Washington Trust Bancorp Annual Report 2006

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FY2006 Annual Report · Washington Trust Bancorp

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Trus ted Advisor

Letter to Shareholders....................................4

Corporate Profile ............................................6

2006 Financial Highlights ...............................7

The Year In Highlights ....................................8

Consolidated Balance Sheets .......................20

Consolidated Statements of Income............21

Consolidated Statements of Changes

in Shareholders’ Equity.................................22

Report of Independent Registered

Public Accounting Firm.................................23

Shareholder Information..............................23

Corporate Directory ......................................24

Washington Trust Locations .........................26

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. All statements, other
than statements of historical facts, including statements regarding our
strategy, effectiveness of investment programs, evaluations of future
interest rate trends and liquidity, expectations as to growth in assets,
deposits and results of operations, success of acquisitions, future
operations, market position, financial position, and prospects, plans,
goals and objectives of management are forward-looking statements.
The actual results, performance or achievements of the Corporation
could differ materially from those projected in the forward-looking
statements as a result of, among other factors, changes in general
national or regional economic conditions, changes in interest rates,
reductions in the market value of wealth management and trust assets
under administration, reductions in loan demand, reductions in deposit
levels necessitating increased borrowing to fund loans and investments,
changes in loan default and charge-off rates, changes in the size and
nature of the Corporation’s competition, changes in legislation or
regulation and accounting principles, policies and guidelines, and
changes in the assumptions used in making such forward-looking
statements. The Corporation assumes no obligation to update forward-
looking statements or update the reasons actual results, performance
or achievements could differ materially from those provided in the
forward-looking statements, except as required by law.

Washington Trust Bancorp, Inc., 2006 Annual Report

Washington Trust:
What’s In A Name?

It is altogether fitting that the word trust is part of the Washington

Trust name. Of all the words in the English language, trust best

describes what is at the root of our relationships with clients and

customers. For more than 200 years, people have trusted

Washington Trust to help them achieve their financial goals.

At dictionary.com, the definition for trust is firm reliance on the

integrity, ability, or character of a person or thing. When people are

discussing personal or business finances, having an advisor with

integrity, ability, and character is essential. For many people in 2006,

that trusted advisor was a person at Washington Trust.

People turn to us for advice on matters that range from the simple

to the complex:

• I want to retire at 65, keep my house in Florida, buy a house in

Maine, and help my two children get through graduate school.

I have all sorts of stock options and restricted stock from my

company. How should I proceed?

• My business has grown significantly. How can I increase my cash

flow and improve its earning power?

• How can I earn the most for the deposits my business makes

while still maintaining access to the funds?

• We’re finally ready to put in our dream kitchen. Are we better

off with a home equity loan or line of credit?

• How can we align our non-profit organization’s investment

portfolio with our mission and values?

At Washington Trust, we play the role of trusted advisor in

every aspect of our business.

Washington Trust Bancorp, Inc., 2006 Annual Report

2006 was a solid year for your Corporation. In light of challenging market

Our commercial lending group made significant strides in expanding both its

conditions and fierce competition, Washington Trust posted excellent earnings

capabilities and market presence. A new commercial lending office in the heart

and earnings per share. Net income reached $25 million, up 8.7% from 2005.

of Providence’s financial district raised our profile and underscored our position

For the 14th consecutive year, we increased our dividend, declaring cash dividends

as a major resource for a wide range of businesses. From start-up financing to

of 19 cents per share. We grew our market share and customer base as well –

growth and acquisition funding, to sophisticated, multi-million-dollar deals,

clear signs of an organization that continues to gain momentum in all areas

we have the experience and capacity to get the job done for our commercial

of its business.

clients. Within our commercial lending group, our commercial real estate

team continued to make significant inroads with developers and real estate

Our performance in 2006 is even more satisfying when you put it in the context

professionals throughout New England and New York.

of our peers. Many banks in our market area reported a decline in earnings

for the year. For Washington Trust to have posted an 8.7% increase in earnings

Despite a challenging interest rate environment, Washington Trust grew

reflects the strength of our brand, the stability of our business model, the

deposit market share. Timely direct mail promotions attracted new deposits

wisdom of our recent strategic initiatives, and the excellence of our people.

and relationships to the Bank. We were also the first to aggressively market

Key to our achievements in 2006 was our ability to balance the stream of

reverse mortgages, an innovative new solution for seniors looking to maintain

earnings from our core lines of business – personal banking, business banking,

their homes and quality of life.

and wealth management.

