Washington Trust Announces Second Quarter 2013 Earnings

WESTERLY, R.I.--(BUSINESS WIRE)--Washington Trust Bancorp, Inc. (NASDAQ Global Select; symbol: WASH), parent company of The Washington Trust Company, today announced second quarter 2013 net income of $9.0 million, or 54 cents per diluted share. These results compare to first quarter of 2013 net income of $7.4 million, or 45 cents per diluted share, and second quarter of 2012 net income of $8.7 million, or 53 cents per diluted share.

“Washington Trust posted another quarter of solid operating results, with a continuation of strong commercial loan growth and healthy mortgage banking activity,” stated Joseph J. MarcAurele, Chairman, President and CEO. “We continue to attract and build customer relationships across all business lines, reinforcing our position as Rhode Island’s Bank of Choice.”

Highlights for the quarter or at June 30th include:

• Total loans were $2.38 billion at June 30, 2013, up by $59.9 million, or 3%, in the second quarter of 2013, led by growth of $33.7 million, or 4%, in the commercial real estate portfolio.
• Deposits totaled $2.30 billion at June 30, 2013, down slightly from March 31, 2013, reflecting seasonal outflow. Total deposits were up by $174.2 million, or 8%, in the last twelve months.
• The returns on average equity and average assets for the second quarter of 2013 were 11.84% and 1.18%, respectively. Comparable amounts for the first quarter of 2013 were 9.91% and 0.98%, respectively.

2013 results also included the following transactions:

• During the second quarter of 2013, certain junior subordinated debentures were redeemed and as a result, unamortized debt issuance costs of $244 thousand were expensed and classified as interest expense in the quarter. The after-tax impact of this was 1 cent per diluted share.
• Included in salaries and employee benefits expense in the second quarter of 2013 was $270 thousand for severance related matters. The after-tax impact of this was 1 cent per diluted share.
• In the first quarter of 2013, the Corporation had recognized an other-than-temporary impairment ("OTTI") charge to earnings on a trust preferred collateralized debt obligation investment security of $2.8 million (or 11 cents per diluted share). There were no such charges in the second quarter of 2013.

Net Interest Income

Net interest income totaled $22.4 million for the second quarter of 2013, essentially flat compared to the first quarter of 2013. The net interest margin for the second quarter of 2013 was 3.26%, compared to 3.32% for the first quarter of 2013.

In connection with the June 2013 redemption of $10.3 million of junior subordinated debentures, unamortized debt issuance costs of $244 thousand were expensed and classified as interest expense in the quarter. The impact of this item was an increase of 4 basis points on the cost of funds and a reduction of 4 basis points on the net interest margin for the second quarter 2013. The rate on this debt was approximately 5.69% at the time of redemption, which included the cost of a related interest rate swap that matured upon the redemption event.

Average interest-earning assets for the second quarter of 2013 increased by $14.4 million, while the yield on interest-earning assets declined by 7 basis points from the previous quarter. Average loan balances grew by $57 million, which were partially offset by payments received on mortgage-backed securities in the investment security portfolio.

Noninterest Income

Noninterest income totaled $16.4 million for the second quarter of 2013, compared to $13.2 million for the previous quarter. In the first quarter 2013, OTTI charges of $2.8 million were recognized. Excluding this item, noninterest income increased by $456 thousand, or 3%, on a linked quarter basis. Other significant linked quarter changes included the following:

• Wealth management revenues were up by $438 thousand, or 6%, including a $344 thousand increase in tax preparation fees, which are typically concentrated in the second quarter.
• Mortgage banking revenues decreased by $681 thousand, or 16%, reflecting a lower level of mortgage loan refinancing activity due to rising market interest rates. In the second quarter of 2013, residential loans sold to the secondary market amounted to $132 million, compared to $153 million in the previous quarter.
• Merchant processing fee revenue rose by $636 thousand, or 32%, on a linked quarter basis, reflecting an increase in the volume of transactions processed for customers. See discussion regarding corresponding increase in merchant processing costs described below.

Noninterest Expenses

Noninterest expenses totaled $25.0 million for the second quarter of 2013, compared to $24.2 million for the previous quarter. Included in salaries and employee benefits expense in the second quarter of 2013 was $270 thousand for severance related matters. Excluding this item, noninterest expenses increased by $551 thousand, or 2%, on a linked quarter basis, largely due to a $538 thousand, or 32%, increase in merchant processing costs. See the discussion above regarding the corresponding increase in merchant processing fee income.

Asset Quality

Total nonaccrual loans decreased by $5.6 million to $20.0 million, or 0.84% of total loans, at June 30, 2013, from $25.7 million, or 1.10%, at March 31, 2013, largely reflecting charge-offs and payoffs on commercial loans. Total past due loans amounted to $26.1 million, or 1.09% of total loans, at June 30, 2013, compared to $26.2 million, or 1.13%, at March 31, 2013.

The loan loss provision charged to earnings amounted to $700 thousand for the second quarter of 2013, compared to $600 thousand for the first quarter of 2013. Net charge-offs amounted to $4.0 million in the second quarter of 2013 and was comprised primarily of a $4.0 million charge-off on one commercial mortgage loan. The remaining carrying value of this loan was $1.0 million at June 30, 2013. Net charge-offs totaled $334 thousand in the first quarter of 2013.

The allowance for loan losses was $27.9 million, or 1.17% of total loans, at June 30, 2013 compared to $31.1 million, or 1.34% of total loans, at March 31, 2013. The decline in the ratio of the allowance for loan losses to total loans reflects charge-offs and a decrease in specific reserves on impaired loans.

