Edgar Filing: WASHINGTON TRUST BANCORP INC

form10-qa20070331.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q/A

(Amendment No. 1 to)

(Mark One)

x	Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended MARCH 31, 2007 or

o	Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from ______ to ______.

Commission file number: 000-13091

WASHINGTONTRUSTBANCORP,INC.

(Exact name of registrant as specified in its charter)

RHODE ISLAND		05-0404671
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

23 BROAD STREET
WESTERLY, RHODE ISLAND		02891
(Address of principal executive offices)		(Zip Code)

(401) 348-1200

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

x Yes o No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o Accelerated filer x Non-accelerated filer o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

o Yes x No

The number of shares of common stock of the registrant outstanding as of May 3, 2007 was 13,356,244.

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EXPLANATORY NOTE

We are filing this Amendment No. 1 to our Quarterly Report on Form 10-Q/A for the quarter ended March 31, 2007, originally filed with the Securities and Exchange Commission (the “SEC”) on May 9, 2007 (the “Original Filing”), to add a subsequent event footnote to disclose certain second quarter 2007 investment securities transactions in the Condensed Notes to Consolidated Financial Statements in Item 1 of Part I of this Form 10-Q/A.

In the Condensed Notes to Consolidated Financial Statements in Item 1 Part I, we added the following new Note 16:

“Based on our assessment of the provisions of Statement of Financial Accounting Standards No. 159, “The Fair Value Option for Financial Assets and Liabilities” (“SFAS No. 159”), on April 12, 2007 we decided to implement early adoption of SFAS No. 159. In connection with this, we selected the fair value option for certain U.S. Government sponsored agency and mortgage-backed securities with lower coupons and slower prepayment characteristics in the held to maturity portfolio totaling approximately $61.9 million. A portfolio restructuring plan was also undertaken to reduce interest rate risk and improve net interest margin, which included the sale of these securities. On Friday April 13, 2007 we executed sale trades for these held to maturity securities. At the time of the sales transactions the historical amortized cost basis of the sold securities exceeded the total sales price by $1.7 million. On Monday April 16, 2007 additional information became available regarding clarifications of the interpretation of the application of SFAS No. 159 by applicable regulatory and accounting industry bodies that led us to conclude that the application of SFAS No. 159 to our transactions might be inconsistent with the intent and spirit of SFAS No. 159. Consequently, we decided not to early-adopt SFAS No. 159.

As a result, in April 2007 we recognized a realized securities loss of $1.7 million and the remaining held to maturity portfolio was reclassified to the available for sale category. This reclassification has been recognized as of April 13, 2007. The Corporation will not be able to classify securities in the held to maturity category for a period of two years from the April 13, 2007 sales date as a result of this action.”

We have also added a cross-reference to this Note 16 in Note 2 to the Consolidated Financial Statements.

We have not modified or updated disclosures presented in the Original Filing in this Form 10-Q/A. Accordingly, this Form 10-Q/A does not reflect events occurring after the filing of the Original Filing on May 9, 2007 or modify or update those disclosures affected by subsequent events or discoveries. Information not affected by this disclosure is unchanged and reflects the disclosures made at the time of the Original Filing on May 9, 2007. Accordingly, this Form 10-Q/A should be read in conjunction with our filings that we have made with the SEC subsequent to the filing of the Original Filing, which include our Form 10-Q for the quarterly period ended June 30, 2007, as amended, and our Current Reports on Form 8-K.

We have only amended disclosures presented in the Original Filing as required to reflect the matters described above and accordingly, have amended only the following items:

·	Part I—Item 1—Financial Statements

·	Part II—Item 6—Exhibits

The other items of the Original Filing have not been amended and, accordingly, have not been repeated in this Form 10-Q/A.

In addition, in accordance with applicable SEC rules, this Form 10-Q/A includes updated certifications from our chief executive officer and chief financial officer as Exhibits 31.1, 31.2, 32.1 and 32.2.

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FORM 10-Q/A
WASHINGTON TRUST BANCORP, INC. AND SUBSIDIARIES
For the Quarter Ended March 31, 2007

TABLE OF CONTENTS
		Page
		Number

PART I. Financial Information

Item 1. Financial Statements

Consolidated Balance Sheets
	March 31, 2007 and December 31, 2006	3

Consolidated Statements of Income
	Three Months Ended March 31, 2007 and 2006	4

Consolidated Statements of Cash Flows
	Three Months Ended March 31, 2007 and 2006	5

Condensed Notes to Consolidated Financial Statements		6

Report of Independent Registered Public Accounting Firm		19

PART II. Other Information

Item 6. Exhibits		20

Signatures		21

Exhibit 15.1 Letter re: Unaudited Interim Financial Information

Exhibit 31.1 Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

Exhibit 31.2 Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

Exhibit 31.2 Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
WASHINGTON TRUST BANCORP, INC. AND SUBSIDIARIES	(Dollars in thousands)