Washington Trust shines in a larger regional context as well. A recent report

and, in 2006, our employees continued this strong legacy of reaching out to

by Keefe, Bruyette & Woods, a leading analyst of financial institutions, ranked

help others. The majority of our employees volunteered their time and talent to

Washington Trust 11th out of 70 banks in the northeastern United States for

organizations involved with housing and economic development, health and

performance from the third quarter ’04 through the third quarter ’06. Your

human services, the arts, youth and family, education, and the environment.

Corporation is operating at the top of its class, among the premier financial

What’s more, Washington Trust executives provided board leadership for many

Washington Trust has been a trusted advisor to the community since its founding,

institutions in the region.

organizations, including The United Way, the Rhode Island Chapter of the

American Red Cross, Meeting Street School, and the Greater Providence YMCA.

At the heart of our success is our position as trusted advisor to clients, customers,

and the community at large. It is a role we embrace and affirm each day through

Looking forward to 2007, we eagerly anticipate the opening of our second

thousands of interactions at every level of the Bank’s business – in commercial

Cranston branch, broadening our presence in that community and bringing our

loan closings, in meetings with high net worth clients, in the lobbies of our 16

branch location total to 17. We will continue to pursue growth opportunities in

branches, and in board meetings for non-profit organizations where we serve

all our lines of business while adhering to our philosophy of maintaining strong

as directors. Relationships matter at Washington Trust. Our employees are

asset quality. We appreciate the ongoing commitment and efforts of our

genuinely committed to helping people achieve their life goals, and that

employees, for they are the “trusted advisors” who connect Washington Trust

commitment drives the continued success of your Corporation.

with customers and nurture those relationships every day. Thank you, as well,

to our shareholders for the trust that you place in us and for your support. It is

2006 was a record-setting year for our wealth management group, providing

a privilege to lead and direct your Corporation.

“ At the heart of our

success is our position as

trusted advisor to clients,

customers, and the

community at large. It is

a role that we embrace and

affirm each day through

thousands of interactions

at every level of the Bank’s

business. ”

John C. Warren
Chairman and Chief Executive Officer

a resounding affirmation of our strategic initiatives in this area in recent years.

Generating important non-interest income, the group’s revenues were up 58%

and accounted for 25% of the Bank’s overall revenues. Our wealth management

group has firmly established itself as a unique resource for investors, combining

world-class expertise and consistent results with local, personalized service.

“ A recent report by Keefe,

Bruyette & Woods, a leading

analyst of financial institutions,

ranked Washington Trust

11th out of 70 banks in the

northeastern United States for

performance from the third

quarter ’04 through the third

quarter ’06. Your Corporation

is operating at the top of its

class, among the premier

financial institutions in the

region.

”

John F. Treanor
President and Chief Operating Officer

H i

Washington Trust Bancorp, Inc., 2006 Annual Report

Washington Trust Profile

As of December 31, 2006

$2.4 billion in assets

$373 million in market capitalization

Washington Trust Bancorp, Inc. is the

publicly-owned holding company of The

Washington Trust Company (the Bank), a

Rhode Island-chartered commercial bank

founded in 1800. Through the Bank and its

other subsidiaries, Washington Trust offers a

broad range of financial services, including

wealth management, by way of its branch

offices in Rhode Island, Massachusetts and
southeastern Connecticut.

At December 31, 2006, Washington Trust

had 465 employees. The Corporation has an

Affirmative Action Plan and is an Equal

Opportunity Employer. Washington Trust 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 Global Market® under the symbol WASH.

As of December 31, 2006, there were 2,090

shareholders of record.

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

Annual Meeting of Shareholders

Tuesday, April 24, 2007, 11:00 a.m.