Loans

Total loans rose by $59.9 million in the second quarter of 2013, with increases in commercial loans of $33.0 million, or 3%, and residential loans of $24.5 million, or 3%. Total loans were up by $91.0 million, or 4%, from December 31, 2012 and by $171.1 million, or 8%, from June 30, 2012.

Investment Securities

The investment securities portfolio declined by $36.6 million from March 31, 2013 and by $65.4 million from December 31, 2012, largely due to principal payments received on mortgage-backed securities which were not reinvested in the securities portfolio.

Deposits and Borrowings

Total deposits decreased by $15.0 million from March 31, 2013 and by $8.0 million from December 31, 2012. In the last twelve months, total deposits grew by $174.2 million, or 8%, including an increase of $75.3 million, or 13%, in demand deposits and NOW account balances.

FHLBB advances increased by $32.1 million from March 31, 2013 and by $12.2 million from December 31, 2012. Junior subordinated debentures declined by $10.3 million from both March 31, 2013 and December 31, 2012, reflecting the June 2013 redemption of the junior subordinated debentures issued to and held by Washington Preferred Capital Trust.

Capital Management

Capital levels continued to exceed the regulatory minimum levels to be considered well capitalized, with a total risk-based capital ratio of 12.93% at June 30, 2013, compared to 13.26% at December 31, 2012. Total shareholder's equity was $303.4 million at June 30, 2013, up by $7.7 million from the balance at December 31, 2012.

Dividends Declared

The Board of Directors declared a quarterly dividend of 25 cents per share for the quarter ended June 30, 2013. The dividend was paid on July 12, 2013 to shareholders of record on July 1, 2013.

Conference Call

Washington Trust will host a conference call to discuss second quarter results on Tuesday, July 23, 2013 at 8:30 am (Eastern Time). Individuals may dial in to the call at 1-888-317-6016. An audio replay of the call will be available by dialing 1-877-344-7529 and entering Conference Number 10030244; the audio replay will be available until 9:00 a.m. on August 7, 2013. A webcast of the call will be posted in the Investor Relations section of Washington Trust's web site, www.washtrust.com, shortly after the conclusion of the call and will be available through September 30, 2013.

Background

Washington Trust Bancorp, Inc. is the parent of The Washington Trust Company, a state-chartered bank headquartered in Westerly, Rhode Island. Founded in 1800, Washington Trust is the oldest community bank in the nation and is the largest independent bank headquartered in Rhode Island. Washington Trust offers a full range of financial services, including commercial banking, small business banking, personal banking, and wealth management and trust services through its offices located in Rhode Island, Connecticut and Massachusetts. The Corporation’s common stock trades on The NASDAQ Global Select® Stock 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 statements that are “forward-looking statements”. We may also make written or oral forward-looking statements in other documents we file with the SEC, in our annual reports to shareholders, in press releases and other written materials, and in oral statements made by our officers, directors or employees. You can identify forward-looking statements by the use of the words “believe,” “expect,” “anticipate,” “intend,” “estimate,” “assume,” “outlook,” “will,” “should,” and other expressions that predict or indicate future events and trends and which do not relate to historical matters. You should not rely on forward-looking statements, because they involve known and unknown risks, uncertainties and other factors, some of which are beyond the control of Washington Trust. These risks, uncertainties and other factors may cause the actual results, performance or achievements of Washington Trust to be materially different from the anticipated future results, performance or achievements expressed or implied by the forward-looking statements.

Some of the factors that might cause these differences include the following: continued weakness in general national, regional or international economic conditions or conditions affecting the banking or financial services industries or financial capital markets, volatility and disruption in national and international financial markets, government intervention in the U.S. financial system, 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 Washington Trust'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, 2012, as filed with the Securities and Exchange Commission and as updated by our Quarterly Reports on Form 10-Q, 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. These forward-looking statements were based on information, plans and estimates at the date of this press release, and Washington Trust assumes no obligation to update any forward-looking statements to reflect changes in underlying assumptions or factors, new information, future events or other changes.

Supplemental Information - Explanation of Non-GAAP Financial Measures

In addition to results presented in accordance with generally accepted accounting principles (“GAAP”), this press release contains certain non-GAAP financial measures. Washington Trust's management believes that the supplemental non-GAAP information, which consists of measurements and ratios based on tangible equity and tangible assets, is utilized by regulators and market analysts to evaluate a company's financial condition and therefore, such information is useful to investors. These disclosures should not be viewed as a substitute for financial results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures which may be presented by other companies. Because non-GAAP financial measures are not standardized, it may not be possible to compare these financial measures with other companies' non-GAAP financial measures having the same or similar names.

Washington Trust Bancorp, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS (unaudited)
(Dollars in thousands, except par value)	Jun 30, 2013			Dec 31, 2012
Assets:
Cash and due from banks	$	79,903		$	73,474
Short-term investments		3,764			19,176
Mortgage loans held for sale, at fair value; amortized cost $29,163 in 2013 and $48,370 in 2012		28,889			50,056
Securities:
Available for sale, at fair value; amortized cost $309,421 in 2013 and $363,408 in 2012		316,714			375,498
Held to maturity, at cost; fair value $33,762 in 2013 and $41,420 in 2012		33,803			40,381
Total securities		350,517			415,879
Federal Home Loan Bank stock, at cost		37,730			40,418
Loans:
Commercial		1,310,114			1,252,419
Residential real estate		748,871			717,681
Consumer		325,995			323,903
Total loans		2,384,980			2,294,003
Less allowance for loan losses		27,884			30,873
Net loans		2,357,096			2,263,130
Premises and equipment, net		26,392			27,232
Investment in bank-owned life insurance		55,750			54,823
Goodwill		58,114			58,114
Identifiable intangible assets, net		5,827			6,173
Other assets		57,325			63,409
Total assets	$	3,061,307		$	3,071,884
Liabilities:
Deposits:
Demand deposits	$	358,797		$	379,889
NOW accounts		301,096			291,174
Money market accounts		540,012			496,402
Savings accounts		293,405			274,934
Time deposits		811,299			870,232
Total deposits		2,304,609			2,312,631
Federal Home Loan Bank advances		373,341			361,172
Junior subordinated debentures		22,681			32,991
Other borrowings		199			1,212
Other liabilities		57,107			68,226
Total liabilities		2,757,937			2,776,232
Shareholders’ Equity:
Common stock of $.0625 par value; authorized 30,000,000 shares; issued and outstanding 16,487,305 shares in 2013 and 16,379,771 shares in 2012		1,030			1,024
Paid-in capital		93,274			91,453
Retained earnings		221,761			213,674
Accumulated other comprehensive loss		(12,695	)		(10,499	)
Total shareholders’ equity		303,370			295,652
Total liabilities and shareholders’ equity	$	3,061,307		$	3,071,884