CONSOLIDATED BALANCE SHEETS	Unaudited
	March 31,			December 31,
	2007			2006
Assets:
Cash and due from banks	$	30,058		$	54,337
Federal funds sold		29,625			16,425
Other short term investments		683			1,147
Mortgage loans held for sale		2,122			2,148
Securities:
Available for sale, at fair value; amortized cost $540,650 in 2007 and $525,966 in 2006		541,942			526,396
Held to maturity, at cost; fair value $162,974 in 2007 and $175,369 in 2006		164,464			177,455
Total securities		706,406			703,851
Federal Home Loan Bank stock, at cost		28,727			28,727
Loans:
Commercial and other		599,170			587,397
Residential real estate		589,565			588,671
Consumer		281,465			283,918
Total loans		1,470,200			1,459,986
Less allowance for loan losses		19,360			18,894
Net loans		1,450,840			1,441,092
Premises and equipment, net		24,603			24,307
Accrued interest receivable		11,572			11,268
Investment in bank-owned life insurance		40,161			39,770
Goodwill		44,558			44,558
Identifiable intangible assets, net		12,448			12,816
Other assets		18,159			18,719
Total assets	$	2,399,962		$	2,399,165
Liabilities:
Deposits:
Demand deposits	$	175,010		$	186,533
NOW accounts		176,006			175,479
Money market accounts		290,273			286,998
Savings accounts		204,465			205,998
Time deposits		837,838			822,989
Total deposits		1,683,592			1,677,997
Dividends payable		2,682			2,556
Federal Home Loan Bank advances		457,145			474,561
Junior subordinated debentures		22,681			22,681
Other borrowings		25,792			14,684
Accrued expenses and other liabilities		32,543			33,630
Total liabilities		2,224,435			2,226,109
Shareholders’ Equity:
Common stock of $.0625 par value; authorized 30,000,000 shares;
issued 13,492,110 in 2007 and 2006		843			843
Paid-in capital		35,697			35,893
Retained earnings		144,841			141,548
Accumulated other comprehensive loss		(2,876	)		(3,515	)
Treasury stock, at cost; 109,575 shares in 2007 and 62,432 shares in 2006		(2,978	)		(1,713	)
Total shareholders’ equity		175,527			173,056
Total liabilities and shareholders’ equity	$	2,399,962		$	2,399,165

The accompanying notes are an integral part of these consolidated financial statements.

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WASHINGTON TRUST BANCORP, INC. AND SUBSIDIARIES	(Dollars and shares in thousands,
CONSOLIDATED STATEMENTS OF INCOME		except per share amounts)

		Unaudited
Three months ended March 31,		2007		2006
Interest income:
Interest and fees on loans		$	23,934	$	21,897
Interest on securities:
Taxable			7,792		8,412
Nontaxable			668		328
Dividends on corporate stock and Federal Home Loan Bank stock			718		677
Interest on federal funds sold and other short-term investments			191		115
Total interest income			33,303		31,429
Interest expense:
Deposits			12,977		10,238
Federal Home Loan Bank advances			4,968		5,359
Junior subordinated debentures			338		338
Other			150		79
Total interest expense			18,433		16,014
Net interest income			14,870		15,415
Provision for loan losses			300		300
Net interest income after provision for loan losses			14,570		15,115
Noninterest income:
Wealth management services
Trust and investment advisory fees			5,038		4,627
Mutual fund fees			1,262		1,130
Financial planning, commissions and other service fees			570		683
Wealth management services			6,870		6,440
Service charges on deposit accounts			1,125		1,119
Merchant processing fees			1,204		1,047
Income from bank-owned life insurance			391		279
Net gains on loan sales and commissions on loans originated for others			264		276
Net realized gains on sales of securities			1,036		59
Other income			358		300
Total noninterest income			11,248		9,520
Noninterest expense:
Salaries and employee benefits			9,812		9,619
Net occupancy			1,017		954
Equipment			832		799
Merchant processing costs			1,019		887
Outsourced services			519		518
Advertising and promotion			429		437
Legal, audit and professional fees			450		376
Amortization of intangibles			368		405
Debt prepayment penalties			1,067		–
Other			1,596		1,709
Total noninterest expense			17,109		15,704
Income before income taxes			8,709		8,931
Income tax expense			2,734		2,858
Net income		$	5,975	$	6,073

Weighted average shares outstanding - basic			13,412.1		13,386.8
Weighted average shares outstanding - diluted			13,723.0		13,698.6
Per share information: Basic earnings per share		$	0.45	$	0.45
Diluted earnings per share		$	0.44	$	0.44
Cash dividends declared per share		$	0.20	$	0.19

The accompanying notes are an integral part of these consolidated financial statements.

