Washington Trust Announces Third Quarter Earnings; Restatement Announced for Period Ended June 30, 2007

Business Wire,  Oct 30, 2007  

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WESTERLY, R.I. -- 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.