Washington Trust Bancorp, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME (unaudited)
(Dollars and shares in thousands, except per share amounts)		Three Months						Six Months
Periods Ended June 30,		2013			2012			2013			2012
Interest income:
Interest and fees on loans		$	25,513		$	25,344		$	50,736		$	50,707
Interest on securities:	Taxable		2,576			4,069			5,421			8,446
	Nontaxable		647			682			1,306			1,375
Dividends on corporate stock and Federal Home Loan Bank stock			39			78			77			155
Other interest income			24			17			52			37
Total interest income			28,799			30,190			57,592			60,720
Interest expense:
Deposits			3,096			3,385			6,290			6,819
Federal Home Loan Bank advances			2,679			3,998			5,416			8,083
Junior subordinated debentures			612			391			1,002			783
Other interest expense			3			5			8			239
Total interest expense			6,390			7,779			12,716			15,924
Net interest income			22,409			22,411			44,876			44,796
Provision for loan losses			700			600			1,300			1,500
Net interest income after provision for loan losses			21,709			21,811			43,576			43,296
Noninterest income:
Wealth management services:
Trust and investment advisory fees			6,230			5,819			12,296			11,597
Mutual fund fees			1,077			1,002			2,099			2,027
Financial planning, commissions and other service fees			605			652			991			1,034
Wealth management services			7,912			7,473			15,386			14,658
Service charges on deposit accounts			790			764			1,581			1,523
Merchant processing fees			2,613			2,732			4,590			4,720
Card interchange fees			683			626			1,282			1,169
Income from bank-owned life insurance			461			477			928			963
Net gains on loan sales and commissions on loans originated for others			3,485			3,015			7,651			6,112
Net realized gains on securities			—			299			—			299
Net gains (losses) on interest rate swap contracts			152			(4	)		171			24
Equity in earnings (losses) of unconsolidated subsidiaries			(57	)		124			(18	)		87
Other income			355			668			761			1,060
Noninterest income, excluding other-than-temporary impairment losses			16,394			16,174			32,332			30,615
Total other-than-temporary impairment losses on securities			—			—			(613	)		(85	)
Portion of loss recognized in other comprehensive income (before tax)			—			—			(2,159	)		(124	)
Net impairment losses recognized in earnings			—			—			(2,772	)		(209	)
Total noninterest income			16,394			16,174			29,560			30,406
Noninterest expense:
Salaries and employee benefits			15,542			14,451			30,984			28,911
Net occupancy			1,364			1,527			2,878			3,053
Equipment			1,192			1,143			2,436			2,250
Merchant processing costs			2,211			2,320			3,884			3,983
Outsourced services			871			895			1,712			1,815
FDIC deposit insurance costs			451			426			882			884
Legal, audit and professional fees			554			519			1,162			1,001
Advertising and promotion			476			478			831			850
Amortization of intangibles			173			186			346			373
Foreclosed property costs			137			170			184			468
Debt prepayment penalties			—			961			—			961
Other expenses			2,034			2,152			3,890			4,078
Total noninterest expense			25,005			25,228			49,189			48,627
Income before income taxes			13,098			12,757			23,947			25,075
Income tax expense			4,115			4,044			7,543			7,924
Net income		$	8,983		$	8,713		$	16,404		$	17,151
Weighted average common shares outstanding - basic			16,454			16,358			16,428			16,344
Weighted average common shares outstanding - diluted			16,581			16,392			16,558			16,381
Per share information:	Basic earnings per common share	$	0.54		$	0.53		$	0.99		$	1.04
	Diluted earnings per common share	$	0.54		$	0.53		$	0.99		$	1.04
	Cash dividends declared per share	$	0.25		$	0.23		$	0.50		$	0.46

