Washington Trust Bancorp Annual Report 2004

FY2004 Annual Report · Washington Trust Bancorp

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23 Broad Street, Westerly, RI 02891

www.washtrust.com

2004 Annual Report

Washington Trust Bancorp, Inc.

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 other-
wise requires, the word “Corporation” herein refers to
the Bancorp and the Bank.

At December 31, 2004, the Bank had 442 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.

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, 2004, there were
2,170 shareholders of record.

2004 Quarters
Stock prices:
High
Low
Close

Dividend declared

2003 Quarters
Stock prices:
High
Low
Close

Dividend declared

$27.60
23.80
26.40
.17

$27.56
24.28
25.99
.17

$26.81
23.20
26.15
.17

$30.50
25.82
29.31
.17

$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

Auditors: KPMG LLP, Providence, Rhode Island
Counsel: Goodwin Procter LLP, Boston, Massachusetts

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.

Annual Meeting of Shareholders:
Tuesday, April 26, 2005, 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.proxyvoting.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.

W A S H I N G T O N T R U S T B A N C O R P, I N C . 2 0 0 4 A N N U A L R E P O R T

Contents

Corporate Profile .........................inside front cover

Letter to Shareholders ............................................2

2004 Financial Highlights........................................4

The Year In Highlights.............................................6

Consolidated Balance Sheets ................................18

Consolidated Statements of Income ....................19

Consolidated Statements of Changes
in Shareholders’ Equity .........................................20

Report of Independent Registered
Public Accounting Firm .........................................21

Shareholder Information ......................................21

Corporate Directory...............................................22

Washington Trust Locations..................................24

Letter to Shareholders

W A S H I N G T O N T R U S T B A N C O R P, I N C . 2 0 0 4 A N N U A L R E P O R T

the best products, aggressively marketing our

capabilities, and continuing to provide the excellent

service we are known for. Our momentum reflects

the success of that strategy. We are attracting

new customers and deepening our relationship

with existing ones, across all lines.

Momentum, in part, is due to the Bank’s expansion

into the Warwick, Cranston, and Providence

markets, where we have gained significant traction.

Taken together, deposits in these branches were

up 41% in 2004, with Warwick reaching $61

million after only 20 months of operation. The

growth of our geographic franchise in the last

five years has been timely, especially given the

Fleet/Bank of America merger within our market

area. It has enabled us to emerge as Rhode

Island’s banking institution of choice. People

want to do business with us.

The Bank’s total retail deposits grew 18% in

2004, fueled by a free checking account packed

with value added features, including free online

banking and bill pay. We also made it easier for

our customers to do business with us, with

significant expansion of our ATM network

through a partnership with Brooks Pharmacy.

We posted striking numbers in consumer lending,

as well, growing our loan business by 40% over

2003. Our home equity products were the major

Washington Trust’s performance in 2004 reflects
a company with significant momentum, as the

theme for this year’s report suggests. At $20.8

million, net income was up 10% for the year.

We posted solid returns for our shareholders

throughout the year, and declared cash dividends

totaling 68 cents per share. The market value of

our common stock rose 12% during 2004. What’s

more, we were pleased to increase our dividend

for the twelfth consecutive year.

As impressive as our 2004 figures are, they only

tell part of the story. When you look at the Bank’s

progress over the last five years, you get an even

better sense of the momentum your Corporation

has generated. At the end of 1999, total assets

for the company were $1.1 billion; at the close of

2004, they stood at $2.3 billion. Deposits were

$661 million five years ago; they now exceed

$1.4 billion. Loans have grown to $1.2 billion,

from $549 million. In 1999, trust and investment

management revenues totaled $9.3 million; in

2004 they totaled $13 million.

Clearly, Washington Trust is a company on the

move. We have committed ourselves to developing

drivers. Armed with the lowest rate in the market,

responsibility for the documentation and testing

we mounted a strong, ongoing marketing and

of internal controls over financial reporting.

sales effort. Homeowners took advantage of the

terrific offer.

