Washington Trust Bancorp
Annual Report 2003

Plain-text annual report

23 Broad Street Westerly, RI 02891 www.washtrust.com A Winning Team Washington Trust Bancorp, Inc. 2003 Annual Report Corporate Profile Washington Trust Bancorp, Inc. (Washington Trust or the Bancorp) is the publicly-owned holding company of The Washington Trust Company (the Bank), a Rhode Island-chartered bank founded in 1800. The Bank offers a broad range of services, including trust and investment management, through its branch offices in Rhode Island and southeastern Connecticut. Unless the context otherwise requires, the word “Corporation” herein refers to the Bancorp and the Bank. At December 31, 2003, the Bank had 449 employees. The Bank has adopted an Affirmative Action Plan and is an Equal Opportunity Employer. The Bank is also a member of the FDIC and an Equal Housing Lender. Stock Transfer and Dividend Disbursing Agent Mellon Investor Services (Mellon), our stock transfer and dividend disbursing agent, is responsible for our shareholder records, issuance of stock certificates, distribution of dividend checks, and IRS Form 1099. Mellon is also responsible for the Corporation’s Dividend Reinvestment (DRIP) and Stock Purchase Plan, which enables shareholders to reinvest their quarterly dividends in Washington Trust shares. Plan members may also make optional cash purchases of common stock up to $10,000 per quarter. For information, contact Mellon on the toll-free Shareholder Information Line, (800) 852-0354, via the secure Mellon Investor Direct website, https://vault.melloninvestor.com/isd, or by writing to: Mellon Investor Direct Services Corporate Office, 85 Challenger Road, Ridgefield Park, NJ 07660. Market and Dividend Information Washington Trust’s common stock trades on the Nasdaq National Market tier of the Nasdaq Stock Market® under the symbol WASH. As of December 31, 2003, there were 2,212 shareholders of record. 2003 Quarters Stock prices: High Low Close Dividend declared 2002 Quarters Stock prices: High Low Close Dividend declared 1 2 3 4 $20.61 19.36 20.21 .15 $24.17 19.80 23.02 .15 $28.49 22.60 24.01 .16 $29.42 23.94 26.20 .16 1 2 3 4 $19.72 18.00 19.42 .14 $24.11 19.05 23.69 .14 $23.83 19.12 19.74 .14 $21.20 19.10 19.53 .14 This report 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. The Corporation’s actual results, performance or achievements could differ materially from those projected in the forward-looking statements as a result, among other factors, of changes in general national or regional economic conditions, changes in interest rates, reductions in the market value of trust and investment assets under management, 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. Contents 2003 Financial Highlights................inside cover Corporate Highlights.......................inside cover Letter to Shareholders ......................................1 The Year In Highlights ......................................2 Consolidated Balance Sheets..........................16 Consolidated Statements of Income ..............17 Consolidated Statements of Changes in Shareholders’ Equity ...................................18 Independent Auditors’ Report .......................19 Management’s Responsibility for Financial Statements .......................................19 Corporate Directory ........................................20 Washington Trust Locations .................................inside back cover On the cover (L-R): Peter J. Miniati, Trust & Investment Services; Cathleen A. Studley, Retail Banking; Gina R. Mead, Mortgage Origination; Patricia M. Hartford, Business Services; Scott D. Lajoie, Commercial Lending; and Holly M. Knott, Merchant Services, were all recognized in 2003 as star performers in their respective areas. Annual Meeting of Shareholders: Tuesday, April 27, 2004, 11:00 a.m., Westerly Public Library, 44 Broad Street, Westerly, Rhode Island 02891 Vote Your Proxy Online For your convenience, you can vote your shares online. Have your proxy card ready and go to the website http://www.eproxy.com/wash. You will be prompted to enter your control number located on your card. Then, follow the instructions to create and submit an electronic ballot. Investor Information Copies of our most recent annual and quarterly reports and a copy of our 2003 Annual Report on Form 10-K are available at no charge by contacting Elizabeth B. Eckel, Senior Vice President, Marketing, at 401-348-1309 or 1-800-475-2265. You may write to Ms. Eckel at the Washington Trust Corporate Office, 23 Broad Street, Westerly, RI 02891. The annual report is also available on our website, www.washtrust.com. Auditors: KPMG LLP, Providence, Rhode Island Counsel: Goodwin Procter LLP, Boston, Massachusetts Washington Trust Bancorp, Inc. 2003 Annual Report 23 Broad Street Westerly, RI 02891 www.washtrust.com A Winning Team Washington Trust Bancorp, Inc. 2003 Annual Report Corporate Profile Washington Trust Bancorp, Inc. (Washington Trust or the Bancorp) is the publicly-owned holding company of The Washington Trust Company (the Bank), a Rhode Island-chartered bank founded in 1800. The Bank offers a broad range of services, including trust and investment management, through its branch offices in Rhode Island and southeastern Connecticut. Unless the context otherwise requires, the word “Corporation” herein refers to the Bancorp and the Bank. At December 31, 2003, the Bank had 449 employees. The Bank has adopted an Affirmative Action Plan and is an Equal Opportunity Employer. The Bank is also a member of the FDIC and an Equal Housing Lender. Stock Transfer and Dividend Disbursing Agent Mellon Investor Services (Mellon), our stock transfer and dividend disbursing agent, is responsible for our shareholder records, issuance of stock certificates, distribution of dividend checks, and IRS Form 1099. Mellon is also responsible for the Corporation’s Dividend Reinvestment (DRIP) and Stock Purchase Plan, which enables shareholders to reinvest their quarterly dividends in Washington Trust shares. Plan members may also make optional cash purchases of common stock up to $10,000 per quarter. For information, contact Mellon on the toll-free Shareholder Information Line, (800) 852-0354, via the secure Mellon Investor Direct website, https://vault.melloninvestor.com/isd, or by writing to: Mellon Investor Direct Services Corporate Office, 85 Challenger Road, Ridgefield Park, NJ 07660. Market and Dividend Information Washington Trust’s common stock trades on the Nasdaq National Market tier of the Nasdaq Stock Market® under the symbol WASH. As of December 31, 2003, there were 2,212 shareholders of record. 2003 Quarters Stock prices: High Low Close Dividend declared 2002 Quarters Stock prices: High Low Close Dividend declared 1 2 3 4 $20.61 19.36 20.21 .15 $24.17 19.80 23.02 .15 $28.49 22.60 24.01 .16 $29.42 23.94 26.20 .16 1 2 3 4 $19.72 18.00 19.42 .14 $24.11 19.05 23.69 .14 $23.83 19.12 19.74 .14 $21.20 19.10 19.53 .14 This report 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. The Corporation’s actual results, performance or achievements could differ materially from those projected in the forward-looking statements as a result, among other factors, of changes in general national or regional economic conditions, changes in interest rates, reductions in the market value of trust and investment assets under management, 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. Contents 2003 Financial Highlights................inside cover Corporate Highlights.......................inside cover Letter to Shareholders ......................................1 The Year In Highlights ......................................2 Consolidated Balance Sheets..........................16 Consolidated Statements of Income ..............17 Consolidated Statements of Changes in Shareholders’ Equity ...................................18 Independent Auditors’ Report .......................19 Management’s Responsibility for Financial Statements .......................................19 Corporate Directory ........................................20 Washington Trust Locations .................................inside back cover On the cover (L-R): Peter J. Miniati, Trust & Investment Services; Cathleen A. Studley, Retail Banking; Gina R. Mead, Mortgage Origination; Patricia M. Hartford, Business Services; Scott D. Lajoie, Commercial Lending; and Holly M. Knott, Merchant Services, were all recognized in 2003 as star performers in their respective areas. Annual Meeting of Shareholders: Tuesday, April 27, 2004, 11:00 a.m., Westerly Public Library, 44 Broad Street, Westerly, Rhode Island 02891 Vote Your Proxy Online For your convenience, you can vote your shares online. Have your proxy card ready and go to the website http://www.eproxy.com/wash. You will be prompted to enter