Washington Trust Bancorp, Inc. and Subsidiaries
SELECTED FINANCIAL HIGHLIGHTS (unaudited)
	At or for the Quarters Ended
(Dollars and shares in thousands, except per share amounts)	Jun 30, 2013		Mar 31, 2013		Dec 31, 2012		Sep 30, 2012		Jun 30, 2012
Financial Data:
Total assets	$3,061,307		$3,051,848		$3,071,884		$3,048,868		$3,041,050
Total loans	2,384,980		2,325,045		2,294,003		2,256,697		2,213,842
Total securities	350,517		387,102		415,879		483,858		516,193
Total deposits	2,304,609		2,319,641		2,312,631		2,234,659		2,130,453
Total shareholders' equity	303,370		301,291		295,652		298,394		292,734
Net interest income	22,409		22,467		23,164		22,736		22,411
Provision for loan losses	700		600		600		600		600
Noninterest income, excluding OTTI losses	16,394		15,938		17,899		16,921		16,174
Net OTTI losses recognized in earnings	—		(2,772	)	(12	)	—		—
Noninterest expenses	25,005		24,184		27,421		26,290		25,228
Income tax expense	4,115		3,428		4,007		3,867		4,044
Net income	8,983		7,421		9,023		8,900		8,713
Share Data:
Basic earnings per common share	$0.54		$0.45		$0.55		$0.54		$0.53
Diluted earnings per common share	$0.54		$0.45		$0.55		$0.54		$0.53
Dividends declared per share	$0.25		$0.25		$0.24		$0.24		$0.23
Book value per share	$18.40		$18.34		$18.05		$18.23		$17.89
Tangible book value per share - Non-GAAP (1)	$14.52		$14.44		$14.13		$14.29		$13.94
Market value per share	$28.52		$27.38		$26.31		$26.27		$24.38
Shares outstanding at end of period	16,487		16,425		16,380		16,371		16,359
Weighted average common shares outstanding - basic	16,454		16,401		16,376		16,366		16,358
Weighted average common shares outstanding - diluted	16,581		16,449		16,425		16,414		16,392
Key Ratios:
Return on average assets	1.18	%	0.98	%	1.19	%	1.17	%	1.16	%
Return on average tangible assets - Non-GAAP (1)	1.21	%	1.01	%	1.21	%	1.19	%	1.18	%
Return on average equity	11.84	%	9.91	%	12.01	%	12.02	%	11.98	%
Return on average tangible equity - Non-GAAP (1)	15.01	%	12.62	%	15.29	%	15.37	%	15.41	%
Capital Ratios:
Tier 1 risk-based capital	11.74% (i)		12.25	%	12.01	%	11.93	%	11.90	%
Total risk-based capital	12.93% (i)		13.50	%	13.26	%	13.18	%	13.15	%
Tier 1 leverage ratio	9.32% (i)		9.53	%	9.30	%	9.11	%	9.00	%
Equity to assets	9.91	%	9.87	%	9.62	%	9.79	%	9.63	%
Tangible equity to tangible assets - Non-GAAP (1)	7.99	%	7.94	%	7.69	%	7.84	%	7.66	%
(i) - estimated
Wealth Management Assets under Administration:
Balance at beginning of period	$4,420,076		$4,199,640		$4,242,520		$4,079,913		$4,196,447
Net investment (depreciation) appreciation & income	(20,956	)	213,979		(5,887	)	155,427		(131,896	)
Net client cash flows	34,454		6,457		(36,993	)	7,180		15,362
Balance at end of period	$4,433,574		$4,420,076		$4,199,640		$4,242,520		$4,079,913

(1) See the section labeled “Supplemental Information - Non-GAAP Financial Measures” at the end of this document.

Washington Trust Bancorp, Inc. and Subsidiaries
SELECTED FINANCIAL HIGHLIGHTS (unaudited)
	Six Months Ended
(Dollars and shares in thousands, except per share amounts)	Jun 30, 2013		Jun 30, 2012
Financial Data:
Net interest income	$44,876		$44,796
Provision for loan losses	1,300		1,500
Noninterest income, excluding OTTI losses	32,332		30,615
Net OTTI losses recognized in earnings	(2,772	)	(209	)
Noninterest expenses	49,189		48,627
Income tax expense	7,543		7,924
Net income	16,404		17,151
Share Data:
Basic earnings per common share	$0.99		$1.04
Diluted earnings per common share	$0.99		$1.04
Dividends declared per share	$0.50		$0.46
Weighted average common shares outstanding - basic	16,428		16,344
Weighted average common shares outstanding - diluted	16,558		16,381
Key Ratios:
Return on average assets	1.08	%	1.13	%
Return on average tangible assets - Non-GAAP (1)	1.11	%	1.16	%
Return on average equity	10.88	%	11.92	%
Return on average tangible equity - Non-GAAP (1)	13.82	%	15.38	%
Asset Quality Data:
Allowance for Loan Losses:
Balance at beginning of period	$30,873		$29,802
Provision charged to earnings	1,300		1,500
Charge-offs	(4,549	)	(1,377	)
Recoveries	260		523
Balance at end of period	$27,884		$30,448
Net Loan Charge-Offs (Recoveries):
Commercial mortgages	$3,922		($381	)
Other commercial	134		873
Residential real estate mortgages	45		177
Consumer	188		185
Total	$4,289		$854
Net charge-offs to average loans (annualized)	0.37	%	0.17	%
Wealth Management Assets Under Administration:
Balance at beginning of period	$4,199,640		$3,900,061
Net investment appreciation & income	193,023		166,259
Net client cash flows	40,911		13,593
Balance at end of period	$4,433,574		$4,079,913

(1) See the section labeled “Supplemental Information - Non-GAAP Financial Measures” at the end of this document.