Looking ahead in 2005, we are confident that

the Bank can build on the momentum it currently

Our commercial lending team had a banner year,

enjoys. As we begin the new year, economic

with loans up 24% for the year. Almost a quarter

indicators are good, and all of our lines of business

of that volume came from commercial real estate

are well positioned. The continued commitment

activity, where we continue to pursue growth

and spirit of our employees help distinguish

while maintaining excellent asset quality. There is

Washington Trust from our competitors, and we

a growing awareness that Washington Trust is a

are thankful for their efforts. We also thank our

player to be reckoned with in the commercial

shareholders for the ongoing support that provides

arena, as we find ourselves getting invited to

the momentum for this Bank to grow and thrive.

bigger and better business opportunities.

As always, we remain committed to our vision of

being The Best Community Bank and Trust

Our trust and investment management area

Company in New England.

provided important non-interest income, with

revenue up 21% in 2004. Washington Trust

Sincerely,

enjoys a growing reputation as a unique niche

player in the trust and investment management

area, combining proven expertise and results with

local decision-making and personalized service.

In addition to all these successes, we allotted

John C. Warren

significant resources, both time and dollars, to the

Chairman and Chief Executive Officer

implementation and fulfillment of our obligations

under the Sarbanes-Oxley Act. Most specifically

this year, our efforts were directed to Section 404

of the Act, or SOX 404, as it is nicknamed. The Act

deals with both corporate governance and financial

John F. Treanor

reporting. SOX 404 deals with management’s

President and Chief Operating Officer

On July 28, 2004, John Warren opened The NASDAQ Stock Market in New York City

in celebration of the 20th anniversary of Washington Trust’s listing.

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 and other
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 (%)

2004

2003

2002

2001

2000

54.4
.6
.2
26.7
50.4
20.8

1.54
.68
11.44
9.64
29.31

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

890.1

$ 839.4

$ 795.8

$ 629.1

$ 511.5

507.7
513.7
228.3
1,249.7
16.8
2,307.8
1,457.9
672.7
151.9

0.97
14.40
2.74
.21
.38
1.34

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

$
$

20.8
1.54
0.97
14.40

$
$

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

W A S H I N G T O N T R U S T B A N C O R P, I N C . 2 0 0 4 A N N U A L R E P O R T

(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 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

2004

2003

2002

2001

2000

20.8

18.9

16.8

13.1

13.2

–
–
–
20.8

1.54
–
1.54

0.97
–
0.97

.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

Return on average equity
Effect of special items, net of tax
Return on average equity, excluding special items

14.40
–
14.40

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 contained in the Financial Highlights section of this annual report.

Total Loans

Total Deposits

Net Income

Diluted Earnings
Per Share

Cash Dividends Declared
Per Share

$0$300$600 $ 900$1,200$1,500$1,249.7$597.2$961.0$795.1$605.62000 2001 2002 2003 2004In Millions70¢60¢50¢40¢30¢20¢10¢0¢48¢52¢56¢62¢68¢2000 2001 2002 2003 2004$0$5$10$15$20$25$20.8$13.2$18.9$16.8$13.12000 2001 2002 2003 2004In Millions$1.60$1.20$0.80$0.40$0.00$1.09$1.07$1.54$1.412000 2001 2002 2003 2004$1.30$0$300$600$900$1,200$1,500$1,457.9$735.7$1,206.1$1,110.5$816.92000 2001 2002 2003 2004In MillionsMomentum = 18% increase

in retail deposits

Cranston branch employees Dot Bogosian, Head Teller, and

Desmond Ranglin, Senior Customer Service Representative,

were members of the branch network that enhanced

the Bank’s presence in new markets.

Washington Trust
Cranston Branch
Cranston, RI

Washington Trust earns consistently high satisfaction ratings due to our outstanding customer service. Pictured here are representatives of our
retail network who work closely with customers on a day-to-day basis: (l-r) Deneane Spaziano, Teller; Peggy Wood, Customer Service Representative;
Carolyn Cullinane, Teller; Patricia Cole, AIC Representative and Debra Thomas, AIC Supervisor; Vanessa Dillon, Warwick Branch Manager;
and Vincent Moretti, Cranston Branch Manager.