your control number located on your card. Then, follow the instructions to create and submit an electronic ballot. Investor Information Copies of our most recent annual and quarterly reports and a copy of our 2003 Annual Report on Form 10-K are available at no charge by contacting Elizabeth B. Eckel, Senior Vice President, Marketing, at 401-348-1309 or 1-800-475-2265. You may write to Ms. Eckel at the Washington Trust Corporate Office, 23 Broad Street, Westerly, RI 02891. The annual report is also available on our website, www.washtrust.com. Auditors: KPMG LLP, Providence, Rhode Island Counsel: Goodwin Procter LLP, Boston, Massachusetts Washington Trust Bancorp, Inc. 2003 Annual Report Financial Highlights (Dollars in millions, except per share amounts) Results as of or for the years ended December 31, Financial Results Net interest income Provision for loan losses Net realized gains on securities Noninterest income, excluding securities gains Noninterest expense Net income Per Share Information Diluted earnings per share Cash dividends declared Book value Tangible book value Closing stock price Financial Condition Securities Loans: Commercial Residential real estate Consumer Total loans Allowance for loan losses Total assets Deposits Federal Home Loan Bank advances Shareholders’ equity Ratios (%) Return on average assets Return on average equity Net interest margin (taxable equivalent basis) Nonperforming assets to total assets Nonaccrual loans to total loans Allowance for loan losses to total loans Earnings and Ratios Excluding Special Items (Non-GAAP Financial Information) Net income Diluted earnings per share Return on average assets (%) Return on average equity (%) 2003 2002 2001 2000 1999 $ $ 48.8 .5 .6 26.1 47.6 18.9 1.41 .62 10.46 8.60 26.20 $ $ 44.3 .4 .7 22.6 43.0 16.8 1.30 .56 9.87 7.93 19.53 $ $ 39.4 .6 .3 21.1 41.7 13.1 1.07 .52 8.15 8.10 19.00 $ $ 37.9 1.2 .8 19.0 37.5 13.2 1.09 .48 7.43 7.36 14.00 $ $ 35.6 1.8 .7 18.1 35.3 12.5 1.03 .44 6.55 6.48 17.75 $ 839.4 $ 795.8 $ 629.1 $ 511.5 $ 446.8 408.5 389.9 162.6 961.0 15.9 1,973.8 1,206.1 607.1 138.1 1.03 14.15 2.89 .14 .29 1.66 382.1 280.9 132.1 795.1 15.5 1,745.7 1,110.5 480.1 128.7 1.07 14.25 3.10 .24 .53 1.95 260.6 235.4 109.6 605.6 13.6 1,362.2 816.9 431.5 97.9 1.01 13.86 3.30 .28 .63 2.24 239.8 251.0 106.4 597.2 13.1 1,218.1 735.7 377.4 89.2 1.14 16.14 3.55 .28 .58 2.20 232.4 225.7 90.9 549.0 12.3 1,105.6 660.8 352.5 78.2 1.19 15.73 3.71 .35 .69 2.25 $ $ 19.6 1.46 1.06 14.64 $ $ 17.2 1.33 1.09 14.60 $ $ 15.6 1.28 1.20 16.54 $ $ 13.9 1.15 1.20 16.98 $ $ 12.8 1.06 1.21 16.04 2003 2002 2001 2000 1999 Rhode Island Offices $ 18.9 $ 16.8 $ 13.1 $ 13.2 $ 12.5 Washington Trust Locations (Dollars in millions, except per share amounts) Results as of or for the years ended December 31, Reconciliation Table – Non-GAAP Financial Information Net income, including special items Add back (deduct) special items, net of tax: Debt prepayment penalties Acquisition related Litigation settlement, net of insurance recovery Net gain on sale of credit card portfolio Net income, excluding special items Diluted earnings per share Effect of special items, net of tax Diluted earnings per share, excluding special items Ratios (%) Return on average assets Effect of special items, net of tax Return on average assets, excluding special items $ $ $ .7 – – – 19.6 1.41 .05 1.46 1.03 .03 1.06 $ $ $ – .4 – – 17.2 1.30 .03 1.33 1.07 .02 1.09 $ $ $ – – 2.5 – 15.6 1.07 .21 1.28 1.01 .19 1.20 $ $ $ – .7 – – 13.9 1.09 .06 1.15 1.14 .06 1.20 $ $ $ – .6 – (.3) 12.8 1.03 .03 1.06 1.19 .02 1.21 15.73 .31 16.04 Return on average equity Effect of special items, net of tax Return on average equity, excluding special items 14.15 .49 14.64 14.25 .35 14.60 13.86 2.68 16.54 16.14 .84 16.98 Non-GAAP Financial Information Disclosure: This annual report contains financial information determined by methods other than in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The Corporation’s management uses these non-GAAP measures in its analysis of the Corporation’s performance. These measures typically adjust GAAP performance measures to exclude the effects of charges and expenses related to the consummation of acquisitions and costs related to the integration of merged entities. These non-GAAP measures also may exclude other significant gains or losses that are unusual in nature. Because these items and their impact on the Corporation’s performance are difficult to predict, management believes that presentations of financial measures excluding the impact of these items provide useful supplemental information that is essential to a proper understanding of the operating results of the Corporation’s core businesses. These disclosures should not be viewed as a substitute for operating results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other corporations. A quantitative reconciliation of the differences between the non-GAAP financial information discussed herein and the most directly comparable financial information calculated and presented in accordance with GAAP is presented above. Total Assets Total Loans Nonperforming Assets to Total Assets Diluted Earnings Per Share Cash Dividends Declared Washington Trust Bancorp, Inc. 2003 Annual Report Account Information Center To speak with a customer service representative, call 401-348-1200 or toll-free 1-800-475-2265. In Connecticut, call 860-443-1508. Online Banking Bank and pay bills via the Internet 24 hours a day, 7 days a week at www.washtrust.com. XPress Banking Automated banking by phone 24 hours a day, 7 days a week at 401-348-1399 or toll-free 1-800-226-5877. Website Current company and shareholder information available at www.washtrust.com. PROVIDENCE Providence Office 180 Washington Street Providence, RI 02903 401-421-3600 Providence Trust and Investment Services Office 66 South Main Street Providence, RI 02903 401-861-8440 Phoenix Investment Management 68 South Main Street Providence, RI 02903 401-331-6650 CRANSTON Cranston Office 645 Reservoir Avenue Cranston, RI 02910 401-946-1004 WARWICK Warwick Office 236 Centerville Road Warwick, RI 02886 401-739-2353 Connecticut Offices MYSTIC Mystic Office Olde Mistick Village Mystic, CT 06355 860-536-1200 A&P Super Foodmart 179 Stonington Road Mystic, CT 06355 860-572-7100 McQuade’s Marketplace 14 Clara Drive Mystic, CT 06355 860-572-2058 WESTERLY Main Office 23 Broad Street Westerly, RI 02891 401-348-1200 Franklin Street Office 126 Franklin Street Westerly, RI 02891 401-348-1367 McQuade’s Marketplace 106 Main Street Westerly, RI 02891 401-348-1201 RICHMOND Richmond Office 1200 Main Street Wyoming, RI 02898 401-539-2427 BLOCK ISLAND Block Island Office Ocean Avenue Block Island, RI 02807 401-466-7710 CHARLESTOWN Charlestown Office 4137 Old Post Road Charlestown, RI 02813 401-364-4000 NARRAGANSETT Sweet Meadows Office 20 Point Judith Road Narragansett, RI 02882 401-782-1000 Bonnet Shores Office 885 Boston Neck Road Narragansett, RI 02882 401-782-4800 SOUTH KINGSTOWN Wakefield Office 730 Kingstown Road Wakefield, RI 02879 401-782-4200 NORTH KINGSTOWN North Kingstown Office 7625 Post Road North Kingstown, RI 02852 401-295-4700 $0$200$400$600$800$1,000$549.0$597.2$961.0$795.11999 2000 2001 2002 2003In Millions$605.6$0$200$400$600$800$1,000$549.0$597.2$961.0$795.11999 2000 2001 2002 2003In Millions$605.6$0$200$400$600$800$1,000$549.0$597.2$961.0$795.11999 2000 2001 2002 2003In Millions$605.6$0$200$400$600$800$1,000$549.0$597.2$961.0$795.11999 2000 2001 2002 2003In Millions$605.6$0$200$400$600$800$1,000$549.0$597.2$961.0$795.11999 2000 2001 2002 2003In Millions$605.6Financial Highlights (Dollars in millions, except per share amounts) Results as of or for the years ended December 31, Financial Results Net interest income Provision for loan losses Net realized gains on securities Noninterest income, excluding securities gains Noninterest expense Net income Per Share Information Diluted earnings per share Cash dividends declared Book value Tangible book value Closing stock price Financial Condition Securities Loans: Commercial Residential real estate Consumer Total loans Allowance for loan losses Total assets Deposits Federal Home Loan Bank advances Shareholders’ equity Ratios (%) Return on average assets Return on average equity Net interest margin (taxable equivalent basis) Nonperforming assets to total assets Nonaccrual loans to total loans Allowance for loan losses to total loans Earnings and Ratios Excluding Special Items (Non-GAAP Financial Information) Net income Diluted earnings per share Return on average assets (%) Return on average equity (%) 2003 2002 2001 2000 1999 $ $ 48.8 .5 .6 26.1 47.6 18.9 1.41 .62 10.46 8.60 26.20 $ $ 44.3 .4 .7 22.6 43.0 16.8 1.30 .56 9.87 7.93 19.53 $ $ 39.4 .6 .3 21.1 41.7 13.1 1.07 .52 8.15 8.10 19.00 $ $ 37.9 1.2 .8 19.0 37.5 13.2 1.09 .48 7.43 