Washington Trust Bancorp, Inc. and Subsidiaries
SELECTED FINANCIAL HIGHLIGHTS (unaudited)
	For the Quarters Ended
	Jun 30, 2013		Mar 31, 2013		Dec 31, 2012		Sep 30, 2012		Jun 30, 2012
Average Yield / Rate (taxable equivalent basis):
Assets:
Commercial loans	4.58	%	4.70	%	4.90	%	4.94	%	5.03	%
Residential real estate loans, including mortgage loans held for sale	4.14	%	4.26	%	4.23	%	4.32	%	4.40	%
Consumer loans	3.81	%	3.84	%	3.86	%	3.89	%	3.85	%
Total loans	4.34	%	4.44	%	4.53	%	4.59	%	4.65	%
Cash, federal funds sold and other short-term investments	0.22	%	0.21	%	0.26	%	0.26	%	0.23	%
FHLBB stock	0.42	%	0.39	%	0.48	%	0.51	%	0.54	%
Taxable debt securities	3.52	%	3.56	%	3.49	%	3.50	%	3.63	%
Nontaxable debt securities	5.94	%	5.98	%	5.89	%	5.83	%	5.93	%
Corporate stocks	—	%	—	%	—	%	—	%	7.58	%
Total securities	3.97	%	3.98	%	3.86	%	3.83	%	3.95	%
Total interest-earning assets	4.17	%	4.24	%	4.31	%	4.34	%	4.41	%
Liabilities:
Interest-bearing demand deposits	—	%	—	%	—	%	—	%	—	%
NOW accounts	0.06	%	0.06	%	0.07	%	0.06	%	0.06	%
Money market accounts	0.29	%	0.29	%	0.28	%	0.26	%	0.23	%
Savings accounts	0.07	%	0.07	%	0.09	%	0.11	%	0.11	%
Time deposits	1.25	%	1.28	%	1.32	%	1.33	%	1.35	%
FHLBB advances	3.29	%	3.21	%	3.27	%	3.18	%	3.25	%
Junior subordinated debentures	7.82	%	4.79	%	4.75	%	4.74	%	4.77	%
Other	5.87	%	1.77	%	5.51	%	6.33	%	2.07	%
Total interest-bearing liabilities	1.11	%	1.11	%	1.19	%	1.27	%	1.33	%
Interest rate spread (taxable equivalent basis)	3.06	%	3.13	%	3.12	%	3.07	%	3.08	%
Net interest margin (taxable equivalent basis)	3.26	%	3.32	%	3.33	%	3.28	%	3.30	%

	At June 30, 2013
	Amortized		Unrealized		Unrealized			Fair
(Dollars in thousands)	Cost (1)		Gains		Losses			Value
Securities Available for Sale:
Obligations of U.S. government-sponsored enterprises	$	29,472	$	1,466	$	—		$	30,938
Mortgage-backed securities issued by U.S. government agencies and U.S. government-sponsored enterprises		172,014		9,239		(28	)		181,225
States and political subdivisions		64,838		2,850		—			67,688
Trust preferred securities:
Individual name issuers		30,696		—		(5,619	)		25,077
Collateralized debt obligations		1,264		—		(867	)		397
Corporate bonds		11,137		269		(17	)		11,389
Total securities available for sale		309,421		13,824		(6,531	)		316,714
Held to Maturity:
Mortgage-backed securities issued by U.S. government agencies and U.S. government-sponsored enterprises		33,803		—		(41	)		33,762
Total securities held to maturity		33,803		—		(41	)		33,762
Total securities	$	343,224	$	13,824		($6,572	)	$	350,476

(1) Net of other-than-temporary impairment losses recognized in earnings.

Washington Trust Bancorp, Inc. and Subsidiaries
SELECTED FINANCIAL HIGHLIGHTS (unaudited)
		Period End Balances At
(Dollars in thousands)		Jun 30, 2013		Mar 31, 2013		Dec 31, 2012		Sep 30, 2012		Jun 30, 2012
Loans:
Commercial:	Mortgages	$	758,437	$	729,968	$	710,813	$	693,221	$	664,410
	Construction & development		39,449		34,179		27,842		25,132		17,365
	Other		512,228		513,000		513,764		500,974		510,220
	Total commercial		1,310,114		1,277,147		1,252,419		1,219,327		1,191,995
Residential real estate:	Mortgages		728,158		702,418		692,798		692,659		680,772
	Homeowner construction		20,713		21,943		24,883		22,753		21,247
	Total residential real estate		748,871		724,361		717,681		715,412		702,019
Consumer:	Home equity lines		228,367		226,640		226,861		227,549		224,550
	Home equity loans		41,312		40,134		39,329		39,452		40,690
	Other		56,316		56,763		57,713		54,957		54,588
	Total consumer		325,995		323,537		323,903		321,958		319,828
	Total loans	$	2,384,980	$	2,325,045	$	2,294,003	$	2,256,697	$	2,213,842

	At June 30, 2013
(Dollars in thousands)	Balance		% of Total
Commercial Real Estate Loans by Property Location:
Rhode Island, Connecticut, Massachusetts	$	762,978	95.6	%
New York		26,080	3.3	%
New Hampshire		8,828	1.1	%
Total commercial real estate loans (1)	$	797,886	100.0	%

(1) Commercial real estate loans consist of commercial mortgages and construction and development loans. Commercial mortgages are loans secured by income producing property.

	At June 30, 2013
(Dollars in thousands)	Balance		% of Total
Residential Mortgages by Property Location:
Rhode Island, Connecticut, Massachusetts	$	728,067	97.1	%
New York, Virginia, New Jersey, Maryland, Pennsylvania, District of Columbia		9,444	1.3	%
New Hampshire		5,224	0.7	%
Ohio		2,748	0.4	%
Washington, Oregon		1,365	0.2	%
Georgia		1,092	0.1	%
New Mexico		472	0.1	%
Other		459	0.1	%
Total residential mortgages	$	748,871	100.0	%

	Period End Balances At
(Dollars in thousands)	Jun 30, 2013	Mar 31, 2013	Dec 31, 2012	Sep 30, 2012	Jun 30, 2012
Deposits:
Demand deposits	$358,797	$375,156	$379,889	$352,330	$321,488
NOW accounts	301,096	294,136	291,174	267,495	263,124
Money market accounts	540,012	503,414	496,402	459,671	388,686
Savings accounts	293,405	284,983	274,934	268,191	264,772
Time deposits	811,299	861,952	870,232	886,972	892,383
Total deposits	$2,304,609	$2,319,641	$2,312,631	$2,234,659	$2,130,453
Out-of-market brokered certificates of deposits included in time deposits	$96,177	$103,045	$102,636	$98,603	$102,661
In-market deposits, excluding out-of-market brokered certificates of deposit	$2,208,432	$2,216,596	$2,209,995	$2,136,056	$2,027,792