W A S H I N G T O N T R U S T B A N C O R P, I N C . 2 0 0 4 A N N U A L R E P O R T

Building Momentum

pay – that made it the best in the market. Backed

by on-going print, radio, and outdoor advertising

How do you build momentum? By having the

support, our free checking campaign enabled us to

right people, being in the right places, offering the

garner more than our fair share of new deposits.

best products, and marketing them aggressively.

While interest rates were at low levels industry-wide,

When everything works in unison, the result is

we offered attractively priced certificates of deposit

momentum. And Washington Trust achieved that

(CDs) and money market accounts. Outstanding

momentum in 2004.

products gave customers good reason to do business

with Washington Trust. And once they did, the

Great Products, Superior Delivery

way we delivered those products strengthened

our relationship with them.

In the face of a highly competitive marketplace,

a less-than-robust local economy, and industry

We know that our best sales people are our

consolidation, Washington Trust grew retail deposits

existing customers. In 2004, we saw first-hand

18% in 2004 to $1.3 billion. That success reflects

how positive “word-of-mouth” translates directly

the Bank’s focus on our customers. At all times,

into momentum, as 10% of our new checking

our goal is to make doing business with

accounts were the result of referrals by existing

Washington Trust rewarding, convenient, and

bank customers. Washington Trust customers who

enjoyable.

referred a friend to the Bank for free checking

received a delicious thank you: a complimentary

Great products drove new business to the Bank.

cake from Gregg’s, one of our key business

Our new free checking product included special

banking customers.

value-added features – free online banking and bill

The cross-functional team approach to selling,

introduced in 2003, delivered significant results in

its second year, with increased sales between

various departments. New software allowed us to

track internal referrals and incorporate the data

into our overall sales incentive program. It’s all

part of the Bank’s effort to better recognize top

Momentum = 24% increase

in commercial loans

W A S H I N G T O N T R U S T B A N C O R P, I N C . 2 0 0 4 A N N U A L R E P O R T

performers. “We shifted a percentage of our

profit-sharing plan to reward employees based on

individual performance,” says B. Michael Rauh,

Senior Vice President of Corporate Sales, Planning

and Delivery. “Now we are more directly

connecting compensation to the achievement

of individual goals.”

As part of our footprint expansion strategy, we

installed ATMs in 46 Brooks Pharmacy locations

statewide and in several stores in Southeastern

Massachusetts and Connecticut. We also won a

contract with the State of Rhode Island to have

Washington Trust ATMs placed at the Division of

Motor Vehicles, state colleges, universities and

administrative offices, and various other state

buildings. By significantly bolstering our ATM

network, we are making it easier for customers

to do business with us and we are increasing our

presence in both new and existing markets.

At The Table, Closing The Deal

It was a banner year for Commercial Lending.

In 2003, our rallying cry to the marketplace was

“Put us on the list,” as we built awareness for our

key business products and overall capabilities.

In 2004, we saw the fruits of our labor. Not only

did a growing number of commercial prospects

put us on their list; more often than ever, they

asked us to come to the table and close the

deal. The result was a record year in terms of new

dollar originations and commitments, up more

than 45% over last year.

A healthy mix of new and existing customers drove

our commercial lending business. “The first order

of business is taking care of our customers,” says

James M. Vesey, Senior Vice President and Chief

Credit Officer. “40% of our new dollar originations

and commitments in 2004 came from companies

that were already doing business with us. This

reflects our commitment to relationship lending.”

In addition, we generated excellent new business

activity throughout our market area.

The Commercial Real Estate Group delivered

outstanding results in the past twelve months,

accounting for 24% of our total commercial

lending volume. High-profile big-ticket projects

like the Gardens Office Park in West Warwick

Washington Trust is a leading resource for commercial loans and commercial real estate projects up to $10 million. The Bank offers construction,
intermediate-term, and long-term financing for commercial real estate transactions throughout New England involving everything from office parks and
shopping centers to residential and industrial buildings. Washington Trust is proud to have provided $2.5 million in financing to Coventry Lumber for
relocation and expansion in Coventry, Rhode Island.

