Washington Trust Announces Quarterly Earnings Increase

Washington Trust Bancorp, Inc. (NASDAQ Global Market; symbol: WASH), parent company of The Washington Trust Company, today announced second quarter 2007 net income of $6.3 million, or 46 cents per diluted share. Net income for the second quarter of last year totaled $6.2 million, or 45 cents per diluted share. The returns on average equity and average assets for the quarter ended June 30, 2007 were 14.37% and 1.06%, respectively, compared to 15.28% and 1.02%, respectively, for the same period in 2006. "We’re pleased to report increased earnings for the second quarter 2007”, stated John C. Warren, Washington Trust Chairman and Chief Executive Officer. "We had solid growth in both our Wealth Management and Commercial Lending areas and our asset quality remains strong.” Warren added, "Our performance is particularly noteworthy taking into consideration a slow growth economy and an unfavorable interest rate environment.” Net income for the six months ended June 30, 2007 amounted to $12.3 million, or 90 cents per diluted share, compared to the $12.3 million, or 89 cents per diluted share, reported for the same period a year ago. The returns on average equity and average assets for the first half of 2007 were 14.01% and 1.03%, respectively, compared to 15.19% and 1.02%, respectively, for the comparable period in 2006. Net interest income totaled $14.8 million for the second quarter of 2007, essentially flat compared to the first quarter of 2007 and down $371 thousand, or 2.4 percent, from the second quarter a year ago. The net interest margin for the second quarter 2007 was 2.75%, down 6 basis points from the first quarter and unchanged from the second quarter of 2006. The decline in net interest margin from the first quarter was primarily attributable to an additional $322 thousand interest recovery received in the first quarter on a previously charged off loan, which accounted for 6 basis points of first quarter net interest margin. While the net interest margin was unchanged from the second quarter of 2006, no dividend income was recognized nor included in net interest income in that quarter on the Corporation’s investment in Federal Home Loan Bank of Boston ("FHLBB”) stock due to a timing change in the FHLBB dividend payment schedule. FHLBB dividend income recognized in the second quarter of 2007 represented approximately 9 basis points of the net interest margin. Total noninterest income amounted to $12.5 million for the second quarter of 2007, up $1.1 million from the same quarter a year ago. On a year to date basis, noninterest income increased $2.8 million, or 13 percent, from 2006. This increase was largely attributable to higher revenues from wealth management services. Wealth management revenues for the second quarter of 2007 were up $756 thousand, or 11 percent, from the second quarter of 2006. For the first six months of 2007, wealth management revenues increased $1.2 million, or 9 percent, from the same period in 2006. Wealth management assets under administration totaled $3.948 billion at June 30, 2007, up $142 million, or 4 percent, in the second quarter of 2007 and up $254 million, or 7 percent, from December 31, 2006. This growth was due to financial market appreciation and business development efforts. Included in noninterest income were net realized gains on sales of securities of $705 thousand and $765 thousand for the three months ended June 30, 2007 and 2006, respectively. These amounts included $397 thousand and $381 thousand of gains recognized in the second quarter of 2007 and 2006, respectively, resulting from the Corporation’s annual contribution of appreciated equity securities to the Corporation’s charitable foundation in 2007 and 2006, respectively. The cost of the annual contributions, which was included in noninterest expenses, amounted to $520 thousand and $513 thousand for the second quarter of 2007 and 2006, respectively. The remainder of net realized securities gains recognized in the second quarter of 2007 included $195 thousand attributable to certain debt and equity securities that were called prior to maturity by the issuers and $113 thousand of net realized gains on the sale of debt and equity securities. As previously disclosed, net