Westerly Public Library

44 Broad Street, Westerly, Rhode Island 02891

Vote Your Proxy Online Or By Phone

For your convenience, you can vote your shares online or by phone. Have

your proxy card ready and go to the website http://www.voteproxy.com or

call 800-PROXIES (800-776-9437). You will be prompted to enter your con-

trol number located on your card. Then, follow the instructions to create

and submit an electronic ballot.

2006 Quarters

Stock prices:
High
Low
Close

Dividend declared

$29.49
25.45
28.07
.19

$28.93
24.07
27.72
.19

$27.44
24.01
26.51
.19

$29.30
25.31
27.89
.19

2005 Quarters

Stock prices:
High
Low
Close

Dividend declared

$29.99
27.00
27.48
.18

$28.81
23.94
27.67
.18

$30.38
26.08
27.19
.18

$29.98
25.77
26.18
.18

Shareholder Return Performance
Presentation

Set forth at right is a line graph comparing the

cumulative total shareholder return on the

Corporation’s Common Stock against the

cumulative total return of The NASDAQ Stock

Market (U.S.) and the NASDAQ Bank Stocks

index for the five years ended December 31.
The historical information set forth below is not
necessarily indicative of future performance.

Washington Trust Bancorp, Inc.
Nasdaq Bank Stocks
The Nasdaq Stock Market (U.S.)

2001

$100.00
$100.00
$100.00

2002

$105.59
$102.37
$69.13

2003

$146.50
$131.69
$103.36

2004

$168.07
$150.71
$112.49

2005

$154.15
$147.23
$114.88

2006

$168.93
$165.21
$126.22

The results presented assume that the value of the Corporation’s Common Stock and each index was $100.00 on
December 31, 2001. The total return assumes reinvestment of dividends.

(Dollars in thousands, except per share amounts)
At or for the years ended December 31,
Financial Condition
Total assets
Total loans
Allowance for loan losses
Securities
Deposits
Shareholders’ equity

Financial Results
Net interest income
Provision for loan losses
Noninterest income
Noninterest expense
Net income

Per Share Information
Diluted earnings per share
Cash dividends declared
Book value
Tangible book value
Closing stock price

Selected Ratios
Return on average assets
Return on average equity
Net interest margin (taxable equivalent basis)
Noninterest income as a percentage of total revenue
Nonperforming assets to total assets
Allowance for loan losses to total loans

Other Selected Data
Wealth management assets under administration
Number of ATMs

2006

2005

2004

$2,399,165
1,459,986
18,894
703,851
1,677,997
173,056

$2,402,003
1,401,908
17,918
783,941
1,639,258
158,446

$2,307,820
1,249,676
16,771
890,058
1,457,885
151,852

$61,474
1,200
42,183
65,335
25,031

$1.82
.76
12.89
8.61
27.89

$60,656
1,200
30,946
56,393
23,024

$1.69
.72
11.86
7.79
26.18

$54,441
610
26,905
50,373
20,829

$1.54
.68
11.44
9.64
29.31

1.04%

0.98%

0.97%

14.99
2.80
40.69
0.11
1.29

14.80
2.79
33.78
0.10
1.28

14.40
2.74
33.07
0.21
1.34

$3,694,813
132

$3,271,756
124

$1,870,510
102

Diluted Earnings
Per Share

Cash Dividends Declared
Per Share

Wealth Management Assets
Under Administration

100150200$0$50$100$150$20012/31/01 12/31/02 12/31/03 12/31/0412/31/05 12/31/06Washington Trust Bancorp, Inc.NASDAQBank StocksThe NASDAQStockMarket (U.S.)
B

Washington Trust Bancorp, Inc., 2006 Annual Report

Moving Beyond Transactions

Companies turn to Washington Trust when they need money – but in their

relationship with us, they are usually looking for more than transactions.

Some may want a sounding board for an idea that they have. Others may

want an opinion on strategy from a person outside of their organization.

Still others may be looking for a referral to another professional resource.

No matter what their reason is, these companies all have one thing in

common: they want to connect with a person they can trust.