Michael Durand, Owner of Eagle Lumber and Coventry Lumber,

chose Washington Trust to finance the construction, relocation and expansion

of the Coventry Lumber location. Above: Michael Durand, Ken Jones,

General Contractor, and Jim Vesey, Washington Trust Senior Vice President

and Chief Credit Officer, view the project under construction this winter.

Coventry Lumber
Nooseneck Hill Road
Coventry, RI

Momentum = 26% increase

in business core deposits

Kentucky Fried Chicken Owner John Daluz celebrates

the reconstruction of his second KFC location with Dave Kmetz,

Vice President, Commercial Lending.

KFC
160 Granite Street
Westerly, RI

W A S H I N G T O N T R U S T B A N C O R P, I N C . 2 0 0 4 A N N U A L R E P O R T

boosted our visibility and made people aware of

made becoming a Washington Trust customer a

the scope of our lending capabilities. “The

quick and easy process.

Commercial Real Estate Group has been a terrific

initiative for us,” Vesey points out. “We will

A new credit card processing system enhanced

continue to grow this business while maintaining

our relationships with our merchant customers.

our excellent asset quality standards.”

In 2004, we provided them with a variety of value-

Solutions for Small Business Owners

on-line access to statements, and faster transaction

added options, including gift cards, convenient

processing via DSL technology. By constantly

Small business owners are unique. In 2004, we

expanding our service offering to merchants, we

let this important segment know that Washington

make it easier for them to do business with their

Trust understands their financial needs by

customers and reconfirm why doing business with

introducing a suite of products and services

Washington Trust is a smart decision.

designed specifically for them. The Freedom

Business Partners™ Account featured a free

Our commitment to the small business community

business checking account, preferred loan rates,

was underscored by our SBA lender ranking, which

and special discounts available exclusively to

by November 30th had risen to #2 in Rhode Island.

small business owners. A highly visible marketing

Many times, smaller businesses have the vision

campaign, including print and radio advertising,

and cash flow required for starting up or expanding,

direct mail, and on-going calling, helped open the

but may lack the necessary collateral. As an

door to new sales opportunities. And once we

SBA preferred lender, we are able to help these

met with prospects, our Small Business Switch Kit

businesses start up, prosper, and grow. And

because of our demonstrated commitment to the

small business market in Rhode Island, the SBA

approved us for expansion into Massachusetts

and Connecticut.

Washington Trust is one of the top small business lenders in Rhode Island, serving businesses of all types and sizes, including Ray Willis Toys

and Bikes, Dunn’s Corners Market, Guytanno’s Cafe, Velvet Crush, Chariho Furniture, and Westerly Urgent Care.

Momentum = 40% increase

in consumer loans

Record Low Lending Rates

the state’s leading loan originators. What’s more,

Fuel Growth

construction activity emerged as an excellent source

of leads for consumer loans, as builders referred us

Our Consumer Lending business in 2004 was

to their clients in need of financing options.

distinguished by remarkable growth. Consumer

loans grew by 40% from the previous year. What

The Value of a Trusted Advisor

drove such impressive performance? “It was our

competitive products, especially our home equity

In 2004, having a reliable and trusted investment

line of credit,” says Phil Friend, Senior Vice

counselor was more important than ever. Clearly,

President, Retail Lending. “In ads and direct mail,

based on the performance of our trust and asset

we continually promoted the fact that we were

management group, investors found what they

offering our lowest home equity line rate ever.

were looking for at Washington Trust. Strong

By combining record-setting rates with our

growth in new assets managed resulted from the

outstanding service delivery, we gave consumers a

increased recognition of the Bank as a premier

very compelling reason to do business with us.”

provider of a comprehensive range of financial

New technology greatly enhanced customer

services.

service in Consumer Lending in 2004. We

On their own, the numbers generated by the

accelerated application processing to the point

group were impressive, reflecting consistent, out-

where we could approve equity lines and loans

standing investment performance and strong fee

within an hour. The world moves faster these

revenue. But what makes those figures even more

days, and Washington Trust is helping our

noteworthy is the fact that they were produced in

customers keep pace by giving them the

information they need in a timely fashion.