Washington Trust Bancorp, Inc. and Subsidiaries
SELECTED FINANCIAL HIGHLIGHTS (unaudited)
	Period End Balances At
(Dollars in thousands)	Jun 30, 2013			Mar 31, 2013			Dec 31, 2012			Sep 30, 2012			Jun 30, 2012
Asset Quality Data:
Nonperforming Assets:
Commercial mortgages	$	9,976		$	14,953		$	10,681		$	5,956		$	2,597
Commercial construction and development		—			—			—			—			—
Other commercial		1,400			3,122			4,412			3,201			3,405
Residential real estate mortgages		7,526			6,699			6,158			7,127			8,659
Consumer		1,124			901			1,292			1,463			1,081
Total nonaccrual loans	$	20,026		$	25,675		$	22,543		$	17,747		$	15,742
Nonaccrual investment securities		397			404			843			929			767
Property acquired through foreclosure or repossession		1,230			2,625			2,047			2,447			2,332
Total nonperforming assets	$	21,653		$	28,704		$	25,433		$	21,123		$	18,841
Total past due loans to total loans		1.09	%		1.13	%		1.22	%		1.05	%		0.92	%
Nonperforming assets to total assets		0.71	%		0.94	%		0.83	%		0.69	%		0.62	%
Nonaccrual loans to total loans		0.84	%		1.10	%		0.98	%		0.79	%		0.71	%
Allowance for loan losses to nonaccrual loans		139.24	%		121.28	%		136.95	%		173.28	%		193.42	%
Allowance for loan losses to total loans		1.17	%		1.34	%		1.35	%		1.36	%		1.38	%
Troubled Debt Restructured Loans:
Accruing troubled debt restructured loans:
Commercial mortgages	$	19,018		$	9,600		$	9,569		$	9,131		$	1,251
Other commercial		2,602			6,554			6,577			6,880			6,916
Residential real estate mortgages		876			1,599			1,123			386			570
Consumer		242			244			154			158			159
Accruing troubled debt restructured loans		22,738			17,997			17,423			16,555			8,896
Nonaccrual troubled debt restructured loans:
Commercial mortgages		—			—			—			—			—
Other commercial		590			721			2,063			2,306			2,317
Residential real estate mortgages		144			155			688			1,697			2,028
Consumer		42			42			44			46			47
Nonaccrual troubled debt restructured loans		776			918			2,795			4,049			4,392
Total troubled debt restructured loans	$	23,514		$	18,915		$	20,218		$	20,604		$	13,288

Washington Trust Bancorp, Inc. and Subsidiaries
SELECTED FINANCIAL HIGHLIGHTS (unaudited)
	Period End Balances At
(Dollars in thousands)	Jun 30, 2013		Mar 31, 2013		Dec 31, 2012		Sep 30, 2012		Jun 30, 2012
Past Due Loans:
Loans 30-59 Days Past Due:
Commercial mortgages	$	—	$	—	$	373	$	3,978	$	411
Other commercial loans		505		689		260		2,719		849
Residential real estate mortgages		4,051		3,891		4,840		2,368		4,969
Consumer loans		1,588		1,534		1,134		1,876		2,660
Loans 30-59 days past due	$	6,144	$	6,114	$	6,607	$	10,941	$	8,889
Loans 60-89 Days Past Due:
Commercial mortgages	$	536	$	193	$	408	$	874	$	233
Other commercial loans		34		341		296		1,169		434
Residential real estate mortgages		1,697		1,451		1,951		821		1,600
Consumer loans		689		461		385		1,213		677
Loans 60-89 days past due	$	2,956	$	2,446	$	3,040	$	4,077	$	2,944
Loans 90 Days or more Past Due:
Commercial mortgages	$	8,895	$	9,852	$	10,300	$	2,495	$	2,339
Other commercial loans		3,428		2,961		3,647		1,366		1,714
Residential real estate mortgages		4,266		4,327		3,658		3,924		4,039
Consumer loans		415		484		844		811		362
Loans 90 days or more past due	$	17,004	$	17,624	$	18,449	$	8,596	$	8,454
Total Past Due Loans:
Commercial mortgages	$	9,431	$	10,045	$	11,081	$	7,347	$	2,983
Other commercial loans		3,967		3,991		4,203		5,254		2,997
Residential real estate mortgages		10,014		9,669		10,449		7,113		10,608
Consumer loans		2,692		2,479		2,363		3,900		3,699
Total past due loans	$	26,104	$	26,184	$	28,096	$	23,614	$	20,287
Accruing loans 90 days or more past due	$	2.431	$	—	$	—	$	—	$	—
Nonaccrual loans included in past due loans	$	17,208	$	19,000	$	20,979	$	14,471	$	12,719

	For the Quarters Ended
(Dollars in thousands)	Jun 30, 2013			Mar 31, 2013			Dec 31, 2012			Sep 30, 2012			Jun 30, 2012
Allowance for Loan Losses:
Balance at beginning of period	$	31,139		$	30,873		$	30,752		$	30,448		$	30,045
Provision charged to earnings		700			600			600			600			600
Charge-offs		(4,175	)		(374	)		(534	)		(424	)		(696	)
Recoveries		220			40			55			128			499
Balance at end of period	$	27,884		$	31,139		$	30,873		$	30,752		$	30,448
Net Loan Charge-Offs (Recoveries):
Commercial mortgages	$	3,814		$	108		$	212		$	212			($388	)
Other commercial		63			71			225			(22	)		549
Residential real estate mortgages		36			9			39			41			(47	)
Consumer		42			146			3			65			83
Total	$	3,955		$	334		$	479		$	296		$	197

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 adjusted for applicable state income taxes, net of the related federal tax benefit. For dividends on corporate stocks, the 70% federal dividends received deduction is also used in the calculation of tax equivalency. Unrealized gains (losses) on available for sale securities are excluded from the average balance and yield calculations. Nonaccrual and renegotiated loans, as well as interest earned on these loans (to the extent recognized in the Consolidated Statements of Income) are included in amounts presented for loans.