7.36 14.00 $ $ 35.6 1.8 .7 18.1 35.3 12.5 1.03 .44 6.55 6.48 17.75 $ 839.4 $ 795.8 $ 629.1 $ 511.5 $ 446.8 408.5 389.9 162.6 961.0 15.9 1,973.8 1,206.1 607.1 138.1 1.03 14.15 2.89 .14 .29 1.66 382.1 280.9 132.1 795.1 15.5 1,745.7 1,110.5 480.1 128.7 1.07 14.25 3.10 .24 .53 1.95 260.6 235.4 109.6 605.6 13.6 1,362.2 816.9 431.5 97.9 1.01 13.86 3.30 .28 .63 2.24 239.8 251.0 106.4 597.2 13.1 1,218.1 735.7 377.4 89.2 1.14 16.14 3.55 .28 .58 2.20 232.4 225.7 90.9 549.0 12.3 1,105.6 660.8 352.5 78.2 1.19 15.73 3.71 .35 .69 2.25 $ $ 19.6 1.46 1.06 14.64 $ $ 17.2 1.33 1.09 14.60 $ $ 15.6 1.28 1.20 16.54 $ $ 13.9 1.15 1.20 16.98 $ $ 12.8 1.06 1.21 16.04 2003 2002 2001 2000 1999 Rhode Island Offices $ 18.9 $ 16.8 $ 13.1 $ 13.2 $ 12.5 Washington Trust Locations (Dollars in millions, except per share amounts) Results as of or for the years ended December 31, Reconciliation Table – Non-GAAP Financial Information Net income, including special items Add back (deduct) special items, net of tax: Debt prepayment penalties Acquisition related Litigation settlement, net of insurance recovery Net gain on sale of credit card portfolio Net income, excluding special items Diluted earnings per share Effect of special items, net of tax Diluted earnings per share, excluding special items Ratios (%) Return on average assets Effect of special items, net of tax Return on average assets, excluding special items $ $ $ .7 – – – 19.6 1.41 .05 1.46 1.03 .03 1.06 $ $ $ – .4 – – 17.2 1.30 .03 1.33 1.07 .02 1.09 $ $ $ – – 2.5 – 15.6 1.07 .21 1.28 1.01 .19 1.20 $ $ $ – .7 – – 13.9 1.09 .06 1.15 1.14 .06 1.20 $ $ $ – .6 – (.3) 12.8 1.03 .03 1.06 1.19 .02 1.21 15.73 .31 16.04 Return on average equity Effect of special items, net of tax Return on average equity, excluding special items 14.15 .49 14.64 14.25 .35 14.60 13.86 2.68 16.54 16.14 .84 16.98 Non-GAAP Financial Information Disclosure: This annual report contains financial information determined by methods other than in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The Corporation’s management uses these non-GAAP measures in its analysis of the Corporation’s performance. These measures typically adjust GAAP performance measures to exclude the effects of charges and expenses related to the consummation of acquisitions and costs related to the integration of merged entities. These non-GAAP measures also may exclude other significant gains or losses that are unusual in nature. Because these items and their impact on the Corporation’s performance are difficult to predict, management believes that presentations of financial measures excluding the impact of these items provide useful supplemental information that is essential to a proper understanding of the operating results of the Corporation’s core businesses. These disclosures should not be viewed as a substitute for operating results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other corporations. A quantitative reconciliation of the differences between the non-GAAP financial information discussed herein and the most directly comparable financial information calculated and presented in accordance with GAAP is presented above. Total Assets Total Loans Nonperforming Assets to Total Assets Diluted Earnings Per Share Cash Dividends Declared Washington Trust Bancorp, Inc. 2003 Annual Report Account Information Center To speak with a customer service representative, call 401-348-1200 or toll-free 1-800-475-2265. In Connecticut, call 860-443-1508. Online Banking Bank and pay bills via the Internet 24 hours a day, 7 days a week at www.washtrust.com. XPress Banking Automated banking by phone 24 hours a day, 7 days a week at 401-348-1399 or toll-free 1-800-226-5877. Website Current company and shareholder information available at www.washtrust.com. PROVIDENCE Providence Office 180 Washington Street Providence, RI 02903 401-421-3600 Providence Trust and Investment Services Office 66 South Main Street Providence, RI 02903 401-861-8440 Phoenix Investment Management 68 South Main Street Providence, RI 02903 401-331-6650 CRANSTON Cranston Office 645 Reservoir Avenue Cranston, RI 02910 401-946-1004 WARWICK Warwick Office 236 Centerville Road Warwick, RI 02886 401-739-2353 Connecticut Offices MYSTIC Mystic Office Olde Mistick Village Mystic, CT 06355 860-536-1200 A&P Super Foodmart 179 Stonington Road Mystic, CT 06355 860-572-7100 McQuade’s Marketplace 14 Clara Drive Mystic, CT 06355 860-572-2058 WESTERLY Main Office 23 Broad Street Westerly, RI 02891 401-348-1200 Franklin Street Office 126 Franklin Street Westerly, RI 02891 401-348-1367 McQuade’s Marketplace 106 Main Street Westerly, RI 02891 401-348-1201 RICHMOND Richmond Office 1200 Main Street Wyoming, RI 02898 401-539-2427 BLOCK ISLAND Block Island Office Ocean Avenue Block Island, RI 02807 401-466-7710 CHARLESTOWN Charlestown Office 4137 Old Post Road Charlestown, RI 02813 401-364-4000 NARRAGANSETT Sweet Meadows Office 20 Point Judith Road Narragansett, RI 02882 401-782-1000 Bonnet Shores Office 885 Boston Neck Road Narragansett, RI 02882 401-782-4800 SOUTH KINGSTOWN Wakefield Office 730 Kingstown Road Wakefield, RI 02879 401-782-4200 NORTH KINGSTOWN North Kingstown Office 7625 Post Road North Kingstown, RI 02852 401-295-4700 $0$200$400$600$800$1,000$549.0$597.2$961.0$795.11999 2000 2001 2002 2003In Millions$605.6$0$200$400$600$800$1,000$549.0$597.2$961.0$795.11999 2000 2001 2002 2003In Millions$605.6$0$200$400$600$800$1,000$549.0$597.2$961.0$795.11999 2000 2001 2002 2003In Millions$605.6$0$200$400$600$800$1,000$549.0$597.2$961.0$795.11999 2000 2001 2002 2003In Millions$605.6$0$200$400$600$800$1,000$549.0$597.2$961.0$795.11999 2000 2001 2002 2003In Millions$605.6Letter to Shareholders Dear Shareholders, The theme of this year’s Annual Report is teamwork and never has this concept been more important than in 2003. Faced with a volatile economy, record low interest rates, and aggressive competition, your Corporation performed exceptionally well, with net income of $18.9 million, up 13% for the year. We posted solid returns for our shareholders and saw the market value of our common stock increase 34% in 2003, closing at $26.20 at December 31st. During the year we declared cash dividends totaling 62 cents per share, including two separate increases in the quarterly dividend rate. This marked our eleventh consecutive year of dividend increases. In early 2003, interest rates reached their lowest levels in some 45 years, fueling a refinancing boom your Corporation had not seen in our 203-year history. Our entire mortgage team, from the front lines to the back offices, worked tirelessly to process a record number of applications and ensure fast closings for our customers. The result was that mortgage activity reached an all-time high with residential mortgage closings totaling a record $308 million. At the same time, total consumer loans were up 23% for the year, led primarily by increases in home equity lines of credit. Aggressive marketing, employee cross-selling and competitive pricing have helped this portfolio grow significantly over the past three to four years. We expect growth to remain strong in 2004. Our commercial lending team made great progress in 2003. Our marketing campaign encouraged businesses to “put us on their list,” and many did just that, as we financed new SBA loans, commercial real estate deals, and million dollar credits. We remain committed to maintaining excellent asset quality and were successful in doing so in a very challenging economic environment. Our trust and investment management area performed well in 2003. This service continues to provide a key source of noninterest income for the Corporation, with revenues totaling $10.8 million for the year 2003. Our business development team successfully attracted an excellent base of new clients. Assets under management increased by 14% for the year, to $1.74 billion. We are encouraged by signs of a strong stock market and by the fact that clients are recognizing the quality of our asset management expertise. In 2003, Washington Trust was honored with several prestigious awards, including the “Greatest Place to Work Award”, the “Outstanding Philanthropic Corporation” Award, and the Encore Award for Support of the Arts. These and many of the other awards received this year are special to us and reflect our success in being a good corporate citizen, employer and neighbor. Over the past year, there has been much media and regulatory spotlight on corporate governance issues. You can be assured that we take corporate governance seriously and that your board and management operate under the highest possible level of integrity. In October, we welcomed two new directors, Barry G. Hittner, Of Counsel with Cameron & Mittleman, LLP, and Kathleen McKeough, Senior Vice President, Human Resources for GTECH Holdings Corporation. Barry