Refinancing activity was steady again in 2004,

spurred by continued low mortgage rates.

With our expanded geographic presence and the

addition of origination and processing staff in

Warwick, we strengthened our position among

W A S H I N G T O N T R U S T B A N C O R P, I N C . 2 0 0 4 A N N U A L R E P O R T

One of the area’s major retail lenders, Washington Trust provided homeowners

and first-time homebuyers with home equity loans and lines of credit,

construction loans, new mortgages, and mortgage refinancing.

Residential
Remodeling Project
West Greenwich, RI

Washington Trust’s home equity products once again proved to be a popular choice for borrowers looking for competitive rates and

quick approvals to finance home improvement projects, consolidate debt and fund major purchases.

Momentum = 21% increase in

investment management revenues

Front row: (l-r) Mary M. McGoldrick, Gerald J. Fogarty, Marie J. Langlois,

Dickson G. Boenning, Rogean B. Makowski. Back row: (l-r) Peter J. Miniati,

Paul D. Nunes, Robert G. Salmonsen, Richard E. Cavanagh,

Gloria J. Miner, Charles P. Roberts, Carl Y. Chern, Gary J. Friedmann,

Barbara S. Williams, Russel W. Burgess.

Washington Trust
Wealth Management

W A S H I N G T O N T R U S T B A N C O R P, I N C . 2 0 0 4 A N N U A L R E P O R T

a challenging investment environment. “Many

knowledgeable, experienced, local staff. With

outside factors influenced market performance,”

Washington Trust, clients knew their money was

observes Mary M. McGoldrick, Senior Vice President

not being managed from a distance.”

and Chief Investment Officer. “Concerns about

terrorism, the outcome of the presidential election,

Well-versed in all aspects of wealth management,

and changing policy at the Federal Reserve all

Washington Trust advisors were proactive through-

contributed to investor concern.” Against this

out 2004 in their efforts to serve the needs of

backdrop, our performance history and the strong

successful individuals. Investors also enjoyed the

relationships that we enjoy with individuals,

convenience of accessing a variety of everyday

families, and institutions served us well.

financial services through the Bank, including

checking accounts, mortgages, and equity lines.

New customers came from three principal sources:

referrals from existing clients, new business

Looking forward, our wealth management advisors,

presentations to prospects and key professional

previously separated into two groups – Trust &

advisors, and relationships established through

Investment Services and Phoenix Investment

the various boards that our employees serve on.

Management – will now all be marketed under

“Clients and key influencers recognized us as an

the Washington Trust brand umbrella. “One of

attractive niche resource for trust and asset

the long-term goals of the Bank is to build the

management services,” says Rogean B. Makowski,

Washington Trust brand,” say Managing Directors

Senior Vice President, Trust Officer. “A key

Marie J. Langlois and Gerald J. Fogarty. “Bringing

competitive strength was our emphasis on providing

all of our investment and trust services under the

a high-quality, professional service through a

Washington Trust name strengthens the brand and

expands the breadth and depth of services offered

under its banner.”

Washington Trust’s team of professionals proactively assisted clients in achieving goals, such as preserving wealth for future generations,

ensuring assets for a comfortable retirement, and providing sufficient funding for children’s education.

Momentum = more than 2000 employee hours

devoted to community service

W A S H I N G T O N T R U S T B A N C O R P, I N C . 2 0 0 4 A N N U A L R E P O R T

Community Service as

Corporate Culture

Since our founding 204 years ago, community

service has been a core value at Washington Trust.

Whether raising funds for those in need, volun-

teering time, serving on boards of non-profit

organizations statewide, or sponsoring community

Among the highlights of our community service

events, the Bank and its employees play an active

efforts in 2004 was the phenomenal success of

and vital role in the neighborhoods where we

our PB Xpress program, now in its 4th year. Our

work and live.

“Community service is more than a program at

Washington Trust,” explains Elizabeth B. Eckel,

Senior Vice President, Marketing. “It’s an

goal was to collect and distribute four tons of

peanut butter, to be delivered to the tables of

hungry Rhode Islanders. Through the efforts of

our employees, customers, and friends in local

schools and businesses, seven tons were brought

essential part of who we are as a company and

in. Talk about momentum!

as individuals.”