realized gains on sales of securities totaling $1.0 million were recognized in the first quarter of 2007. Noninterest expenses amounted to $17.9 million for the second quarter of 2007, up $595 thousand, or 3 percent, from the same quarter a year ago. For the six months ended June 30, 2007, noninterest expenses totaled $35.0 million, up $2.0 million, or 6 percent, from the same period in 2006. During the first quarter of 2007, the Corporation prepaid $26.5 million in higher cost advances from the FHLBB, resulting in a debt prepayment penalty charge, recorded in noninterest expense, of $1.1 million. Excluding debt prepayment penalty expense, noninterest expenses increased $933 thousand, or 3 percent, over the same six-month period last year. Total assets were $2.4 billion at June 30, 2007, essentially unchanged from December 31, 2006. Loan growth amounted to $29.2 million in the first six months of 2007, including $35.6 million, or 6 percent, in commercial loan growth. Residential loans declined by $5.3 million, or 1 percent, and consumer loans have decreased by $1.1 million, or 0.4 percent, in the first half of 2007. The investment securities portfolio totaled $679.9 million at June 30, 2007, down $24.0 million from December 31, 2006. Total deposits decreased by $8.9 million from December 31, 2006. Excluding brokered certificates of deposit, in-market deposits were up $7.4 million, or 0.5 percent, in the first six months of 2007. Declines in demand and savings deposits were offset by increases in consumer and commercial certificates of deposit. FHLBB advances totaled $468.8 million at June 30, 2007, down $5.7 million from December 31, 2006. Other borrowings increased $12.9 million in the first six months of 2007, mainly due to an increase in securities sold under repurchase agreements, partially offset by payment in the first quarter of $6.7 million in deferred acquisition costs. Asset quality, as measured by the level of nonperforming assets, remained strong in the first half of 2007. Nonperforming assets totaled $3.0 million, or 0.12% of total assets, at June 30, 2007, compared to $2.4 million, or 0.10% of total assets, a year ago. There are no assets acquired through foreclosure on the balance sheet at June 30, 2007. The Corporation has never offered a sub-prime or Alt-A residential mortgage loan program and we have not experienced any recent significant deterioration of asset quality as measured by delinquencies in residential and consumer loans. Total residential mortgage and consumer loan 30-day+ delinquencies amounted to $1.8 million, or 0.21% of these loans, at June 30, 2007, compared to $1.4 million, or 0.16% of these loans, at December 31, 2006. The allowance for loan losses was $19.3 million, or 1.30% of total loans, at June 30, 2007, compared to $18.9 million, or 1.29% of total loans, at December 31, 2006 and $18.5 million, or 1.29% of total loans, at June 30, 2006. Net charge-offs amounted to $167 thousand for the first half of 2007, compared to net charge-offs of $38 thousand for the same period a year ago. The Corporation’s loan loss provision charged to earnings amounted to $300 thousand and $600 thousand, respectively, for the three and six months ended June 30, 2007, consistent with the amounts recorded in 2006. Total shareholders’ equity amounted to $173.6 million at June 30, 2007, compared to $173.1 million at December 31, 2006. Under the Corporation’s 2006 Stock Repurchase Plan, 149,700 shares were repurchased at a total cost of $3.9 million during the first six months of 2007. Book value per share as of June 30, 2007 and December 31, 2006 amounted to $13.05 and $12.89, respectively. 