and Kathy bring a wealth of talent and professional experience to our board and we are pleased to have them on our team. They fill positions left by the April 2003 retirements of Alcino G. Almeida and Richard A. Grills. We are grateful for the contributions Al and Richard made to our board and welcome them to our Directors’ Advisory Council. Looking forward in 2004, we are excited about the challenges ahead for your Corporation. We are encouraged by signs of improvement in the economy and recoveries in the stock market. We are well positioned to take advantage of any opportunities presented by the recently announced Fleet/Bank of America merger and other recent industry consolidations in our region. And, as always, we remain committed to our vision to be “The Best Community Bank and Trust Company in New England.” Sincerely, John C. Warren Chairman and Chief Executive Officer John F. Treanor President and Chief Operating Officer 1 Longtime client Michael Integlia & Company came to W to build The Gardens Office Park, a pair of state-of-the-art “Wherever we are, we want to be viewed as the best – the best employees, the best customer experience.” – John C. Warren, Chairman and CEO Washington Trust 2003: The Year in Highlights By all marks, 2003 was a terrific year for Washington Trust: outstanding earnings, record mortgage production, and successful business development growth were all critical to its achievements. Yet, one of the key factors in the Bank’s success is something that cannot be measured and does not appear in its financial statements: the Washington Trust 2 Washington Trust Bancorp, Inc. 2003 Annual Report o Washington Trust in 2003 for $7 million in long-term financing office buildings located in West Warwick, R.I. Greater Providence Team L-R: Joseph A. Carnevale, Commercial Lending; Geoffrey J. Wagner, Commercial Lending; James J. Vetelino, Merchant Services; Peter J. Miniati, Trust & Investment Services; Russell W. Hahn, Commercial Lending; Frank B. Geary, Commercial Lending; Paula Fahlman, Business Services; Scott D. Lajoie, Commercial Lending; Harvey C. Perry, II, Office for Non-Profit Resources; Robert D. McCormick, Commercial Lending. spirit of teamwork. As John F. Treanor, diligently to supply them with superior tools President and Chief Operating Officer, says, and resources so they could provide the very “There’s a real ‘esprit de corps’ here – people best customer experience. working together.” Perhaps more than anything else, it was a bank-wide commitment to teamwork that defined Washington Trust in 2003. Throughout the year, front-line employees and the sales staff focused on cross-training, cross-selling, and providing excellent customer service. Meanwhile, their colleagues behind the scenes, from marketing to operations, human resources to technology, worked “The Power of Teamwork” To help business development efforts, the Bank developed cross-functional sales teams to cover each of its market areas in Rhode Island and southeastern Connecticut. These teams, comprised of experienced professionals from business banking, retail banking and trust and investment services, called on existing clients and prospects. As a result of Peter Delis received an SBA loan from Washington Trust in 2003 to open his new restaurant, Toti’s Pizza Palace in Seekonk, Mass., a busy suburb of Providence, R.I. 3 Opened in May 2003, the Warwick branch is strategically market. By year-end, the branch had surpassed projections for deposits, mor “Washington Trust offers a sincere approach to service.” – Daniel J. Dubeau, Vice President and Market Manager their efforts, new business was generated and existing relationships were retained and expanded. The team approach enabled members to achieve, and in many cases surpass, their sales goals, while providing an even higher level of customer service for the Bank’s clients. “By formalizing the team selling concept, we were able to give our customers and prospects better access to all of Washington Trust’s products and services,” says B. Michael Rauh, Senior Vice President of Corporate 4 Washington Trust Bancorp, Inc. 2003 Annual Report located between the greater Providence, R.I. market and the Bank’s traditional South County, R.I. for deposits, mortgages and consumer loans. L-R: Dickson G. Boenning, Trust & Investment Services; Cathleen A. Studley, Retail Banking; Stephen E. Russell, Commercial Lending; Daniel J. Dubeau, Retail Banking; Gina R. Mead, Mortgage Origination; Patricia M. Hartford, Business Services; Norman D. Meyers, Merchant Services; Vincent F. Moretti, Retail Banking. Sales, Planning and Delivery. “Our teams were a fifth retail banking officer was promoted trained to recognize clients’ needs and to to the position of Sales Manager. She is bring in the right expert on the team to help. responsible for coordinating the branch Our customers really appreciate this approach.” training, product knowledge, cross-sales and referral programs, as well as overseeing the To better support the focus on sales and “mystery shopper” program that ensures customer service, four key officers on the retail that customers consistently receive the level banking team were elevated to the positions of superior customer service that is of Market Area Manager, covering the Bank’s Washington Trust’s hallmark. geographic regions in Rhode Island and southeastern Connecticut. These individuals “Nailing Down the Best Rates” are responsible for overseeing sales and customer service for the branches located in their respective regions. In addition, Not since the Eisenhower Administration had mortgage rates dipped as low as they West Bay Team B&S Machine Services, Inc., a supplier of replacement parts for metal cutting machinery, received an SBA loan from Washington Trust to help fund a management buyout. 5 Cathy Buchanan and Jason Dittleman, owners of Crestar Mfg. The Frame Factory have been Washington Trust business banking customers since star “Each of our customers knows that we have a whole team of professionals backing us up.” – Cynthia Valenti Smith, Vice President, Mortgage Origination did in 2003. Thanks to these favorable market conditions and a strong team of lending professionals, Washington Trust more than doubled its projected mortgage volume for the year. “The mortgage market, especially refinancing, was ‘red hot’ in 2003,” says Stephen M. Bessette, Senior Vice President, Retail Lending. To ensure swift and accurate service, the mortgage group relied on strong teamwork within the department, plus some extra help from other areas of the Bank. “To help us get 6 Washington Trust Bancorp, Inc. 2003 Annual Report  Mfg. The Frame Factory, winners of the Décor Top 100 Award for Retail Excellence, since starting their business in 1998. Narragansett Bay Team L-R: Charles P. Roberts, Trust & Investment Services; Catherine Fusco, Commercial Lending; Laureen E. Dufficy, Retail Banking; Joseph E. LaPlume, Commercial Lending; John Mitchell, Jr., Mortgage Origination; Holly M. Knott, Merchant Services; Lori Fuka, Trust & Investment Services; John W. Kennedy, Commercial Lending. through the busiest parts of our season, some “Put Us On The List” of our part-timers volunteered to temporarily switch to full-time schedules. And, we were able to ‘borrow’ employees from some of the other departments to help out,” Bessette adds. “Everyone really pitched in to make certain that we provided the best possible customer experience.” Consumer Lending also outpaced expectations for the year, led by strong home equity financing. Aggressive marketing and smart product design helped generate a steady demand for the products throughout the year. In 2003, the Commercial Lending area benefited from the support of a multi-media marketing campaign entitled “For Business Banking, Put Us On The List.” The campaign highlighted the Bank’s key business products, including multi-million dollar commercial loans and commercial real estate loans, international banking and cash management services. "Washington Trust has always had an outstanding reputation as a top commercial lender," says Elizabeth B. Eckel, Senior Vice President of Marketing. "This campaign Ryan’s Market has served the people of Wickford, R.I. for more than 120 years and established a relationship with Washington Trust in 1997, using products ranging from deposit accounts to leasing. 