As the Bank grows, so does our opportunity to

Momentum Into 2005

reach more people. The challenge is to hold on to

These are exciting times for Washington Trust, our

the community spirit that distinguishes our corpo-

employees, our customers, and our shareholders.

rate culture as we expand into new markets.

We have a strong brand, an esprit de corps that is

Toward that end, the Bank introduced its Reach

second to none, a marketplace that welcomes our

For The Stars volunteer initiative in 2004. By

unique product and service offering, and a proven

making on-going volunteerism part of employee

growth strategy. Best of all, our success is

job descriptions and the review process, it under-

grounded in core values that have distinguished

scores that helping others is integral to what it

the Bank since its founding. With a genuine

means to be a Washington Trust employee. We

commitment to helping others – our customers, our

kicked off our Reach For The Stars program in

April by hosting the Volunteer Center of Rhode

neighbors, and the larger communities where we

work and live – Washington Trust looks forward

Island’s National Volunteer Week activities, as well

to gaining even more momentum in 2005.

as participating in a series of community events.

In 2004, Washington Trust employees enthusiastically supported various community groups throughout Rhode Island and southeastern

Connecticut, including South County Habitat for Humanity, Rhode Island Community Food Bank, local Adopt-A-Family holiday programs,

Rhode Island Community Farm, Pawcatuck Neighborhood Center, and Audubon Society of Rhode Island.

John C. Warren (right), Washington Trust Chairman and CEO, was selected

as the United Way of Rhode Island’s 2004-05 Campaign Chairman.

John and Tony Maione, United Way’s President and CEO, work with a

broad array of partners including human service and government

agencies, foundations, business leaders, and labor and faith-based

organizations to identify the issues that matter most and focus resources

on effective solutions for the community.

United Way
of Rhode Island
224 Waterman Street
Providence, RI

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 $724,209 in 2004

and $663,529 in 2003

Held to maturity, at cost; fair value $156,270 in 2004 and $169,401 in 2003

Total securities

Federal Home Loan Bank stock, at cost

Loans:

Commercial and other
Residential real estate
Consumer

Total loans
Less allowance for loan losses
Net loans

Premises and equipment, net
Accrued interest receivable
Investment in bank-owned life insurance
Goodwill
Identifiable intangible assets
Other assets

Total assets

Liabilities:
Deposits:

Demand deposits
NOW accounts
Money market accounts
Savings accounts
Time deposits

Total deposits

Dividends payable
Federal Home Loan Bank advances
Other borrowings
Accrued expenses and other liabilities

Total liabilities

Commitments and contingencies

2004

2003

34,801
17,280
1,095

40,710
20,400
2,486

735,666
154,392

890,058

34,373

507,711
513,695
228,270

1,249,676
16,771
1,232,905

24,248
9,367
29,249
22,591
1,309
10,544

673,845
165,576

839,421

31,464

408,477
389,855
162,649

960,981
15,914
945,067

24,941
7,911
28,074
22,591
1,953
8,789

$2,307,820

$1,973,807

$189,588
174,727
196,775
251,920
644,875

1,457,885

2,257
672,748
3,417
19,661

$194,144
153,344
83,037
257,497
518,119

1,206,141

2,113
607,104
2,311
18,083

2,155,968

1,835,752

Shareholders’ Equity:
Common stock of $.0625 par value; authorized 30 million shares in 2004
and 2003; issued 13,278,685 shares in 2004 and 13,204,024 in 2003

Paid-in capital
Retained earnings
Unearned stock-based compensation
Accumulated other comprehensive income
Treasury stock, at cost; 9,309 shares in 2004 and 9,463 shares in 2003

Total shareholders’ equity

Total liabilities and shareholders’ equity

830
31,718
113,314
(737)
6,937
(210)

151,852

825
29,868
101,492
(22)
6,101
(209)

138,055

$2,307,820

$1,973,807

Refer to Washington Trust Bancorp, Inc.’s 2004 Annual Report on Form 10-K for a complete set of consolidated financial statements.