Many commercial clients come to Washington Trust through a referral

from an attorney, accountant, or professional peer, or through an existing

relationship with a commercial lender who has now become part of the

Washington Trust team. Amid the recent consolidation of the banking

industry in our region, Washington Trust’s commercial lending team

continues to distinguish itself through its experience, accessibility, and

commitment to outstanding client service.

John Regan
Vice President and Team Leader

Commercial Lending

We are a

“

relationship-oriented bank.

In commercial lending, that

means we make individualized

While attractive terms and innovative structure get us in the door with

decisions. If there is a company

clients, service is what keeps them with us. Knowledgeable, personalized

service nurtures relationships, and in this area, Washington Trust excels.

More than one commercial client has said to us that they only heard from

their previous bank when something went wrong. They soon discovered

that business as usual is different at Washington Trust. They have a

relationship with a local banking professional who knows and cares about

their business, and is easy to communicate with – by phone, email,

and/or in person – whenever the need arises. Local decision-making

we believe in that needs a deal

structured in a particular way,

we have the flexibility and

willingness to think outside of

the box for them.

”

Dominion Diagnostics is a rapidly growing national medical laboratory, offering innovative clinical pharmacological

and toxicological testing and support services to healthcare providers in a variety of fields. Viewing the progress on their

latest facility expansion above (L to R) are Frank Fornari, Chief Executive Officer; Gwen Bauer, Chief Medical Officer;

Stephen Jordan, Chief Operating Officer; and David Siwicki, President.

We view Washington Trust as our partner

as we grow our business. Their counsel is

“

extremely important to Dominion.

– Stephen Jordan

Chief Operating Officer
Dominion Diagnostics

”

Washington Trust Bancorp, Inc., 2006 Annual Report

allows us to be more flexible and responsive than our competitors. In

fact, it is not unusual for our Chairman or President to visit prospects

and customers to discuss their needs and gain a better understanding

of their business.

Washington Trust connects companies with considerable resources.

Our capabilities include multi-million dollar financing and lines of

credit, all types of commercial loans, asset-based financing, loan

participations and syndications, and a comprehensive suite of cash

management services. This offering will be augmented in 2007 with

the introduction of our remote deposit capture service, providing our

commercial clients increased convenience and enabling us to serve a

broader customer base.

Awareness of Washington Trust as a major regional player in commercial

lending and commercial real estate is growing steadily. We were pleased

to open our new commercial lending office in the heart of Providence’s

financial district in December 2006, and continue to expand our

commercial real estate practice throughout New England and New York.

Keeping Banking Personal

It is a paradox of our times: as people embrace technology to facilitate

all aspects of their financial lives, they also crave human interaction,

especially when making important financial transactions. Washington

Trust has incorporated technology as an essential part of our overall

relationship with customers, but never at the expense of personalized,

One of the fastest-growing companies in America, Carousel Industries is a communication systems integrator and reseller that

specializes in the design, implementation, and support of strategic integrated communication solutions. Pictured above (L to R)

are Jeff Gardner, Chief Executive Officer, and Michael Vickers, President.

“

At the end of the day, I know Washington Trust

will do the right thing for Carousel.

– Jeff Gardner

Chief Executive Officer
Carousel Industries

”

Jennifer Dantu
Merchant Sales Representative

We take the time

“

to get to know a customer’s

business. That’s where

long-term relationships

begin – with a genuine

understanding of who they are

and what they are

trying to accomplish.

”

Washington Trust Bancorp, Inc., 2006 Annual Report

one-to-one service. That is our pedigree. It is also the source of

significant competitive advantage.

At the retail level, online banking, Internet loan applications, and ATMs

all make banking more convenient for customers. But how we truly

differentiate ourselves is by adding value with advice that enables people

to manage their money intelligently and simplify their lives. Helpful

everyday interactions earn us loyalty as well as new business, as customers

come to trust our counsel and recommend us to their friends.

A new product that underscores our role as trusted advisor is reverse

mortgages, which we introduced to the market in 2006. This innovative

loan is designed for homeowners, age 62 or older, who wish to maintain

ownership of their home, but face escalating expenses that make it all but

impossible to do so. A reverse mortgage enables seniors to convert their

home equity into cash while living at home for as long as they choose.