7 The owners of The Chanler at Cliffwalk came to W used to transform the historic mansion into an elegant “Great service means that the customer leaves happier than they were when they came in.” – Mike Urgo, Branch Manager, Westerly McQuade’s communicated our capabilities to business owners, as well as accountants, attorneys and others who advise clients on business banking matters." The Commercial Lending area had a solid year in 2003, originating a record number of quality credits. “We really made our mark as a statewide commercial lender,” says James M. Vesey, Senior Vice President, Commercial Lending. “The marketing campaign generated awareness and energized our sales teams. We received positive feedback from 8 Washington Trust Bancorp, Inc. 2003 Annual Report  Washington Trust in 2003 for a commercial real estate loan, which was oceanfront hotel and restaurant. Greater Westerly Team L-R: Christopher J. Sheehan, Retail Banking; Rogean B. Makowski, Trust & Investment Services; David C. Kmetz, Commercial Lending; Nina L. Luchka, Merchant Services; John J. Breen, Mortgage Origination; Sharon L. Snyder, Trust & Investment Services; Louis J. Luzzi, Commercial Lending. new and existing clients.” The Commercial Working in tandem with their counterparts Lending area also benefited from referrals in Commercial Lending and branch generated through the new cross-functional management, Washington Trust’s Business teams. Says Vesey, “I can’t say enough about Services professionals helped to bring in new the team sales calling approach – it was very clients and service the cash management positive for us.” needs of existing ones. By meeting with clients one-on-one at their place of business, In 2003, the Bank formed a very successful they were able to assess their needs and Commercial Real Estate Group. This arm of make recommendations that were best suited the Commercial Lending area helps the Bank to each. From business deposits and overnight expand its reach by bringing multi-million-dollar sweep investments to business online banking, loan products to new clients located farther they made sure that customers received the into New England. right products and services. Since 1943 the Gencarelli family, owners of Westerly, RI-based Ginger’s Oil, has relied on Washington Trust for services such as personal and business deposits, trust planning and business financing. 9 The Thanksgiving Day football game between Westerly High School and Stonington High School is the oldest high school football rivalr the nation. Annually, Washington Trust presents a Team Leadership A “We have a commitment from the top down to do whatever it takes to make sure our products are superior to anyone else’s.” – David C. Kmetz, Vice President, Commercial Lending Also during the year, the Bank increased its sales and service outreach to municipal and state governments. To help grow this area, the product line for municipal services was enhanced and experienced sales staff was added to the Washington Trust team. “Running With the Bulls” Trust and investment assets under administra- tion grew to $1.7 billion in 2003, benefiting from successful business development efforts throughout the year, and improvements in the equity markets late in the year. Clients seeking 10 Washington Trust Bancorp, Inc. 2003 Annual Report  High School and Stonington High School is the oldest high school football rivalry in Leadership Award to one player on each team. Easter n Connecticut and Block Island Team Joe and Nancy Rustici, owners of Elmridge Golf Course in Pawcatuck, Conn., came to Washington Trust in 2003 to refinance their 36-hole course. L-R: Julia Anne M. Slom, Commercial Real Estate Group; Paul D. Nunes, Trust & Investment Services; Cynthia Valenti Smith, Mortgage Origination; Joseph M. Confessore, Commercial Lending; Joseph J. Iacoi, Business Services; Amy U. Arruda, Retail Banking. personal attention and disciplined management associates to us, because they are confident style turned to Washington Trust for consistent, that we always put their needs first.” reliable performance. In order to accommodate for this growth, the Bank dedicated a variety Phoenix Managing Director Marie J. Langlois of new resources to the trust and asset adds, “Our investment professionals have management areas, including the addition extensive experience in high net worth of a number of skilled professionals. portfolio management, investment research, and investment policy and strategy formation. Phoenix Investment Management added a The team’s investment performance puts us in substantial number of new clients in 2003. the top quartile of money managers for the Managing Director Gerald J. Fogarty says, previous three-, five-, and ten-year periods.” “Our customers were pleased with our ability That level of expertise shows, as Phoenix to preserve their wealth during the bear ended the year with substantial growth in market years and referred their friends and assets under management. 11 Washington Trust Senior Vice President and Chief Investment Of “Morning Business Report with Frank Coletta,” a popular business news segment on Pr “Great service means giving a little more than the client expects.” – Peter Miniati, Vice President and Trust Officer In 2003, the Trust and Investment Services area developed a line of credit tied to investment assets for high net worth clients, a market that Washington Trust has identified as a key growth area. To better serve this market, a private banking service will be introduced in 2004. “Trust and Investment Services has been providing our clients with highly personal service for more than 100 years,” says Rogean B. Makowski, Senior Vice President and Trust Officer. “Our 2004 initiative will create a more comprehensive private banking 12 Washington Trust Bancorp, Inc. 2003 Annual Report  Investment Officer Mary M. McGoldrick regularly presents her economic outlook on the r business news segment on Providence TV station NBC 10 WJAR. Phoenix Investment Management Team L-R: Carl Y. Chern, Deborah L. Picozzi, Joanne M. Mollica, Linda A. Kelly, Gerald J. Fogarty, Jr., Gary J. Friedmann, Marie J. Langlois, Barbara S. Williams. service with dedicated bankers providing all Adding a new dimension to the Bank’s facets of their personal, business and trust community service programming in 2003 was service needs. This strategy will help us grow the formation of the Office for Non-Profit this important niche market.” Resources, which provides non-profit organi- zations with assistance in finding resources “People Matter” for professional services. “The health and Washington Trust is committed to serving people: customers, employees, shareholders, and neighbors. This philosophy means providing the best products and services to customers and the highest value to shareholders, while ensuring that the needs of employees and the local communities are being met as well. well-being of our cities and towns rests, in part, on the vitality of our local non-profit organizations,” says Harvey C. Perry, II, Senior Vice President and Director, Office for Non-Profit Resources. “This new initiative strengthens our long-standing reputation for helping the non-profit community.” Children's Friend and Service of Rhode Island serves the state's most vulnerable children by providing a variety of services. They trust their endowments to the professionals of Phoenix Investment Management. 13 Dan Dubeau, Vice President and Branch Manager of the Bank’ helps fourth graders at Robertson Elementary in Warwick, R.I., lear “The thing that makes us different is the way we deliver our products to the customer… and that’s all about people.” – John F. Treanor, President and COO Community volunteerism is a tradition at Washington Trust, and in 2003, the teamwork ethic that helped the Bank succeed in business carried over into the community service realm as well. Throughout the year, hundreds of Washington Trust employees banded together to raise tens of thousands of dollars for the American Cancer Society and the American Heart Association, to collect thousands of dollars to benefit the victims and families of the Station Fire Relief Fund, and to contribute countless jars of peanut butter, Thanksgiving 14 Washington Trust Bancorp, Inc. 2003 Annual Report  of the Bank’s Warwick Office, R.I., learn the importance of saving money. Mortgage Team One of the many awards won by the Bank in 2003 was the Greatest Place to Work Award, presented by the Providence Business News. The judges cited the Bank’s “high morale, strong ethics, and fun work environment” as their reasons for choosing Washington Trust. Employees in the Bank’s consumer credit, loan operations underwriting and secondary market departments helped the mortgage department originate and close a record number of loans in 2003. food items and toys to help local families “At the very heart of Washington Trust’s in need. corporate philosophy is our strong belief that people matter,” says John C. Warren, Chairman Also during the year, teams of Washington and CEO. “We are committed to this belief Trust bankers went “back to school” to teach because we know that when our employees hundreds of elementary school children about are happy, they make our customers and our the importance of saving money, and show neighbors in the community happy. When we hundreds more high school students how to take care of our employees, customers and use credit wisely. These programs, developed neighbors, Washington Trust succeeds. And when by the American Banker’s Association, allowed Washington Trust succeeds, our shareholders are employees to use their knowledge to educate the ultimate benefactors of our success.” local children and helped the Bank fulfill its pledge to actively participate in the “America’s Promise” initiative. 