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 Monday, July 23, 2007 at 4:30 p.m. (Eastern Time) to discuss the Corporation’s second 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 #: 246111. The replay will be available until 11:59 p.m. on July 31, 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® 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, 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, 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   Three Months Ended June 30, Mar. 31, June 30, (Dollars and shares in thousands, except per share amounts) 2007 2007 2006   Operating Results Net interest income $14,846 $14,870 $15,217 Provision for loan losses 300 300 300 Net gains on sales of securities 705 1,036 765 Other noninterest income 11,823 10,212 10,682 Noninterest expenses 17,875 17,109 17,280 Income tax expense 2,889 2,734 2,907 Net income 6,310 5,975 6,177   Per Share Basic earnings $0.47 $0.45 $0.46 Diluted earnings $0.46 $0.44 $0.45 Dividends declared $0.20 $0.20 $0.19   Weighted Average Shares Outstanding Basic 13,339.6 13,412.1 13,419.9 Diluted 13,616.4 13,723.0 13,703.2   Key Ratios Return on average assets 1.06% 1.00% 1.02% Return on average equity 14.37% 13.66% 15.28% Interest rate spread (taxable equivalent basis) 2.38% 2.46% 2.43% Net interest margin (taxable equivalent basis) 2.75% 2.81% 2.75%   Allowance for Loan Losses Balance at beginning of period $19,360 $18,894 $18,247 Provision charged to earnings 300 300 300 Net recoveries (charge-offs) (333) 166 (67) Balance at end of period $19,327 $19,360 $18,480 Washington Trust Bancorp, Inc. and Subsidiaries FINANCIAL SUMMARY   Six Months Ended June 30, June 30, (Dollars and shares in thousands, except per share amounts) 2007 2006   Operating Results Net interest income $29,716 $30,632 Provision for loan losses 600 600 Net realized gains on securities 1,741 824 Other noninterest income 22,035 20,143 Noninterest expenses 34,984 32,984 Income tax expense 5,623 5,765 Net income 12,285 12,250   Per Share Basic earnings $0.92 $0.91 Diluted earnings $0.90 $0.89 Dividends declared $0.40 $0.38   Weighted Average Shares Outstanding Basic 13,375.7 13,403.4 Diluted 13,667.6 13,699.6   Key Ratios Return on average assets 1.03% 1.02% Return on average equity 14.01% 15.19% Interest rate spread (taxable equivalent basis) 2.42% 2.49% Net interest margin (taxable equivalent basis) 2.78% 2.79%   Allowance for Loan Losses Balance at beginning of period $18,894 $17,918 Provision charged to earnings 600 600 Net (charge-offs) recoveries (167) (38) Balance at end of period $19,327 $18,480         Three Months Six Months Ended Ended (Dollars and shares in thousands, except per share amounts) June 30, 2007 June 30, 2007   Wealth Management Assets Under Administration Balance at beginning of period $3,806,274 $3,694,813 Net market appreciation and income 113,656 161,725 Net customer cash flows 28,460 91,852 Balance at end of period $3,948,390 $3,948,390 Washington Trust Bancorp, Inc. and Subsidiaries FINANCIAL SUMMARY   (Dollars and shares in thousands, except per share amounts) June 30, Dec. 31, June 30, Period-End Balance Sheet 2007 2006 2006 Assets $2,396,300 $2,399,165 $2,432,277 Total securities 679,859 703,851 786,251 Loans: Commercial and other: Mortgages 265,560 282,019 273,186 Construction and development 43,755 32,233 33,768 Other 313,673 273,145 258,655 Total commercial and other 622,988 587,397 565,609 Residential real estate: Mortgages 572,321 577,522 568,914 Homeowner construction 11,071 11,149 20,280 Total residential real estate 583,392 588,671 589,194 Consumer: Home equity lines 139,256 145,676 153,037 Home equity loans 97,253 93,947 84,030 Other 46,285 44,295 39,438 Total consumer 282,794 283,918 276,505 Total loans 1,489,174 1,459,986 1,431,308 Deposits: Demand deposits 177,210 186,533 184,227 NOW accounts 174,715 175,479 178,063 Money market accounts 290,046 286,998 239,912 Savings accounts 196,105 205,998 191,585 Time deposits 831,013 822,989 877,010 Total deposits 1,669,089 1,677,997 1,670,797 Brokered deposits included in time deposits 159,297 175,618 216,138 Federal Home Loan Bank advances 468,827 474,561 543,588 Shareholders’ equity 173,606 173,056 161,329   Capital Ratios Tier 1 risk-based capital 9.46% 9.57% 9.41% Total risk-based capital 10.79% 10.96% 10.85% Tier 1 leverage ratio 6.20% 6.01% 5.73%   Share Information Shares outstanding at end of period 13,305.1 13,429.7 13,429.4 Book value per share $13.05 $12.89 $12.01 Tangible book value per share $8.79 $8.61 $8.02 Market value per share $25.21 $27.89 $27.72   Credit Quality Nonaccrual loans: Commercial: Mortgages $1,385 $981 – Construction and development – – – Other 645 831 566 Residential real estate 698 721 1,692 Consumer 241 190 177 Total nonaccrual loans $2,969 $2,723 $2,435 Other real estate owned, net - - - Nonperforming assets to total assets 0.12% 0.11% 0.10% Nonaccrual loans to total