Washington Trust Bancorp, Inc. and Subsidiaries
CONSOLIDATED AVERAGE BALANCE SHEETS (unaudited)
	Three Months Ended
	June 30, 2013						March 31, 2013						June 30, 2012
	Average Balance		Interest		Yield/ Rate		Average Balance		Interest		Yield/ Rate		Average Balance		Interest		Yield/ Rate
(Dollars in thousands)
Assets:
Commercial loans	$	1,291,244	$	14,747	4.58	%	$	1,243,716	$	14,421	4.70	%	$	1,166,545	$	14,590	5.03	%
Residential real estate loans, including mortgage loans held for sale		762,363		7,877	4.14	%		755,528		7,937	4.26	%		714,154		7,809	4.40	%
Consumer loans		325,539		3,090	3.81	%		322,668		3,053	3.84	%		320,442		3,067	3.85	%
Total loans		2,379,146		25,714	4.34	%		2,321,912		25,411	4.44	%		2,201,141		25,466	4.65	%
Cash, federal funds sold and short-term investments		44,690		24	0.22	%		53,734		28	0.21	%		30,078		17	0.23	%
FHLBB stock		37,730		39	0.42	%		39,790		38	0.39	%		40,418		54	0.54	%
Taxable debt securities		293,586		2,576	3.52	%		323,730		2,845	3.56	%		451,207		4,069	3.63	%
Nontaxable debt securities		66,468		985	5.94	%		68,064		1,004	5.98	%		70,462		1,039	5.93	%
Corporate stocks		—		—	—	%		—		—	—	%		1,804		34	7.58	%
Total securities		360,054		3,561	3.97	%		391,794		3,849	3.98	%		523,473		5,142	3.95	%
Total interest-earning assets		2,821,620		29,338	4.17	%		2,807,230		29,326	4.24	%		2,795,110		30,679	4.41	%
Noninterest-earning assets		213,336						210,338						222,057
Total assets	$	3,034,956					$	3,017,568					$	3,017,167
Liabilities and Shareholders' Equity:
Interest-bearing demand deposits	$	135	$	—	—	%	$	—	$	—	—	%	$	—	$	—	—	%
NOW accounts		289,858		45	0.06	%		283,004		45	0.06	%		254,528		39	0.06	%
Money market accounts		535,107		381	0.29	%		495,453		351	0.29	%		405,241		232	0.23	%
Savings accounts		286,547		47	0.07	%		279,536		46	0.07	%		258,824		72	0.11	%
Time deposits		843,462		2,623	1.25	%		869,576		2,752	1.28	%		905,466		3,042	1.35	%
FHLBB advances		326,839		2,679	3.29	%		345,270		2,737	3.21	%		494,257		3,998	3.25	%
Junior subordinated debentures		31,405		612	7.82	%		32,991		390	4.79	%		32,991		391	4.77	%
Other		205		3	5.87	%		1,146		5	1.77	%		973		5	2.07	%
Total interest-bearing liabilities		2,313,558		6,390	1.11	%		2,306,976		6,326	1.11	%		2,352,280		7,779	1.33	%
Demand deposits		365,747						360,851						321,094
Other liabilities		52,249						50,305						52,939
Shareholders' equity		303,402						299,436						290,854
Total liabilities and shareholders' equity	$	3,034,956					$	3,017,568					$	3,017,167
Net interest income (FTE)			$	22,948					$	23,000					$	22,900
Interest rate spread					3.06	%					3.13	%					3.08	%
Net interest margin					3.26	%					3.32	%					3.30	%

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

(Dollars in thousands)	Three Months Ended
	Jun 30, 2013	Mar 31, 2013	Jun 30, 2012
Commercial loans	$201	$188	$122
Nontaxable debt securities	338	345	357
Corporate stocks	—	—	10
Total	$539	$533	$489

Washington Trust Bancorp, Inc. and Subsidiaries
CONSOLIDATED AVERAGE BALANCE SHEETS (unaudited)
Six Months Ended June 30,	2013						2012
	Average Balance		Interest		Yield/ Rate		Average Balance		Interest		Yield/ Rate
(Dollars in thousands)
Assets:
Commercial loans	$	1,267,612	$	29,168	4.64	%	$	1,144,114	$	28,888	5.08	%
Residential real estate loans, including mortgage loans held for sale		758,964		15,814	4.20	%		717,430		15,884	4.45	%
Consumer loans		324,111		6,143	3.82	%		320,195		6,164	3.87	%
Total loans		2,350,687		51,125	4.39	%		2,181,739		50,936	4.69	%
Cash, federal funds sold and short-term investments		49,186		52	0.21	%		41,196		37	0.18	%
FHLBB stock		38,755		77	0.40	%		41,012		106	0.52	%
Taxable debt securities		308,576		5,421	3.54	%		468,828		8,446	3.62	%
Nontaxable debt securities		67,261		1,989	5.96	%		71,185		2,098	5.93	%
Corporate stocks		—		—	—	%		1,828		67	7.37	%
Total securities		375,837		7,410	3.98	%		541,841		10,611	3.94	%
Total interest-earning assets		2,814,465		58,664	4.20	%		2,805,788		61,690	4.42	%
Noninterest-earning assets		211,845						221,430
Total assets	$	3,026,310					$	3,027,218
Liabilities and Shareholders' Equity:
Interest-bearing demand deposits	$	68	$	—	—	%	$	—	$	—	—	%
NOW accounts		286,450		90	0.06	%		250,390		85	0.07	%
Money market accounts		515,390		732	0.29	%		408,647		457	0.22	%
Savings accounts		283,059		93	0.07	%		253,837		142	0.11	%
Time deposits		856,447		5,375	1.27	%		895,405		6,135	1.38	%
FHLBB advances		336,004		5,416	3.25	%		509,012		8,083	3.19	%
Junior subordinated debentures		32,194		1,002	6.28	%		32,991		783	4.77	%
Other		673		8	2.40	%		9,938		239	4.84	%
Total interest-bearing liabilities		2,310,285		12,716	1.11	%		2,360,220		15,924	1.36	%
Demand deposits		363,313						326,159
Other liabilities		51,282						53,012
Shareholders' equity		301,430						287,827
Total liabilities and shareholders' equity	$	3,026,310					$	3,027,218
Net interest income (FTE)			$	45,948					$	45,766
Interest rate spread					3.09	%					3.06	%
Net interest margin					3.29	%					3.28	%