15 Financial Statements Washington Trust Bancorp, Inc. and Subsidiary Consolidated Balance Sheets December 31, (Dollars in thousands) Assets: Cash and due from banks Federal funds sold and other short-term investments Mortgage loans held for sale Securities: Available for sale, at fair value; amortized cost $663,529 in 2003 and $539,109 in 2002 Held to maturity, at cost; fair value $169,401 in 2003 and $250,446 in 2002 Total securities Federal Home Loan Bank stock, at cost Loans Less allowance for loan losses Net loans Premises and equipment, net Accrued interest receivable Goodwill Identifiable intangible assets Other assets Total assets Liabilities: Deposits: Demand Savings Time Total deposits Dividends payable Federal Home Loan Bank advances Other borrowings Accrued expenses and other liabilities Total liabilities Commitments and contingencies 2003 2002 $ 40,710 20,400 2,486 $ 39,298 11,750 4,566 673,845 165,576 839,421 31,464 960,981 15,914 945,067 24,941 7,911 22,591 1,953 36,863 553,556 242,277 795,833 24,582 795,126 15,487 779,639 24,415 7,773 22,588 2,672 32,545 $1,973,807 $1,745,661 $194,144 493,878 518,119 1,206,141 2,113 607,104 2,311 18,083 $157,539 471,354 481,600 1,110,493 1,825 480,080 9,183 15,359 1,835,752 1,616,940 Shareholders’ Equity: Common stock of $.0625 par value; authorized 30 million shares in 2003 and 2002; issued 13,204,024 shares in 2003 and 13,086,795 in 2002 Paid-in capital Retained earnings Unamortized employee restricted stock Accumulated other comprehensive income Treasury stock, at cost; 9,463 shares in 2003 and 44,361 shares in 2002 Total shareholders’ equity Total liabilities and shareholders’ equity 825 29,868 101,492 (22) 6,101 (209) 138,055 $1,973,807 818 28,767 90,717 (24) 9,294 (851) 128,721 $1,745,661 Refer to Washington Trust Bancorp, Inc.’s 2003 Annual Report on Form 10-K for a complete set of consolidated financial statements. 16 Washington Trust Bancorp, Inc. 2003 Annual Report Washington Trust Bancorp, Inc. and Subsidiary Consolidated Statements of Income Years ended December 31, (Dollars in thousands, except per share amounts) 2003 2002 2001 Interest income: Interest and fees on loans Interest on securities Dividends on corporate stock and Federal Home Loan Bank stock Interest on federal funds sold and other short-term investments Total interest income Interest expense: Savings deposits Time deposits Federal Home Loan Bank advances Other Total interest expense Net interest income Provision for loan losses Net interest income after provision for loan losses Noninterest income: Trust and investment management fees Service charges on deposit accounts Net gains on loan sales Merchant processing fees Income from bank-owned life insurance Net realized gains on securities Other income Total noninterest income Noninterest expense: Salaries and employee benefits Net occupancy Equipment Merchant processing costs Legal, audit and professional fees Advertising and promotion Outsourced services Debt prepayment penalties Amortization of intangibles Acquisition related expenses Litigation settlement cost, net of recovery Other Total noninterest expense Income before income taxes Income tax expense Net income Weighted average shares outstanding – basic Weighted average shares outstanding – diluted Per share information: Basic earnings per share Diluted earnings per share Cash dividends declared per share $51,603 32,430 2,081 131 86,245 $49,576 35,571 1,973 219 87,339 $50,618 33,988 2,327 594 87,527 3,221 15,333 18,819 73 37,446 48,799 460 48,339 10,769 4,920 4,690 3,410 1,161 630 1,155 26,735 26,945 2,979 3,380 2,716 1,242 1,440 1,333 941 719 – – 5,937 47,632 27,442 8,519 5,598 16,776 20,596 87 43,057 44,282 400 43,882 10,171 3,787 2,884 3,002 1,155 678 1,581 23,258 23,793 2,694 3,333 2,391 1,893 1,180 1,077 – 651 605 – 5,373 42,990 24,150 7,393 5,127 18,866 24,068 99 48,160 39,367 550 38,817 10,408 3,514 2,058 2,642 1,134 348 1,381 21,485 20,845 2,632 3,375 2,124 1,336 1,237 975 – 129 – 3,625 5,375 41,653 18,649 5,541 $18,923 13,114.1 13,393.6 $1.44 $1.41 $.62 $16,757 12,737.3 12,932.4 $1.32 $1.30 $.56 $13,108 12,039.2 12,202.5 $1.09 $1.07 $.52 Refer to Washington Trust Bancorp, Inc.’s 2003 Annual Report on Form 10-K for a complete set of consolidated financial statements. 17 Financial Statements Washington Trust Bancorp, Inc. and Subsidiary Consolidated Statements of Changes in Shareholders’ Equity (Dollars in thousands) Common Stock Paid-in Capital Retained Earnings Unamortized Employee Restricted Stock Accumulated Other Comprehensive Income Treasury Stock Total Balance at January 1, 2001 Net income Cumulative effect of change in accounting principle, net of tax Unrealized gains on securities, net of $1,499 income tax expense Reclassification adjustments, net of tax Comprehensive income Cash dividends declared Shares issued Shares repurchased Balance at December 31, 2001 $750 $10,144 $74,265 13,108 $ – $4,027 $ – (391) 3,000 (220) 4 552 (6,259) $754 $10,696 $81,114 $ – $6,416 17 (1,060) $(1,043) Net income Unrealized gains on securities, net of $1,629 income tax expense Reclassification adjustments, net of tax Comprehensive income Cash dividends declared Amortization of employee restricted stock, 16,757 (7,154) 3,310 (432) net of shares issued Shares issued Shares issued for acquisition Shares repurchased Balance at December 31, 2002 1 (185) 18,255 64 (24) $818 $28,767 $90,717 $(24) $9,294 Net income Unrealized losses on securities, net of $1,002 income tax benefit Reclassification adjustments, net of tax Minimum pension liability adjustment, net of $153 income tax benefit Comprehensive income Cash dividends declared Amortization of employee restricted stock, 18,923 (8,148) (2,499) (410) (284) net of shares issued Shares issued Shares repurchased Balance at December 31, 2003 29 1,072 7 2 $825 $29,868 $101,492 $(22) $6,101 31 1,930 (209) $(209) $138,055 851 (209) Disclosure of Reclassification Amount: Years ended December 31, Reclassification adjustment for net gains included in net income Income tax effect on net gains Reclassification adjustment for amortization of unrealized loss on interest rate floor contract included in net income Income tax effect on interest rate floor contract amortization Net reclassification adjustments 2003 2002 2001 $(630) 220 – – $(410) $(678) 237 13 (4) $(432) $(348) 122 10 (4) $(220) Refer to Washington Trust Bancorp, Inc.’s 2003 Annual Report on Form 10-K for a complete set of consolidated financial statements. 18 Washington Trust Bancorp, Inc. 2003 Annual Report $89,186 13,108 (391) 3,000 (220) 15,497 (6,259) 573 (1,060) $97,937 16,757 3,310 (432) 19,635 (7,154) 24 704 (536) $(851) 1 519 18,319 (536) $128,721 18,923 (2,499) (410) (284) 15,730 (8,148) Independent Auditors’ Report We have audited, in accordance with auditing standards generally accepted in the United States of America, the consolidated balance sheets of Washington Trust Bancorp, Inc. and subsidiary as of December 31, 2003 and 2002 and the related consolidated statements of income, changes in shareholders’ equity and cash flows for each of the years in the three-year period ended December 31, 2003 (not presented herein); and in our report dated February 27, 2004, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated financial statements is fairly stated, in all material respects, in relation to the consolidated financial statements from which it has been derived. Providence, Rhode Island February 27, 2004 Management’s Responsibility for Financial Statements Scope of Responsibility – Management prepares the accompanying consolidated financial statements and related information and is responsible for their integrity and objectivity. The consolidated financial statements were prepared in conformity with accounting principles generally accepted in the United States of America. These consolidated financial statements include amounts that are based on management’s estimates and judgments. We believe that these consolidated financial statements present fairly the Corporation’s financial position and results of operations and that the other information contained in the annual report is consistent with the consolidated financial statements. Internal Controls – We maintain and rely on systems of internal accounting controls