W A S H I N G T O N T R U S T B A N C O R P, I N C . 2 0 0 4 A N N U A L R E P O R T

Washington Trust Bancorp, Inc. and Subsidiary
Consolidated Statements of Income

Years ended December 31,
(Dollars and shares in thousands, except per share amounts)

2004

2003

2002

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:

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
Merchant processing fees
Net gains on loan sales
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
Advertising and promotion
Outsourced services
Legal, audit and professional fees
Amortization of intangibles
Debt prepayment penalties
Acquisition related expenses
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

$60,828
33,787
2,105
133

96,853

$51,603
32,430
2,081
131

86,245

$49,576
35,571
1,973
219

87,339

22,197
20,153
62

42,412

54,441
610

53,831

13,048
4,483
4,259
1,901
1,175
248
1,791

26,905

28,816
3,201
3,267
3,534
1,748
1,616
1,535
644
–
–
6,012

50,373

30,363
9,534

$20,829

13,227.8
13,542.7

$1.57
$1.54
$.68

18,554
18,819
73

37,446

48,799
460

48,339

10,769
4,920
3,410
4,690
1,161
630
1,155

26,735

26,945
2,979
3,380
2,716
1,440
1,333
1,242
719
941
–
5,937

47,632

27,442
8,519

$18,923

13,114.1
13,393.6

$1.44
$1.41
$.62

22,374
20,596
87

43,057

44,282
400

43,882

10,171
3,787
3,002
2,884
1,155
678
1,581

23,258

23,793
2,694
3,333
2,391
1,180
1,077
1,893
651
–
605
5,373

42,990

24,150
7,393

$16,757

12,737.3
12,932.4

$1.32
$1.30
$.56

Refer to Washington Trust Bancorp, Inc.’s 2004 Annual Report on Form 10-K for a complete set of consolidated financial statements.

Financial Statements

W A S H I N G T O N T R U S T B A N C O R P, I N C . 2 0 0 4 A N N U A L R E P O R T

Washington Trust Bancorp, Inc. and Subsidiary
Consolidated Statements of Changes in Shareholders’ Equity

Report of Independent Registered
Public Accounting Firm

(Dollars in thousands)

Common
Stock

Paid-in
Capital

Retained
Earnings

Unearned
Stock-Based
Compensation

Accumulated
Other
Comprehensive
Income

Treasury
Stock

Total

Balance at January 1, 2002
Net income
Unrealized gains on securities,

net of $1,629 income tax expense
Reclassification adjustments, net of tax
Comprehensive income
Cash dividends declared
Restricted stock award
Amortization of restricted stock
Shares issued
Shares issued for acquisition
Shares repurchased
Balance at December 31, 2002

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
Restricted stock award
Amortization of restricted stock
Shares issued
Shares repurchased
Balance at December 31, 2003

Net income
Unrealized gains on securities,

net of $383 income tax expense

Reclassification adjustments, net of tax
Minimum pension liability adjustment,

net of $5 income tax benefit

Comprehensive income
Cash dividends declared
Restricted stock unit award
Amortization of restricted stock
Shares issued
Shares repurchased
Balance at December 31, 2004

$754

$10,696

$81,114
16,757

$ –

$6,416

$(1,043)

3,310
(432)

(7,154)

(25)
1

(185)
18,255

$818

$28,767

$90,717

$(24)

$9,294

18,923

(2,499)
(410)

(284)

(8,148)

(29)
31

1,072

$825

$29,868

$101,492

$(22)

$6,101

20,829

704

(536)
$(851)

851
(209)
$(209)

$97,937
16,757

3,310
(432)
19,635
(7,154)
–
1
519
18,319
(536)
$128,721

18,923

(2,499)
(410)

(284)
15,730
(8,148)
–
31
1,930
(209)
$138,055

20,829

1,006
(161)

(9)

850

1,000

(9,007)

(850)
135

$830 $31,718 $113,314

$(737)

$6,937

(9)
21,665
(9,007)
–
135
1,159
(155)
$(210) $151,852

154
(155)

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

2004

$(248)
87

–
–
$(161)

2003

$(630)
220

–
–
$(410)

2002

$(678)
237

13
(4)
$(432)

Refer to Washington Trust Bancorp, Inc.’s 2004 Annual Report on Form 10-K for a complete set of consolidated financial statements.

