. 31,   Sept. 30,
    (Dollars in thousands)                             2007        2007
    ----------------------------------------------------------------------
    Wealth Management Assets Under
     Administration
    ------------------------------------------
    Balance at beginning of period                  $4,025,877  $3,867,674
    Net investment (depreciation) appreciation
     & income                                          (11,751)    122,424
    Net customer cash flows                                226      35,779
    ----------------------------------------------------------------------
    Balance at end of period                        $4,014,352  $4,025,877
    ======================================================================
    
    Period End Balances
    ------------------------------------------
    Loans
     Commercial:                 Mortgages            $278,821    $276,995
                                 Construction
                                  and
                                  development           60,361      48,899
                                 Other                 341,084     324,129
    ----------------------------------------------------------------------
                                 Total
                                  commercial           680,266     650,023
     Residential:                Mortgages             588,628     566,776
                                 Homeowner
                                  construction          11,043      12,040
    ----------------------------------------------------------------------
                                 Total
                                  residential
                                  real estate          599,671     578,816
                                 Home equity
     Consumer:                    lines                144,429     139,732
                                 Home equity
                                  loans                 99,827      99,798
                                 Other                  49,459      46,124
    ----------------------------------------------------------------------
                                 Total
                                  consumer             293,715     285,654
    ----------------------------------------------------------------------
                                 Total loans        $1,573,652  $1,514,493
    ======================================================================
    Deposits
     Demand deposits                                  $175,542    $182,830
     NOW accounts                                      164,944     172,378
     Money market accounts                             321,600     312,257
     Savings accounts                                  176,278     189,157
     Time deposits                                     807,841     799,265
    ----------------------------------------------------------------------
     Total deposits                                 $1,646,205  $1,655,887
    ======================================================================
    
    Out of market brokered certificates of
     deposits
     included in time deposits                        $129,798    $130,017
    
    In-market deposits, excluding out of
     market brokered
     certificates of deposit                        $1,516,407  $1,525,870
    
    Washington Trust Bancorp, Inc. and Subsidiaries
                  SELECTED FINANCIAL HIGHLIGHTS (unaudited)
    
    Securities Available for Sale Amortized Unrealized Unrealized   Fair
    (Dollars in thousands)          Cost      Gains      Losses    Value
    ----------------------------------------------------------------------
    At September 30, 2008
     U.S. Treasury obligations
      and obligations of U.S.
      government-sponsored
       agencies                     $76,013     $1,949        $-   $77,962
     Mortgage-backed securities
      issued by U.S.
      government and government-
       sponsored agencies           568,495      2,385    (4,904)  565,976
     States and political
      subdivisions                   80,685         34    (4,091)   76,628
     Trust preferred securities      37,985          -   (12,201)   25,784
     Corporate bonds                  1,748          -       (14)    1,734
     Common stocks                    1,458        350       (36)    1,772
     Perpetual preferred stocks       5,153          -    (1,553)    3,600
    ----------------------------------------------------------------------
     Total securities available
      for sale                     $771,537     $4,718  $(22,799) $753,456
    ======================================================================
    
    
    Securities Available for Sale Amortized Unrealized Unrealized   Fair
    (Dollars in thousands)          Cost      Gains      Losses    Value
    ----------------------------------------------------------------------
    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 stocks                    3,931      2,850         -     6,781
     Perpetual preferred stocks       8,165          -    (1,604)    6,561
    ----------------------------------------------------------------------
     Total securities available
      for sale                     $750,583     $9,297   $(8,102) $751,778
    ======================================================================
    
    Washington Trust Bancorp, Inc. and Subsidiaries
                  SELECTED FINANCIAL HIGHLIGHTS (unaudited)
    