P. Schurman Contractors builds architecturally designed, high-end residences, additions, and renovations. Since 1975,

As with any new product, reverse mortgages require significant education

the company has constructed some of the most unique homes in South County, Rhode Island. Pictured above in their

and explanation before a customer decides to move forward. Our success

home are Paul and Barbara Schurman.

“

We love the personal touch that we get with

Washington Trust. It’s a bank that shows a personal

interest in and respect for its customers.

– Paul and Barbara Schurman
P. Schurman Contractors

”

with introducing this innovative product is directly related to the trust we

have earned with our customers, their families, and our professional peers.

At times, being a trusted advisor means telling people what not to do.

We embrace innovation when it will benefit our customers. However,

we do not recommend products that we feel create excessive risk.

When they are not in the customer’s best interest, it is part of our job

to explain why.

Lori Dufficy
Vice President, Market Manager

The true value that

we provide is found in the

“

various pieces of advice

that we give to people

and businesses each day.

They trust us to help them

manage their money and

achieve their goals.

”

W e

M a

e m e

Washington Trust Bancorp, Inc., 2006 Annual Report

The people at Washington Trust have what it takes to be a trusted

advisor: knowledge, experience, and a commitment to doing what is

best for our customers.

Building Bridges

When people turn to Washington Trust, they are often looking to go

from one place to another. A business wants to expand operations to

new markets. Grandparents want to go from generating wealth to passing

it on to their heirs. A young couple wants to go from dreaming about a

first home to purchasing it. The trusted advisors at Washington Trust

provide the bridge that enables people to get to where they want to go.

Nowhere is this bridge-building more evident than in our wealth

management group, where our advisors help clients navigate the gap

Gerald Fogarty
Managing Director

Washington Trust Investors

“

When people turn to us,

sure, it’s about money,

between their financial resources and their life goals. In most cases, we

but it’s really about something

I want to preserve my wealth for my

a secure retirement, setting up a trust fund for a special-needs child, or

are dealing with an individual’s or institution’s financial lifeblood. Our

job is to help our client achieve their mission, whatever it may be – living

building a non-profit organization’s endowment. When these are the

“

children and grandchildren. Washington Trust

took the time to get to know what’s important

to me, and it shows every time they make

stakes, nothing less than the most trusted advisor will do.

a recommendation.

– Wealth Management Client

”

Our wealth management group begins by building a personal relationship

with clients while helping them articulate their needs and hopes for

much bigger than that.

They have a mission – to

provide for their heirs,

to fund a cause they believe in,

to set up an endowment.

It is a privilege to help

individuals and institutions

themselves, their families, community, and career. By thoroughly under-

achieve their life goals.

standing a client’s goals through the planning process, we can develop

”

W e

M a

e m e

Washington Trust Bancorp, Inc., 2006 Annual Report

effective strategies to achieve them. The group meets each client’s

unique needs with a comprehensive set of wealth management services.

Recommendations are built upon our commitment to exceptional

service and financial guidance, combined with disciplined investment

and fiduciary services.

Clients quickly discover that our wealth management group possesses

unique qualifications to be their trusted advisor. We combine world-class

capabilities with a full range of investment options that are delivered

locally by people our clients know and trust. Our larger competitors

have resources, certainly, but they cannot provide local, personalized

service. Imagine having your life savings to invest and being routed to

a call center halfway across the country to speak to a person you will

never see. Conversely, the local broker, boutique, or financial planner

may offer personalized service, but he or she cannot connect clients

with the most sought-after asset managers, mutual funds, and separately

managed accounts. Washington Trust’s wealth management group

gives clients the best of both worlds – the very best investment options

Founded in 1856, Tockwotton Home is a non-profit assisted living residence and nursing home located in Providence.

Above (L to R), Robert Martin, Assisted Living Administrator, and Kevin McKay, Executive Director, discuss plans for the

and expert service that’s local and personalized.

construction of their new location in 2007.

“

Washington Trust knows our organization.

When the mission is so important, you really have

to trust the people who are advising you.

”

– Kevin McKay

Executive Director

Tockwotton Home

The significant achievements of our wealth management group in

2006 are a direct result of the trust that our advisors have earned

from our clients.