The Board of Directors and Shareholders
Washington Trust Bancorp, Inc.:

We have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States), the consolidated balance sheets of Washington Trust Bancorp, Inc. and subsidiary as of December 31, 2004
and 2003, and the related consolidated statements of income, changes in shareholders’ equity, and cash flows
(not presented herein) for each of the years in a three-year period ended December 31, 2004; and in our report
dated March 15, 2005, we expressed an unqualified opinion on those consolidated financial statements.

In our opinion, the information set forth in the accompanying 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
March 15, 2005

Shareholder Information

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 com-
mon 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.

Copies of our most recent annual and quarterly reports and a copy of our 2004 Annual Report on Form 10-K are
available at no charge by contacting Elizabeth B. Eckel, Senior Vice President, Marketing, at 401-348-1566 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.

Corporate Directory

Washington Trust Bancorp, Inc.

Board of Directors

Gary P. Bennett, Retired Chairman and Chief Executive Officer, Analysis and Technology, Inc.

Steven J. Crandall, Vice President, Ashaway Line & Twine Mfg. Co.

Larry J. Hirsch, Esq., Retired President, Westerly Jewelry Co.

Barry G. Hittner, Esq., Of Counsel, Cameron & Mittleman, LLP

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 Business Administration, University of Rhode Island

Kathleen McKeough, Retired Senior Vice President of Human 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.

W A S H I N G T O N T R U S T B A N C O R P, I N C . 2 0 0 4 A N N U A L R E P O R T

The Washington Trust Company

Executive Officers

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

Senior Management

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

Vernon F. Bliven, Senior Vice President, Human Resources

Elizabeth B. Eckel, Senior Vice President, Marketing

Gerald J. Fogarty, Jr., Managing Director

Philip L. Friend, Senior Vice President, Retail Lending

James P. Sullivan, CPA, Retired Finance Officer, Roman Catholic Diocese of Providence

William D. Gibson, Senior Vice President, Credit Administration

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

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

Joseph E. LaPlume, 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

David V. Devault, Executive Vice President, Treasurer and Chief Financial Officer

Harvey C. Perry, II, Senior Vice President, Director of Office for Non-Profit Resources

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, Joseph H. Potter, Joseph E. Pucci, Anthony J. Rose, Jr., William Blunt White

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

Washington Trust Locations

W A S H I N G T O N T R U S T B A N C O R P, I N C . 2 0 0 4 A N N U A L R E P O R T

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.

RICHMOND
Richmond Office
1200 Main Street
Wyoming, RI 02898
401-539-2427

SOUTH KINGSTOWN
Wakefield Office
730 Kingstown Road
Wakefield, RI 02879
401-782-4200

WARWICK
Warwick Office
236 Centerville Road
Warwick, RI 02886
401-739-2353

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

Connecticut Offices

MYSTIC
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

Mystic Office
Olde Mistick Village
Mystic, CT 06355
860-536-1200

Rhode Island Offices

CORPORATE OFFICE
23 Broad Street
Westerly, RI 02891
401-348-1200

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

CRANSTON
Cranston Office
645 Reservoir Avenue
Cranston, RI 02910
401-946-1004

NARRAGANSETT
Bonnet Shores Office
885 Boston Neck Road
Narragansett, RI 02882
401-782-4800

Sweet Meadows Office
20 Point Judith Road
Narragansett, RI 02882
401-782-1000

NORTH KINGSTOWN
North Kingstown Office
7625 Post Road
North Kingstown, RI 02852
401-295-4700

PROVIDENCE
Providence Office
180 Washington Street
Providence, RI 02903
401-421-3600

Providence Wealth
Management Offices
66-68 South Main Street
Providence, RI 02903
401-861-8440
401-331-6650

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23 Broad Street, Westerly, RI 02891

www.washtrust.com

2004 Annual Report

Washington Trust Bancorp, Inc.