    The following is supplemental information concerning the securities
     portfolio:
                                      At September 30, 2008
    ----------------------------------------------------------------------
                         Number  Credit  Amortized   Unrealized     Fair
                                                   ---------------
    (Dollars in           of     Rating
     thousands)          Issuers   (a)     Cost    Gains  Losses    Value
    ----------------------------------------------------------------------
    Trust preferred
     securities
     Individual name
      issuers (b):             2     Aa    $15,415    $-  $(3,480) $11,935
                               4     A      13,192     -   (3,068)  10,124
                               1     Baa     1,908     -   (1,175)     733
    ----------------------------------------------------------------------
     Total individual
      name issuers             7            30,515     -   (7,723)  22,792
    ----------------------------------------------------------------------
    
     Collateralized
      debt obligations        (c)    Baa     7,470     -   (4,478)   2,992
    ----------------------------------------------------------------------
     Total trust
      preferred
      securities                           $37,985    $- $(12,201) $25,784
    ======================================================================
    
    Corporate bonds            1     Baa    $1,748    $-     $(14)  $1,734
    ======================================================================
    

    (a) Source: Moody's

    (b) We own various series of trust preferred securities issued by seven corporate financial institutions.

    (c) We own two pooled trust preferred securities in the form of collateralized debt obligations. There are 73 issuers in one of the trust preferred CDO securities, and 38 issuers in the other. As of September 30, 2008, 3 of the 73 pooled issuers for one security and 2 of the 38 pooled issuers for the other security have invoked their original contractual right to defer interest payments. The respective tranche of the securities held by Washington Trust continues to accrue and make payments as expected, and have investment grade credit ratings.

                                                At September 30, 2008
    ----------------------------------------------------------------------
                                           Amortized   Unrealized    Fair
                                                     --------------
    (Dollars in thousands)                   Cost    Gains  Losses  Value
    ----------------------------------------------------------------------
    Common and preferred stocks
     Common stock                             $1,458  $350    $(36) $1,772
     Perpetual preferred stock:
      FNMA preferred stock                        71     -       -      71
      FHLMC preferred stock                       18     -       -      18
      Other preferred (financials)             4,064     -  (1,399)  2,665
      Other preferred (utilities)              1,000     -    (154)    846
    ----------------------------------------------------------------------
     Total preferred                           5,153     -  (1,553)  3,600
    ----------------------------------------------------------------------
     Total common and preferred               $6,611  $350 $(1,589) $5,372
    ======================================================================
    
    Washington Trust recorded impairment charges to earnings for equity
     securities deemed to be other-than-temporarily impaired in the
     amounts shown in the following table:
    
    (Dollars in thousands)
                                                             Three   Nine
    Periods ended September 30, 2008                         Months Months
    ----------------------------------------------------------------------
    FNMA and FHLMC preferred stock                             $982$1,412
    Other preferred (financials)                                  -  1,577
    ----------------------------------------------------------------------
     Total                                                     $982$2,989
    ======================================================================
    
    Washington Trust Bancorp, Inc. and Subsidiaries
                  SELECTED FINANCIAL HIGHLIGHTS (unaudited)
    
                                        At or for the Quarters Ended
    ----------------------------------------------------------------------
                                   Sept.    June    Mar.    Dec.   Sept.
                                     30,     30,     31,     31,     30,
    (Dollars in thousands)          2008    2008    2008    2007    2007
    ----------------------------------------------------------------------
    Asset Quality Data
    ------------------------------
    Allowance for Loan Losses
    Balance at beginning of period $21,963$20,724$20,277$19,472$19,327
    Provision charged to earnings    1,100   1,400     450   1,000     300
    Charge-offs                      (492)   (219)   (106)   (225)   (182)
    Recoveries                          60      58     103      30      27
    ----------------------------------------------------------------------
    Balance at end of period       $22,631 $21,963 $20,724 $20,277 $19,472
    ======================================================================
    
    Past Due Loans
     Loans 30-59 Days Past Due
      Commercial categories         $3,560  $6,682  $2,240  $1,450    $726
      Residential mortgages          1,619   1,624     475   1,620   2,744
      Consumer loans                    77     476      43      73     282
    ----------------------------------------------------------------------
      Loans 30-59 days past due     $5,256  $8,782  $2,758  $3,143  $3,752
    ----------------------------------------------------------------------
    