Russel Burgess
Vice President and Investment Officer

“

It really goes

way beyond our

investment product.

Our products are a means

to help people achieve

their goals, but it’s the

relationship that they

truly value.

”

Y e

e w

Washington Trust Bancorp, Inc., 2006 Annual Report

New Cranston Branch

Heart Walk

Construction progresses on our newest

Washington Trust employees raised funds

branch, which is slated to open in May 2007

for the American Heart Association by

on Oaklawn Avenue.

participating in the Rhode Island branch’s

Heart Walk in September.

Peanut Butter Drive

Our sixth annual P.B. Xpress peanut butter

Get Smart About Credit Day

drive collected a record 11 tons of peanut

Washington Trust employees visited local

butter for the Rhode Island Community

high schools to teach young adults about

Food Bank.

Best of Rhode Island

the importance of establishing and

maintaining good credit.

We were proud to salute 33 of our business

New Commercial Lending Office

clients who were featured in Rhode Island

In December, our commercial lending team

Monthly’s Best of Rhode Island™ issue.

relocated to its new office in the heart of

Providence’s financial district.

Washington Trust Stars

Throughout the year, the Washington Trust

Domestic Violence Awareness Month

Stars made appearances at community

More than 400 cell phones were collected

events around the region.

at our branches in October to benefit the

Domestic Violence Resource Center of

Worksite Health Award

South County.

Washington Trust received the Outstanding

Award by the Worksite Wellness Council of

Free Community Shred Day™

Rhode Island.

We offered people a safe and secure way to

prevent identity theft with a free Community

“

In 2006, Washington Trust continued to gain

momentum in all aspects of its business and

community outreach.

”

– John C. Warren

Chairman and Chief Executive Officer

Rebuilding Together

Shred Day™ in November.

In April, a team of Washington Trust

employees repaired a home in Providence,

Business Leaders Forum

Rhode Island as part of a Rebuilding

Our September forum on Rhode Island’s

Together project.

economic and business environment attracted

business leaders from throughout the region

and featured New England Patriots great

Steve Grogan as guest motivational speaker.

e m e

Washington Trust Bancorp, Inc. and Subsidiaries Consolidated Balance Sheets

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

Washington Trust Bancorp, Inc., 2006 Annual Report

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 $525,966 in 2006

and $620,638 in 2005

Held to maturity, at cost; fair value $175,369 in 2006 and $162,756 in 2005
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, net
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
Junior subordinated debentures
Other borrowings
Accrued expenses and other liabilities

Total liabilities

Commitments and contingencies
Shareholders’ Equity:
Common stock of $.0625 par value; authorized 30,000,000 shares in 2006

and 2005; issued 13,492,110 shares in 2006 and 13,372,295 shares in 2005

Paid-in capital
Retained earnings
Accumulated other comprehensive loss
Treasury stock, at cost; 62,432 shares in 2006 and 10,519 shares in 2005

Total shareholders’ equity
Total liabilities and shareholders’ equity

2006

2005

$ 54,337
17,572
2,148

526,396
177,455
703,851
28,727

587,397
588,671
283,918
1,459,986
18,894
1,441,092
24,307
11,268
39,770
44,558
12,816
18,719
$2,399,165

$186,533
175,479
286,998
205,998
822,989
1,677,997
2,556
474,561
22,681
14,684
33,630
2,226,109

843
35,893
141,548
(3,515)
(1,713)
173,056
$2,399,165

$ 48,997
17,166
439

619,234
164,707
783,941
34,966

554,734
582,708
264,466
1,401,908
17,918
1,383,990
23,737
10,594
30,360
39,963
14,409
13,441
$2,402,003

$196,102
178,677
223,255
212,499
828,725
1,639,258
2,408
545,323
22,681
9,774
24,113
2,243,557

836
32,778
126,735
(1,653)
(250)
158,446
$2,402,003

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

Interest and fees on loans
Interest on securities

Taxable
Nontaxable

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
Junior subordinated debentures
Other
Total interest expense

Net interest income
Provision for loan losses
Net interest income after provision for loan losses
Noninterest income:

Wealth management services:

Trust and investment advisory fees
Mutual fund fees
Financial planning, commissions and other service fees

Wealth management services
Service charges on deposit accounts
Merchant processing fees
Income from bank-owned life insurance
Net gains on loan sales and commissions on loans originated for others
Net realized gains on securities
Other income
Total noninterest income

Noninterest expense:

Salaries and employee benefits
Net occupancy
Equipment
Merchant processing costs
Outsourced services
Advertising and promotion
Legal, audit and professional fees
Amortization of intangibles
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

2006

2005

2004

$ 92,190

$ 78,931

$ 60,828

33,763
1,618
2,842
721
131,134

46,982
20,916
1,352
410
69,660
61,474
1,200
60,274

19,099
4,665
2,616
26,380
4,915
6,208
1,410
1,423
443
1,404
42,183

38,698
3,888
3,370
5,257
2,009
1,894
1,637
1,593
6,989
65,335
37,122
12,091
$ 25,031

13,424.1
13,723.2

$1.86
$1.82
$.76

32,934
886
2,491
451
115,693

32,186
22,233
458
160
55,037
60,656
1,200
59,456

14,407
1,336
919
16,662
4,502
5,203
1,110
1,679
357
1,433
30,946

32,133
3,460
3,456
4,319
1,723
1,977
1,900
852
6,573
56,393
34,009
10,985
$ 23,024

13,315.2
13,626.7

$1.73
$1.69
$.72

33,125
662
2,105
133
96,853

22,197
20,153
-
62
42,412
54,441
610
53,831

12,385
-
663
13,048
4,483
4,259
1,175
1,901
248
1,791
26,905

28,816
3,201
3,267
3,534
1,616
1,748
1,535
644
6,012
50,373
30,363
9,534
$ 20,829

13,227.8
13,542.7

$1.57
$1.54
$.68

Refer to Washington Trust Bancorp, Inc.’s 2006 Annual Report on Form 10-K for a complete set of consolidated financial statements.

e m e

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

Report of Independent Registered Public Accounting Firm

(Dollars and shares in thousands)

Common
Shares
Outstanding

Common
Stock

Paid-in
Capital

Retained
Earnings

Accumulated
Other
Comprehensive
Income (Loss)

Treasury
Stock

Total

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

Washington Trust Bancorp, Inc., 2006 Annual Report

Balance at January 1, 2004
Net income for 2004
Unrealized gains on securities,

net of $383 income tax expense
Reclassification adjustments for net

realized gains included in net income,

net of $87 income tax expense
Minimum pension liability adjustment,

net of $5 income tax benefit

Comprehensive income
Cash dividends declared
Share-based compensation
Deferred compensation plan
Exercise of stock options and

related tax benefit

Shares repurchased
Balance at December 31, 2004

Net income for 2005
Unrealized losses on securities,

net of $4,443 income tax benefit
Reclassification adjustments for net

realized gains included in net income,
net of $125 income tax expense
Minimum pension liability adjustment,

net of $160 income tax benefit

Comprehensive income
Cash dividends declared
Share-based compensation
Deferred compensation plan
Exercise of stock options and

related tax benefit

13,195

$825

$29,846

$101,492
20,829

$6,101

$(209)

1,006

(161)

(9)

(9,007)

135

(1)

80
(5)
13,269

1,000

$830

$30,981

$113,314

$6,937

125
(125)
$(210)

1,130
(125)
$151,852

23,024

(9,603)

(8,061)

(232)

(297)

(1)

372
7

814

(40)

Shares issued – dividend reinvestment

plan and other

Balance at December 31, 2005

28
13,362

2
$836

604
$32,778

Net income for 2006
Unrealized gains on securities, net
of $843 income tax expense

Reclassification adjustments for net

realized gains included in net income,
net of $322 income tax expense
Minimum pension liability adjustment,

net of $33 income tax expense

Comprehensive income
Adjustment to initially apply SFAS No. 158,

net of $1,741 income tax benefit

$126,735

$(1,653)

$(250)

25,031

1,432

(121)

(3,234)

Cash dividends declared
Share-based compensation
Deferred compensation plan
Exercise of stock options and

related tax benefit

Shares issued – dividend reinvestment plan
Shares repurchased
Balance at December 31, 2006

(10,218)

694
7

1,200
1,214

5
2

$843

$35,893

$141,548

$(3,515)

(144)

(1,410)
$(1,713)

(5)

77
46
(50)
13,430

Refer to Washington Trust Bancorp, Inc.’s 2006 Annual Report on Form 10-K for a complete set of consolidated financial statements.