designed to provide reasonable assurance that assets are safeguarded and transactions are properly authorized and recorded. We continually monitor these internal accounting controls, modifying and improving them as business conditions and operations change. Our internal audit department also independently reviews and evaluates these controls. We recognize the inherent limitations in all internal control systems and believe that our systems provide an appropriate balance between the costs and benefits desired. We believe our systems of internal accounting controls provide reasonable assurance that errors or irregularities that would be material to the consolidated financial statements are prevented or detected in the normal course of business. Independent Auditors – Our independent auditors, KPMG LLP, have audited the consolidated financial statements. Their audit was conducted in accordance with auditing standards generally accepted in the United States of America, which includes the consideration of our internal controls to the extent necessary to form an independent opinion on the consolidated financial statements prepared by management. Audit Committee – The audit committee of the board of directors, composed solely of independent outside directors, assists the board of directors in overseeing management’s discharge of its financial reporting responsibilities. The committee meets with management, our director of internal audit and representatives of KPMG LLP to discuss significant changes to financial reporting principles and policies and internal controls and procedures proposed or contemplated by management, our internal auditors or KPMG LLP. Additionally, the committee is responsible for the selection, evaluation and, if applicable, replacement of our independent auditors; and the evaluation of the independence of the independent auditors. Both internal audit and KPMG LLP have access to the audit committee without management’s presence. Code of Ethics – We recognize our responsibility for maintaining a strong ethical climate. This responsibility is addressed in the Corporation’s written code of ethics. John C. Warren Chairman and Chief Executive Officer David V. Devault Executive Vice President, Treasurer and Chief Financial Officer 19 Corporate Directory Washington Trust Bancorp, Inc. Board of Directors The Washington Trust Company Executive Officers Gary P. Bennett, Retired Chairman and Chief Executive Officer, Analysis and Technology, Inc. Steven J. Crandall, Vice President, Ashaway Line & Twine Mfg. Co. John C. Warren, Chairman and Chief Executive Officer John F. Treanor, President and Chief Operating Officer David V. Devault, Executive Vice President, Secretary, Treasurer and Chief Financial Officer Larry J. Hirsch, Esq., Retired President, Westerly Jewelry Co. Barry G. Hittner, Esq., Of Counsel Cameron & Mittleman, LLP Senior Management Katherine W. Hoxsie, Vice President, Hoxsie Buick-Pontiac-GMC Truck, Inc. Mary E. Kennard, Esq., Vice President and University Counsel, The American University Edward M. Mazze, Ph.D., Dean, College of Dennis L. Algiere, Senior Vice President, Chief Compliance Officer & Director of Community Affairs Carl M. Amaral, Senior Vice President, Branch Sales and Service Stephen M. Bessette, Senior Vice President, Retail Lending Business Administration, University of Rhode Island Vernon F. Bliven, Senior Vice President, Human Resources Kathleen McKeough, Senior Vice President of Human Elizabeth B. Eckel, Senior Vice President, Marketing Resources, GTECH Holdings Corporation Victor J. Orsinger, II, Esq., Partner, Orsinger and Nardone, Attorneys at Law H. Douglas Randall, III, President, H.D. Randall, Realtors Joyce Olson Resnikoff, Chief Executive Officer, Olde Mistick Village Patrick J. Shanahan, Jr., Retired Chairman, President and Chief Executive Officer, First Financial Corp. James P. Sullivan, CPA, Retired Finance Officer, Roman Catholic Diocese of Providence Neil H. Thorp, President, Thorp & Trainer, Inc. John F. Treanor, President and Chief Operating Officer, Washington Trust Bancorp, Inc. John C. Warren, Chairman and Chief Executive Officer, Washington Trust Bancorp, Inc. Officers of the Corporation John C. Warren, Chairman and Chief Executive Officer John. F. Treanor, President and Chief Operating Officer David V. Devault, Executive Vice President, Treasurer and Chief Financial Officer Harvey C. Perry, II, Senior Vice President and Secretary The Washington Trust Company Directors’ Advisory Council Alcino G. Almeida, William Atherton, Charles M. Baker, Jr., Charles C. Buffum, David Curtis, Richard A. Grills, Joseph J. Kirby, Jacques de Laporte, James W. McCormick, Jr., Thomas F. Moore, Brendan P. O’Donnell, Arthur Perry, Joseph H. Potter, Joseph E. Pucci, Anthony J. Rose, Jr., James D. Thornton, William Blunt White Gerald J. Fogarty, Jr., Managing Director, Phoenix Investment Management Philip L. Friend, Senior Vice President, Retail Lending William D. Gibson, Senior Vice President, Credit Administration Mark K.W. Gim, Senior Vice President, Financial Planning and Asset Liability Management Russell W. Hahn, Senior Vice President, Commercial Lending Marie J. Langlois, Managing Director, Phoenix Investment Management Joseph E. LaPlume, Senior Vice President, Commercial Lending Louis J. Luzzi, Senior Vice President, Commercial Lending Rogean B. Makowski, Senior Vice President, Trust Officer Mary M. McGoldrick, Senior Vice President and Chief Investment Officer Barbara J. Perino, CPA, Senior Vice President, Operations and Technology Harvey C. Perry, II, Senior Vice President, Director of Office for Non-Profit Resources B. Michael Rauh, Jr., Senior Vice President, Corporate Sales, Planning and Delivery Julia Anne M. Slom, Senior Vice President, Commercial Real Estate Group James M. Vesey, Senior Vice President and Chief Credit Officer James J. Walther, Senior Vice President, Director of Internal Audit 20 Washington Trust Bancorp, Inc. 2003 Annual Report Financial Highlights (Dollars in millions, except per share amounts) Results as of or for the years ended December 31, Financial Results Net interest income Provision for loan losses Net realized gains on securities Noninterest income, excluding securities gains Noninterest expense Net income Per Share Information Diluted earnings per share Cash dividends declared Book value Tangible book value Closing stock price Financial Condition Securities Loans: Commercial Residential real estate Consumer Total loans Allowance for loan losses Total assets Deposits Federal Home Loan Bank advances Shareholders’ equity Ratios (%) Return on average assets Return on average equity Net interest margin (taxable equivalent basis) Nonperforming assets to total assets Nonaccrual loans to total loans Allowance for loan losses to total loans Earnings and Ratios Excluding Special Items (Non-GAAP Financial Information) Net income Diluted earnings per share Return on average assets (%) Return on average equity (%) 2003 2002 2001 2000 1999 $ $ 48.8 .5 .6 26.1 47.6 18.9 1.41 .62 10.46 8.60 26.20 $ $ 44.3 .4 .7 22.6 43.0 16.8 1.30 .56 9.87 7.93 19.53 $ $ 39.4 .6 .3 21.1 41.7 13.1 1.07 .52 8.15 8.10 19.00 $ $ 37.9 1.2 .8 19.0 37.5 13.2 1.09 .48 7.43 7.36 14.00 $ $ 35.6 1.8 .7 18.1 35.3 12.5 1.03 .44 6.55 6.48 17.75 $ 839.4 $ 795.8 $ 629.1 $ 511.5 $ 446.8 408.5 389.9 162.6 961.0 15.9 1,973.8 1,206.1 607.1 138.1 1.03 14.15 2.89 .14 .29 1.66 382.1 280.9 132.1 795.1 15.5 1,745.7 1,110.5 480.1 128.7 1.07 14.25 3.10 .24 .53 1.95 260.6 235.4 109.6 605.6 13.6 1,362.2 816.9 431.5 97.9 1.01 13.86 3.30 .28 .63 2.24 239.8 251.0 106.4 597.2 13.1 1,218.1 735.7 377.4 89.2 1.14 16.14 3.55 .28 .58 2.20 232.4 225.7 90.9 549.0 12.3 1,105.6 660.8 352.5 78.2 1.19 15.73 3.71 .35 .69 2.25 $ $ 19.6 1.46 1.06 14.64 $ $ 17.2 1.33 1.09 14.60 $ $ 15.6 1.28 1.20 16.54 $ $ 13.9 1.15 1.20 16.98 $ $ 12.8 1.06 1.21 16.04 2003 2002 2001 2000 1999 Rhode Island Offices $ 18.9 $ 16.8 $ 13.1 $ 13.2 $ 12.5 Washington Trust Locations (Dollars in millions, except per share amounts) Results as of or for the years ended December 31, Reconciliation Table – Non-GAAP Financial Information Net income, including special items Add back (deduct) special items, net of tax: Debt prepayment penalties Acquisition related Litigation settlement, net of insurance recovery Net gain on sale of credit card portfolio Net income, excluding special items Diluted earnings per share Effect of special items, net of tax Diluted earnings per share, excluding special items Ratios (%) Return on average assets Effect of special items, net of tax Return on average assets, excluding special items $ $ $ .7 – – – 19.6 1.41 .05 1.46 1.03 .03 1.06 $ $ $ – .4 – – 17.2 1.30 .03 1.33 1.07 .02 1.09 $ $ $ – – 2.5 – 15.6 1.07 .21 1.28 1.01 .19 1.20 $ $ $ – .7 – – 13.9 1.09 .06 1.15 1.14 .06 1.20 $ $ $ – .6 – (.3) 12.8 