     Loans 60-89 Days Past Due
      Commercial categories           $257  $2,091  $3,715  $1,313    $166
      Residential mortgages            296       1     344      39     220
      Consumer loans                     -      87      22      38       -
    ----------------------------------------------------------------------
      Loans 60-89 days past due       $553  $2,179  $4,081  $1,390    $386
    ----------------------------------------------------------------------
    
     Loans 90 Days or more Past
      Due
      Commercial categories         $5,134  $3,625  $3,088  $1,963  $1,347
      Residential mortgages            188     408     441     441     302
      Consumer loans                    48       -      36      86      76
    ----------------------------------------------------------------------
      Loans 90 days or more past
       due                          $5,370  $4,033  $3,565  $2,490  $1,725
    ----------------------------------------------------------------------
    
     Total Past Due Loans
      Commercial categories         $8,951 $12,398  $9,043  $4,726  $2,239
      Residential mortgages          2,103   2,033   1,260   2,100   3,266
      Consumer loans                   125     563     101     197     358
    ----------------------------------------------------------------------
      Total past due loans         $11,179 $14,994 $10,404  $7,023  $5,863
    ======================================================================
    
    Nonperforming Assets
    Commercial mortgages            $1,986  $1,991  $1,300  $1,094  $1,099
    Commercial construction and
     development                         -       -       -       -       -
    Other commercial                 3,555   2,948   3,081   1,781     581
    Residential real estate
     mortgages                         962   1,072   1,111   1,158     731
    Consumer                           208     170     208     271     262
    ----------------------------------------------------------------------
    Total nonaccrual loans          $6,711  $6,181  $5,700  $4,304  $2,673
    Other real estate owned, net       113       -       -       -       -
    ----------------------------------------------------------------------
    Total nonperforming assets      $6,824  $6,181  $5,700  $4,304  $2,673
    ======================================================================
    
    Total past due loans to total
     loans                           0.63%   0.88%   0.65%   0.45%   0.39%
    Nonperforming assets to total
     assets                          0.25%   0.23%   0.22%   0.17%   0.11%
    Nonaccrual loans to total
     loans                           0.38%   0.36%   0.36%   0.27%   0.18%
    Allowance for loan losses to
     nonaccrual loans              337.22% 355.33% 363.58% 471.12% 728.47%
    Allowance for loan losses to
     total loans                     1.28%   1.29%   1.30%   1.29%   1.29%
    
    Washington Trust Bancorp, Inc. and Subsidiaries
                  SELECTED FINANCIAL HIGHLIGHTS (unaudited)
    
                                                       Nine Months Ended
    ----------------------------------------------------------------------
                                                     September  September
                                                         30,        30,
    (Dollars and shares in thousands, except per
     share amounts)                                     2008       2007
    ----------------------------------------------------------------------
    
    Operating Results
    ------------------------------------------------
    Net interest income                                 $47,927    $45,107
    Provision for loan losses                             2,950        900
    Net (losses) gains on securities                    (1,080)        336
    Other noninterest income                             34,873     33,885
    Noninterest expenses                                 53,667     52,181
    Income tax expense                                    7,152      8,234
    Net income                                           17,951     18,013
    
    Basic earnings per share                              $1.34      $1.35
    Diluted earnings per share                            $1.32      $1.32
    Dividends declared per share                          $0.62      $0.60
    
    Weighted average shares outstanding - basic        13,383.0   13,358.1
    Weighted average shares outstanding - diluted      13,564.5   13,612.7
    Shares outstanding at end of period                13,423.2   13,350.5
    