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

(Dollars in thousands)
Six Months Ended June 30,	2013	2012
Commercial loans	$389	$229
Nontaxable debt securities	683	723
Corporate stocks	—	18
Total	$1,072	$970

Washington Trust Bancorp, Inc. and Subsidiaries
SUPPLEMENTAL INFORMATION - Non-GAAP Financial Measures (unaudited)
	At or for the Quarters Ended
(Dollars in thousands, except per share amounts)	Jun 30, 2013		Mar 31, 2013		Dec 31, 2012		Sep 30, 2012		Jun 30, 2012
Calculation of Tangible Book Value per Share:
Total shareholders' equity at end of period	$303,370		$301,291		$295,652		$298,394		$292,734
Less:
Goodwill	58,114		58,114		58,114		58,114		58,114
Identifiable intangible assets, net	5,827		6,000		6,173		6,346		6,528
Total tangible shareholders' equity at end of period	$239,429		$237,177		$231,365		$233,934		$228,092
Shares outstanding at end of period	16,487		16,425		16,380		16,371		16,359
Book value per share - GAAP	$18.40		$18.34		$18.05		$18.23		$17.89
Tangible book value per share - Non-GAAP	$14.52		$14.44		$14.12		$14.29		$13.94
Calculation of Tangible Equity to Tangible Assets:
Total tangible shareholders' equity at end of period	$239,429		$237,177		$231,365		$233,934		$228,092
Total assets at end of period	$3,061,307		$3,051,848		$3,071,884		$3,048,868		$3,041,050
Less:
Goodwill	58,114		58,114		58,114		58,114		58,114
Identifiable intangible assets, net	5,827		6,000		6,173		6,346		6,528
Total tangible assets at end of period	$2,997,366		$2,987,734		$3,007,597		$2,984,408		$2,976,408
Equity to assets - GAAP	9.91	%	9.87	%	9.62	%	9.79	%	9.63	%
Tangible equity to tangible assets - Non-GAAP	7.99	%	7.94	%	7.69	%	7.84	%	7.66	%
Calculation of Return on Average Tangible Assets:
Net income	$8,983		$7,421		$9,023		$8,900		$8,713
Total average assets	$3,034,956		$3,017,583		$3,044,764		$3,045,203		$3,017,167
Less:
Average goodwill	58,114		58,114		58,114		58,114		58,114
Average identifiable intangible assets, net	5,912		6,085		6,257		6,434		6,619
Total average tangible assets	$2,970,930		$2,953,384		$2,980,393		$2,980,655		$2,952,434
Return on average assets - GAAP	1.18	%	0.98	%	1.19	%	1.17	%	1.16	%
Return on average tangible assets - Non-GAAP	1.21	%	1.01	%	1.21	%	1.19	%	1.18	%
Calculation of Return on Average Tangible Equity:
Net income	$8,983		$7,421		$9,023		$8,900		$8,713
Total average shareholders' equity	$303,402		$299,436		$300,430		$296,150		$290,854
Less:
Average goodwill	58,114		58,114		58,114		58,114		58,114
Average identifiable intangible assets, net	5,912		6,085		6,257		6,434		6,619
Total average tangible shareholders' equity	$239,376		$235,237		$236,059		$231,602		$226,121
Return on average shareholders' equity - GAAP	11.84	%	9.91	%	12.01	%	12.02	%	11.98	%
Return on average tangible shareholders' equity - Non-GAAP	15.01	%	12.62	%	15.29	%	15.37	%	15.41	%

Washington Trust Bancorp, Inc. and Subsidiaries
SUPPLEMENTAL INFORMATION - Non-GAAP Financial Measures (unaudited)
	Six Months Ended
(Dollars in thousands)	Jun 30, 2013		Jun 30, 2012
Calculation of return on average tangible assets:
Net income	$16,404		$17,151
Total average assets	$3,026,310		$3,027,218
Less:
Average goodwill	58,114		58,114
Average identifiable intangible assets, net	5,998		6,712
Total average tangible assets	$2,962,198		$2,962,392
Return on average assets - GAAP	1.08	%	1.13	%
Return on average tangible assets - Non-GAAP	1.11	%	1.16	%
Calculation of return on average tangible equity:
Net income	$16,404		$17,151
Total average shareholders' equity	$301,430		$287,827
Less:
Average goodwill	58,114		58,114
Average identifiable intangible assets, net	5,998		6,712
Total average tangible shareholders' equity	$237,318		$223,001
Return on average shareholders' equity - GAAP	10.88	%	11.92	%
Return on average tangible shareholders' equity - Non-GAAP	13.82	%	15.38	%