loans 0.20% 0.19% 0.17% Allowance for loan losses to nonaccrual loans 650.96% 693.87% 758.93% Allowance for loan losses to total loans 1.30% 1.29% 1.29%   Assets Under Administration Market value $3,948,390 $3,694,813 $3,424,698 Washington Trust Bancorp, Inc. and Subsidiaries CONSOLIDATED BALANCE SHEETS   (Dollars in thousands) June 30, Dec. 31,     2007   2006 Assets: Cash and due from banks $36,942 $54,337 Federal funds sold 19,175 16,425 Other short-term investments 1,899 1,147 Mortgage loans held for sale 4,132 2,148 Securities: Available for sale, at fair value; amortized cost $530,142 in 2007 and $525,966 in 2006 525,688 526,396 Held to maturity, at cost; fair value $150,515 in 2007 and $175,369 in 2006   154,171   177,455 Total securities 679,859 703,851 Federal Home Loan Bank stock, at cost 28,727 28,727 Loans: Commercial and other 622,988 587,397 Residential real estate 583,392 588,671 Consumer   282,794   283,918 Total loans 1,489,174 1,459,986 Less allowance for loan losses   19,327   18,894 Net loans 1,469,847 1,441,092 Premises and equipment, net 26,293 24,307 Accrued interest receivable 11,145 11,268 Investment in bank-owned life insurance 40,560 39,770 Goodwill 44,558 44,558 Identifiable intangible assets, net 12,100 12,816 Other assets   21,063   18,719 Total assets   $2,396,300   $2,399,165   Liabilities: Deposits: Demand deposits $177,210 $186,533 NOW accounts 174,715 175,479 Money market accounts 290,046 286,998 Savings accounts 196,105 205,998 Time deposits   831,013   822,989 Total deposits 1,669,089 1,677,997 Dividends payable 2,667 2,556 Federal Home Loan Bank advances 468,827 474,561 Junior subordinated debentures 22,681 22,681 Other borrowings 27,574 14,684 Accrued expenses and other liabilities   31,856   33,630 Total liabilities   2,222,694   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 35,734 35,893 Retained earnings 148,485 141,548 Accumulated other comprehensive loss (6,519) (3,515) Treasury stock, at cost; 186,972 shares in 2007 and 62,432 in 2006   (4,937)   (1,713) Total shareholders’ equity   173,606   173,056 Total liabilities and shareholders’ equity   $2,396,300   $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 Six Months Periods ended June 30,   2007   2006   2007   2006 Interest income: Interest and fees on loans $24,414 $23,130 $48,348 $45,027 Interest on securities: Taxable 7,709 8,648 15,501 17,060 Nontaxable 759 371 1,427 699 Dividends on corporate stock and Federal Home Loan Bank stock 685 249 1,403 926 Interest on federal funds sold and other short-term investments   184   150   375   265 Total interest income   33,751   32,548   67,054   63,977 Interest expense: Deposits 13,215 11,161 26,192 21,399 Federal Home Loan Bank advances 5,063 5,745 10,031 11,104 Junior subordinated debentures 338 338 676 676 Other   289   87   439   166 Total interest expense   18,905   17,331   37,338   33,345 Net interest income 14,846 15,217 29,716 30,632 Provision for loan losses   300   300   600   600 Net interest income after provision for loan losses   14,546   14,917   29,116   30,032 Noninterest income: Wealth management services: Trust and investment advisory fees 5,252 4,682 10,290 9,309 Mutual fund fees 1,352 1,214 2,614 2,344 Financial planning, commissions and other service fees   889   841   1,459   1,524 Wealth management services 7,493 6,737 14,363 13,177 Service charges on deposit accounts 1,220 1,236 2,345 2,355 Merchant processing fees 1,829 1,656 3,033 2,703 Income from bank-owned life insurance 399 346 790 625 Net gains on loan sales and commissions on loans originated for others 510 336 774 612 Net realized gains on securities 705 765 1,741 824 Other income   372   371   730   671 Total noninterest income   12,528   11,447   23,776   20,967 Noninterest expense: Salaries and employee benefits 10,285 9,830 20,097 19,449 Net occupancy 1,038 1,018 2,055 1,972 Equipment 861 881 1,693 1,680 Merchant processing costs 1,558 1,407 2,577 2,294 Outsourced services 535 496 1,054 1,014 Advertising and promotion 572 681 1,001 1,118 Legal, audit and professional fees 404 403 854 779 Amortization of intangibles 348 406 716 811 Debt prepayment penalties - - 1,067 - Other   2,274   2,158   3,870   3,867 Total noninterest expense   17,875   17,280   34,984   32,984 Income before income