    Key Ratios
    ------------------------------------------------
    Return on average assets                              0.90%      1.01%
    Return on average tangible assets                     0.92%      1.03%
    Return on average equity                             12.68%     13.74%
    Return on average tangible equity                    18.80%     20.37%
    Interest rate spread (taxable equivalent basis)       2.33%      2.42%
    Net interest margin (taxable equivalent basis)        2.64%      2.79%
    
    Allowance for Loan Losses
    ------------------------------------------------
    Balance at beginning of period                      $20,277    $18,894
    Provision charged to earnings                         2,950        900
    Charge-offs                                           (818)      (553)
    Recoveries                                              222        231
    ----------------------------------------------------------------------
    Balance at end of period                            $22,631    $19,472
    ======================================================================
    
    Net charge-offs to average loans                       .04%       .02%
    
    Wealth Management Assets Under Administration
    ------------------------------------------------
    Balance at beginning of period                   $4,014,352 $3,609,180
    Net investment (depreciation) appreciation and
     income                                           (512,983)    284,149
    Net customer cash flows                             123,133    132,548
    ----------------------------------------------------------------------
    Balance at end of period                         $3,624,502 $4,025,877
    ======================================================================
    

    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 September
     30,                       2008                       2007
    ----------------------------------------------------------------------
                      Average            Yield/  Average            Yield/
    (Dollars in
     thousands)       Balance   Interest  Rate   Balance   Interest  Rate
    ----------------------------------------------------------------------
    Assets
    Residential real
     estate loans      $619,288   $8,629  5.54%   $584,223   $7,886  5.35%
    Commercial and
     other loans        812,749   12,834  6.28%    635,435   12,203  7.62%
    Consumer loans      303,745    4,106  5.38%    282,472    4,988  7.01%
    ----------------------------------------------------------------------
     Total loans      1,735,782   25,569  5.86%  1,502,130   25,077  6.62%
    Short-term
     investments,
     federal funds
     sold
     and other           31,213      128  1.63%     21,375      275  5.10%
    Taxable debt
     securities         696,815    8,504  4.85%    582,152    7,565  5.16%
    Nontaxable debt
     securities          80,833    1,144  5.63%     80,998    1,145  5.61%
    Corporate stocks
     and FHLBB stock     49,830      448  3.58%     42,129      748  7.03%
    ----------------------------------------------------------------------
     Total
      securities        858,691   10,224  4.74%    726,654    9,733  5.31%
    ----------------------------------------------------------------------
     Total interest-
      earning assets  2,594,473   35,793  5.49%  2,228,784   34,810  6.20%
    Non interest-
     earning assets     160,296                    161,578
    ----------------------------------------------------------------------
     Total assets    $2,754,769                  2,390,362
    ======================================================================
    Liabilities and
     Shareholders'
     Equity
    NOW accounts       $166,379      $77  0.18%   $166,271      $70  0.17%
    Money market
     accounts           303,675    1,363  1.79%    300,329    2,950  3.90%
    Savings accounts    173,654      203  0.47%    194,439      646  1.32%
    Time deposits       891,803    8,241  3.68%    817,379    9,474  4.60%
    FHLBB advances      758,858    8,011  4.20%    468,384    5,243  4.44%
    Junior
     subordinated
     debentures          32,991      524  6.31%     22,681      338  5.91%
    Other                23,251      274  4.68%     25,857      291  4.47%
    ----------------------------------------------------------------------
     Total interest-
      bearing
      liabilities     2,350,611   18,693  3.16%  1,995,340   19,012  3.78%
    Demand deposits     187,238                    188,495
    Other
     liabilities         30,256                     31,640
    Shareholders'
     equity             186,664                    174,887
    ----------------------------------------------------------------------
     Total
      liabilities
      and
      shareholders'
      equity         $2,754,769                 $2,390,362
    ======================================================================
     Net interest
      income (FTE)               $17,100                    $15,798
    ======================================================================
    Interest rate
     spread                               2.33%                      2.42%
    Net interest
     margin                               2.62%                      2.81%
    

    Interest income amounts presented in the preceding table include the following adjustments for taxable equivalency:

    (Dollars in thousands)
    
    Three months ended September 30,                             2008 2007
    ----------------------------------------------------------------------
    Commercial and other loans                                    $49  $45
    Nontaxable debt securities                                    366  364
    Corporate stocks                                               41   79
    ----------------------------------------------------------------------
     Total                                                       $456 $488
    ======================================================================
    
    Washington Trust Bancorp, Inc. and Subsidiaries
               CONSOLIDATED AVERAGE BALANCE SHEETS (unaudited)
    
    
    Nine months
     ended September
     30,                       2008                       2007
    ----------------------------------------------------------------------
                      Average            Yield/  Average            Yield/
    (Dollars in
     thousands)       Balance   Interest  Rate   Balance   Interest  Rate
    ----------------------------------------------------------------------
    Assets
    Residential real
     estate loans      $606,422  $25,183  5.55%   $588,808  $23,471  5.33%
    Commercial and
     other loans        756,636   37,190  6.57%    612,886   35,306  7.70%
    Consumer loans      298,136   12,662  5.67%    282,154   14,724  6.98%
    ----------------------------------------------------------------------
     Total loans      1,661,194   75,035  6.03%  1,483,848   73,501  6.62%
    Short-term
     investments,
     federal funds
     sold
     and other           21,506      318  1.97%     17,302      650  5.03%
    Taxable debt
     securities         684,371   25,222  4.92%    604,303   23,196  5.13%
    Nontaxable debt
     securities          81,168    3,440  5.66%     76,578    3,238  5.65%
    Corporate stocks
     and FHLBB stock     48,624    1,679  4.61%     42,796    2,310  7.21%
    ----------------------------------------------------------------------
     Total
      securities        835,669   30,659  4.90%    740,979   29,394  5.30%
    ----------------------------------------------------------------------
     Total interest-
      earning assets  2,496,863  105,694  5.65%  2,224,827  102,895  6.18%
    Non interest-
     earning assets     164,921                    163,803
    ----------------------------------------------------------------------
     Total assets    $2,661,784                 $2,388,630
    ======================================================================
    Liabilities and
     Shareholders'
     Equity
    NOW accounts       $165,551     $236  0.19%   $168,217     $202  0.16%
    Money market
     accounts           315,499    5,314  2.25%    295,876    8,630  3.90%
    Savings accounts    174,425      853  0.65%    198,845    2,017  1.36%
    Time deposits       829,028   24,628  3.97%    828,976   28,483  4.59%
    FHLBB advances      728,920   23,104  4.23%    468,956   15,323  4.37%
    Junior
     subordinated
     debentures          29,341    1,371  6.24%     22,681    1,014  5.98%
    Other                25,496      863  4.52%     21,521      730  4.53%
    ----------------------------------------------------------------------
     Total interest-
      bearing
      liabilities     2,268,260   56,369  3.32%  2,005,072   56,399  3.76%
    Demand deposits     174,973                    177,713
    Other
     liabilities         29,801                     31,072
    Shareholders'
     equity             188,750                    174,773
    ----------------------------------------------------------------------
     Total
      liabilities
      and
      shareholders'
      equity         $2,661,784                 $2,388,630
    ======================================================================
     Net interest
      income (FTE)               $49,325                    $46,496
    ======================================================================
    Interest rate
     spread                               2.33%                      2.42%
    Net interest
     margin                               2.64%                      2.79%
    

    Interest income amounts presented in the preceding table include the following adjustments for taxable equivalency:

    (Dollars in thousands)
    
    Nine months ended September 30,                           2008   2007
    ----------------------------------------------------------------------
    Commercial and other loans                                 $139   $121
    Nontaxable debt securities                                1,096  1,030
    Corporate stocks                                            163    238
    ----------------------------------------------------------------------
     Total                                                   $1,398 $1,389
    ======================================================================
    

    Source: Washington Trust Bancorp, Inc.


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