1.03 .03 1.06 1.19 .02 1.21 15.73 .31 16.04 Return on average equity Effect of special items, net of tax Return on average equity, excluding special items 14.15 .49 14.64 14.25 .35 14.60 13.86 2.68 16.54 16.14 .84 16.98 Non-GAAP Financial Information Disclosure: This annual report contains financial information determined by methods other than in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The Corporation’s management uses these non-GAAP measures in its analysis of the Corporation’s performance. These measures typically adjust GAAP performance measures to exclude the effects of charges and expenses related to the consummation of acquisitions and costs related to the integration of merged entities. These non-GAAP measures also may exclude other significant gains or losses that are unusual in nature. Because these items and their impact on the Corporation’s performance are difficult to predict, management believes that presentations of financial measures excluding the impact of these items provide useful supplemental information that is essential to a proper understanding of the operating results of the Corporation’s core businesses. These disclosures should not be viewed as a substitute for operating results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other corporations. A quantitative reconciliation of the differences between the non-GAAP financial information discussed herein and the most directly comparable financial information calculated and presented in accordance with GAAP is presented above. Total Assets Total Loans Nonperforming Assets to Total Assets Diluted Earnings Per Share Cash Dividends Declared Washington Trust Bancorp, Inc. 2003 Annual Report Account Information Center To speak with a customer service representative, call 401-348-1200 or toll-free 1-800-475-2265. In Connecticut, call 860-443-1508. Online Banking Bank and pay bills via the Internet 24 hours a day, 7 days a week at www.washtrust.com. XPress Banking Automated banking by phone 24 hours a day, 7 days a week at 401-348-1399 or toll-free 1-800-226-5877. Website Current company and shareholder information available at www.washtrust.com. PROVIDENCE Providence Office 180 Washington Street Providence, RI 02903 401-421-3600 Providence Trust and Investment Services Office 66 South Main Street Providence, RI 02903 401-861-8440 Phoenix Investment Management 68 South Main Street Providence, RI 02903 401-331-6650 CRANSTON Cranston Office 645 Reservoir Avenue Cranston, RI 02910 401-946-1004 WARWICK Warwick Office 236 Centerville Road Warwick, RI 02886 401-739-2353 Connecticut Offices MYSTIC Mystic Office Olde Mistick Village Mystic, CT 06355 860-536-1200 A&P Super Foodmart 179 Stonington Road Mystic, CT 06355 860-572-7100 McQuade’s Marketplace 14 Clara Drive Mystic, CT 06355 860-572-2058 WESTERLY Main Office 23 Broad Street Westerly, RI 02891 401-348-1200 Franklin Street Office 126 Franklin Street Westerly, RI 02891 401-348-1367 McQuade’s Marketplace 106 Main Street Westerly, RI 02891 401-348-1201 RICHMOND Richmond Office 1200 Main Street Wyoming, RI 02898 401-539-2427 BLOCK ISLAND Block Island Office Ocean Avenue Block Island, RI 02807 401-466-7710 CHARLESTOWN Charlestown Office 4137 Old Post Road Charlestown, RI 02813 401-364-4000 NARRAGANSETT Sweet Meadows Office 20 Point Judith Road Narragansett, RI 02882 401-782-1000 Bonnet Shores Office 885 Boston Neck Road Narragansett, RI 02882 401-782-4800 SOUTH KINGSTOWN Wakefield Office 730 Kingstown Road Wakefield, RI 02879 401-782-4200 NORTH KINGSTOWN North Kingstown Office 7625 Post Road North Kingstown, RI 02852 401-295-4700 $0$200$400$600$800$1,000$549.0$597.2$961.0$795.11999 2000 2001 2002 2003In Millions$605.6$0$200$400$600$800$1,000$549.0$597.2$961.0$795.11999 2000 2001 2002 2003In Millions$605.6$0$200$400$600$800$1,000$549.0$597.2$961.0$795.11999 2000 2001 2002 2003In Millions$605.6$0$200$400$600$800$1,000$549.0$597.2$961.0$795.11999 2000 2001 2002 2003In Millions$605.6$0$200$400$600$800$1,000$549.0$597.2$961.0$795.11999 2000 2001 2002 2003In Millions$605.623 Broad Street Westerly, RI 02891 www.washtrust.com A Winning Team Washington Trust Bancorp, Inc. 2003 Annual Report Corporate Profile Washington Trust Bancorp, Inc. (Washington Trust or the Bancorp) is the publicly-owned holding company of The Washington Trust Company (the Bank), a Rhode Island-chartered bank founded in 1800. The Bank offers a broad range of services, including trust and investment management, through its branch offices in Rhode Island and southeastern Connecticut. Unless the context otherwise requires, the word “Corporation” herein refers to the Bancorp and the Bank. At December 31, 2003, the Bank had 449 employees. The Bank has adopted an Affirmative Action Plan and is an Equal Opportunity Employer. The Bank is also a member of the FDIC and an Equal Housing Lender. Stock Transfer and Dividend Disbursing Agent Mellon Investor Services (Mellon), our stock transfer and dividend disbursing agent, is responsible for our shareholder records, issuance of stock certificates, distribution of dividend checks, and IRS Form 1099. Mellon is also responsible for the Corporation’s Dividend Reinvestment (DRIP) and Stock Purchase Plan, which enables shareholders to reinvest their quarterly dividends in Washington Trust shares. Plan members may also make optional cash purchases of common stock up to $10,000 per quarter. For information, contact Mellon on the toll-free Shareholder Information Line, (800) 852-0354, via the secure Mellon Investor Direct website, https://vault.melloninvestor.com/isd, or by writing to: Mellon Investor Direct Services Corporate Office, 85 Challenger Road, Ridgefield Park, NJ 07660. Market and Dividend Information Washington Trust’s common stock trades on the Nasdaq National Market tier of the Nasdaq Stock Market® under the symbol WASH. As of December 31, 2003, there were 2,212 shareholders of record. 2003 Quarters Stock prices: High Low Close Dividend declared 2002 Quarters Stock prices: High Low Close Dividend declared 1 2 3 4 $20.61 19.36 20.21 .15 $24.17 19.80 23.02 .15 $28.49 22.60 24.01 .16 $29.42 23.94 26.20 .16 1 2 3 4 $19.72 18.00 19.42 .14 $24.11 19.05 23.69 .14 $23.83 19.12 19.74 .14 $21.20 19.10 19.53 .14 This report 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. The Corporation’s actual results, performance or achievements could differ materially from those projected in the forward-looking statements as a result, among other factors, of changes in general national or regional economic conditions, changes in interest rates, reductions in the market value of trust and investment assets under management, 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. Contents 2003 Financial Highlights................inside cover Corporate Highlights.......................inside cover Letter to Shareholders ......................................1 The Year In Highlights ......................................2 Consolidated Balance Sheets..........................16 Consolidated Statements of Income ..............17 Consolidated Statements of Changes in Shareholders’ Equity ...................................18 Independent Auditors’ Report .......................19 Management’s Responsibility for Financial Statements .......................................19 Corporate Directory ........................................20 Washington Trust Locations .................................inside back cover On the cover (L-R): Peter J. Miniati, Trust & Investment Services; Cathleen A. Studley, Retail Banking; Gina R. Mead, Mortgage Origination; Patricia M. Hartford, Business Services; Scott D. Lajoie, Commercial Lending; and Holly M. Knott, Merchant Services, were all recognized in 2003 as star performers in their respective areas. Annual Meeting of Shareholders: Tuesday, April 27, 2004, 11:00 a.m., Westerly Public Library, 44 Broad Street, Westerly, Rhode Island 02891 Vote Your Proxy Online For your convenience, you can vote your shares online. Have your proxy card ready and go to the website http://www.eproxy.com/wash. You will be prompted to enter your control number located on your card. Then, follow the instructions to create and submit an electronic ballot. Investor Information Copies of our most recent annual and quarterly reports and a copy of our 2003 Annual Report on Form 10-K are available at no charge by contacting Elizabeth B. Eckel, Senior Vice President, Marketing, at 401-348-1309 or 1-800-475-2265. You may write to Ms. Eckel at the Washington Trust Corporate Office, 23 Broad Street, Westerly, RI 02891. The annual report is also available on our website, www.washtrust.com. Auditors: KPMG LLP, Providence, Rhode Island Counsel: Goodwin Procter LLP, Boston, Massachusetts Washington Trust Bancorp, Inc. 2003 Annual Report 

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