$138,055
20,829

1,006

(161)

(9)
21,665
(9,007)
135
(1)

23,024

(8,061)

(232)

(297)
14,434
(9,603)
372
(33)

818

606
$158,446

25,031

1,432

(121)

61
26,403

(3,234)
(10,218)
694
(137)

1,296
1,216
(1,410)
$173,056

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 Subsidiaries as of December 31, 2006
and 2005, and the related consolidated statements of income, changes in shareholders’ equity, and cash flows
(not presented herein) for each of the years in the three-year period ended December 31, 2006; and in our report
dated March 12, 2007, 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 12, 2007

r m a

Stock Transfer and Dividend Disbursing Agent

American Stock Transfer & Trust Company (AST), 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. AST 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.

For information, contact AST on the toll-free Shareholder Information Line, 800-852-0354, via the secure AST
Shareholder Services website, http://www.amstock.com, or by writing to: American Stock Transfer, 59 Maiden Lane,
Plaza Level, New York, NY 10038.

To receive a duplicate copy of your 2006 IRS Form 1099, please visit http://www.amstock.com or call 401-348-1566.

Copies of our most recent annual and quarterly reports and a copy of our 2006 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
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.

D i

Washington Trust Bancorp, Inc., 2006 Annual Report

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., Distinguished University Professor 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.

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

Galan G. Daukas, Executive Vice President, Wealth Management

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

The Washington Trust Company Directors’ Advisory Council

Alcino G. Almeida, 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

The Washington Trust Company

Senior Management

John C. Warren, Chairman and Chief Executive Officer

John F. Treanor, President and Chief Operating Officer

Dennis L. Algiere, Senior Vice President, Chief Compliance Officer and Director of Community Affairs

Carl M. Amaral, Senior Vice President, Branch Sales and Service

Stephen M. Bessette, Executive Vice President, Retail Lending

Vernon F. Bliven, Senior Vice President, Human Resources

Galan G. Daukas, Executive Vice President, Wealth Management

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

Elizabeth B. Eckel, Senior Vice President, Marketing

Gerald J. Fogarty, Jr., Managing Director, Washington Trust Investors

Philip L. Friend, Senior Vice President, Retail Lending

William D. Gibson, Senior Vice President, Risk Management

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, Washington Trust Investors

Rogean B. Makowski, Senior Vice President, Wealth Management Client Services

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., Executive Vice President, Sales, Service 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

Weston Financial Group, Inc.

Galan G. Daukas, Executive Managing Director

Douglas A. Biggar, Managing Director

Wayne M. Grzecki, Managing Director

I. Richard Horowitz, Managing Director

Joseph Robbat, Jr., Managing Director

Robert I. Stock, Managing Director

Ronald A. Sugameli, Managing Director

W a

Notes:

Washington Trust Bancorp, Inc., 2006 Annual Report

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

OPENING SPRING 2007
Oaklawn Avenue Office
1203 Oaklawn Avenue
Cranston, RI 02920
401-732-0049

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 Commercial
Lending Office
10 Weybosset Street, Suite 100
Providence, RI 02903
401-331-5090

Providence Wealth
Management Offices
66-70 South Main Street
Providence, RI 02903
401-861-8440
401-331-6650

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

Massachusetts Office

WELLESLEY
Weston Financial Group
Wellesley Office Park
40 William Street
Wellesley, MA 02481
781-235-7055

Account
Information Center

To speak with a customer service
representative, call 401-348-1200
or toll-free 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
800-226-5877.

Website

Current company and shareholder
information available at
www.washtrust.com.

23 Broad Street, Westerly, Rhode Island 02891 www.washtrust.com