taxes 9,199 9,084 17,908 18,015 Income tax expense   2,889   2,907   5,623   5,765 Net income   $6,310   $6,177   $12,285   $12,250   Weighted average shares outstanding - basic 13,339.6 13,419.9 13,375.7 13,403.4 Weighted average shares outstanding - diluted 13,616.4 13,703.2 13,667.6 13,699.6 Per share information: Basic earnings per share $0.47 $0.46 $0.92 $0.91 Diluted earnings per share $0.46 $0.45 $0.90 $0.89 Cash dividends declared per share $0.20 $0.19 $0.40 $0.38 Washington Trust Bancorp, Inc. and Subsidiaries CONSOLIDATED AVERAGE BALANCE SHEETS     Three months ended June 30, 2007 2006 Average Yield/ Average Yield/ (Dollars in thousands)   Balance   Interest   Rate   Balance   Interest   Rate Assets: Residential real estate loans $590,226 $7,812 5.31% $590,595 $7,505 5.10% Commercial and other loans 615,606 11,730 7.64% 568,937 11,049 7.79% Consumer loans   282,408   4,911   6.98%   272,819   4,633   6.81% Total loans 1,488,240 24,453 6.59% 1,432,351 23,187 6.49% Federal funds sold and other short-term investments 17,028 184 4.34% 12,827 150 4.69% Taxable debt securities 605,538 7,709 5.11% 737,987 8,648 4.70% Nontaxable debt securities 78,964 1,112 5.65% 39,659 570 5.76% Corporate stocks and FHLBB stock   42,806   763   7.15%   51,128   343   2.69% Total securities   744,336   9,768   5.26%   841,601   9,711   4.63% Total interest-earning assets 2,232,576 34,221 6.15% 2,273,952 32,898 5.80% Non interest-earning assets   159,111           154,648         Total assets   $2,391,687           $2,428,600         Liabilities and Shareholders’ Equity: NOW accounts $168,742 $64 0.15% $177,260 $80 0.18% Money market accounts 293,245 2,869 3.92% 233,489 1,835 3.15% Savings accounts 196,647 661 1.35% 195,251 274 0.56% Time deposits 837,223 9,621 4.61% 871,519 8,972 4.13% FHLBB advances 467,411 5,063 4.34% 554,639 5,745 4.15% Junior subordinated debentures 22,681 338 5.98% 22,681 338 5.98% Other   25,764   289   4.51%   7,346   87   4.75% Total interest-bearing liabilities 2,011,713 18,905 3.77% 2,062,185 17,331 3.37% Demand deposits 173,473 182,546 Other liabilities 30,863 22,184 Shareholders’ equity   175,638           161,685         Total liabilities and shareholders’ equity   $2,391,687           $2,428,600         Net interest income (FTE)       $15,316           $15,567     Interest rate spread 2.38% 2.43% Net interest margin 2.75% 2.75% Washington Trust Bancorp, Inc. and Subsidiaries CONSOLIDATED AVERAGE BALANCE SHEETS     Six months ended June 30, 2007 2006 Average Yield/ Average Yield/ (Dollars in thousands)   Balance   Interest   Rate   Balance   Interest   Rate Assets: Residential real estate loans $591,138 $15,585 5.32% $590,217 $14,909 5.09% Commercial and other loans 601,425 23,102 7.75% 562,511 21,303 7.64% Consumer loans   281,992   9,736   6.96%   269,960   8,922   6.66% Total loans 1,474,555 48,423 6.62% 1,422,688 45,134 6.40% Federal funds sold and other short-term investments 15,271 375 4.96% 11,510 265 4.64% Taxable debt securities 614,211 15,501 5.09% 737,776 17,060 4.66% Nontaxable debt securities 74,332 2,090 5.67% 37,430 1,074 5.79% Corporate stocks and FHLBB stock   43,136   1,563   7.30%   50,241   1,104   4.43% Total securities   746,950   19,529   5.27%   836,957   19,503   4.70% Total interest-earning assets 2,221,505 67,952 6.17% 2,259,645 64,637 5.77% Non interest-earning assets   165,038           152,019         Total assets $2,386,543     $2,411,664     Liabilities and Shareholders’ Equity: NOW accounts $169,206 $132 0.16% $173,859 $147 0.17% Money market accounts 293,613 5,680 3.90% 230,911 3,442 3.01% Savings accounts 201,086 1,371 1.38% 199,984 561 0.57% Time deposits 834,870 19,009 4.59% 861,464 17,249 4.04% FHLBB advances 467,429 10,031 4.33% 551,035 11,104 4.06% Junior subordinated debentures 22,681 676 6.01% 22,681 676 6.01% Other   19,316   439   4.58%   7,183   166   4.67% Total interest-bearing liabilities 2,008,201 37,338 3.75% 2,047,117 33,345 3.28% Demand deposits 172,232 181,257 Other liabilities 30,791 21,972 Shareholders’ equity   175,319           161,318         Total liabilities and shareholders’ equity   $2,386,543           $2,411,664         Net interest income (FTE)       $30,614           $31,292     Interest rate spread 2.42% 2.49% Net interest margin 2.78% 2.79%