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WASHINGTON TRUST BANCORP, INC. AND SUBSIDIARIES	(Dollars in thousands)
CONSOLIDATED STATEMENTS OF CASH FLOWS
		(Unaudited)
Three months ended March 31,		2007			2006
Cash flows from operating activities:
Net income		$	5,975		$	6,073
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses			300			300
Depreciation of premises and equipment			728			729
Loss on disposal of premises and equipment			21			–
Net amortization of premium and discount			204			416
Net amortization of intangibles			368			405
Share-based compensation			171			181
Earnings from bank-owned life insurance			(391	)		(279	)
Net gains on loan sales			(264	)		(276	)
Net realized gains on sales of securities			(1,036	)		(59	)
Proceeds from sales of loans			11,364			6,819
Loans originated for sale			(11,201	)		(8,364	)
Increase in accrued interest receivable, excluding purchased interest			(295	)		(567	)
Decrease (increase) in other assets			266			(681	)
(Decrease) increase in accrued expenses and other liabilities			(1,018	)		761
Other, net			–			6
Net cash provided by operating activities			5,192			5,464
Cash flows from investing activities:
Purchases of:	Mortgage-backed securities available for sale		(17,065	)		(12,851	)
	Other investment securities available for sale		(15,873	)		(18,608	)
	Other investment securities held to maturity		(10,302	)		(6,141	)
Proceeds from sale of:	Other investment securities available for sale		2,001			193
Maturities and principal payments of:	Mortgage-backed securities available for sale		14,177			23,787
	Other investment securities available for sale		2,982			–
	Mortgage-backed securities held to maturity		2,980			4,291
	Other investment securities held to maturity		20,265			1,335
Net increase in loans			(8,339	)		(349	)
Purchases of loans, including purchased interest			(1,630	)		(16,616	)
Purchases of premises and equipment			(1,045	)		(1,098	)
Net cash used in investing activities			(11,849	)		(26,057	)
Cash flows from financing activities:
Net increase in deposits			5,595			21,363
Net increase (decrease) in other borrowings			11,108			(3,666	)
Proceeds from Federal Home Loan Bank advances			170,400			160,204
Repayment of Federal Home Loan Bank advances			(187,805	)		(149,463	)
Purchases of treasury stock, including deferred compensation plan activity			(1,930	)		(69	)
Proceeds from the issuance of common stock under dividend reinvestment plan			–			313
Proceeds from the exercise of share options			113			530
Tax benefit from share option exercises			189			201
Cash dividends paid			(2,556	)		(2,408	)
Net cash (used in) provided by financing activities			(4,886	)		27,005
Net (decrease) increase in cash and cash equivalents			(11,543	)		6,412
Cash and cash equivalents at beginning of year			71,909			66,163
Cash and cash equivalents at end of period		$	60,366		$	72,575

Noncash Investing and Financing Activities: Loans charged off		$	25		$	38
Supplemental Disclosures:	Interest payments		18,393			14,727
	Income tax payments		125			240

The accompanying notes are an integral part of these consolidated financial statements.

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WASHINGTON TRUST BANCORP INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

General

Washington Trust Bancorp, Inc. (the “Bancorp”) is a publicly-owned registered bank holding company and financial holding company. The Bancorp owns all of the outstanding common stock of The Washington Trust Company (the “Bank”), a Rhode Island chartered commercial bank founded in 1800. Through its subsidiaries, the Bancorp offers a complete product line of financial services to individuals and businesses including commercial, residential and consumer lending, retail and commercial deposit products, and wealth management services through its branch offices in Rhode Island, Massachusetts and southeastern Connecticut, ATMs, and its Internet web site (www.washtrust.com).

(1) Basis of Presentation

The consolidated financial statements include the accounts of the Bancorp and its subsidiaries (collectively, the “Corporation” or “Washington Trust”). All significant intercompany transactions have been eliminated. Certain prior year amounts have been reclassified to conform to the current year classification. Such reclassifications have no effect on previously reported net income or shareholders’ equity.

The accounting and reporting policies of the Corporation conform to U.S. generally accepted accounting principles (“GAAP”) and to general practices of the banking industry. In preparing the financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the balance sheet and revenues and expenses for the period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to change are the determination of the allowance for loan losses and the review of goodwill and other intangible assets for impairment.

In the opinion of management, the accompanying consolidated financial statements reflect all adjustments (consisting of normal recurring adjustments) and disclosures necessary to present fairly the Corporation’s financial position as of March 31, 2007 and December 31, 2006, respectively, and the results of operations and cash flows for the interim periods presented. Interim results are not necessarily reflective of the results of the entire year. The unaudited consolidated financial statements of the Corporation presented herein have been prepared pursuant to the rules of the Securities and Exchange Commission (“SEC”) for quarterly reports on Form 10-Q and do not include all of the information and note disclosures required by GAAP. The accompanying consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in Washington Trust’s Annual Report on Form 10-K for the year ended December 31, 2006.

(2) New Accounting Pronouncements

In February 2006, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 155, “Accounting for Certain Hybrid Financial Instruments - an amendment of FASB Statements No. 133 and 140.” This Statement eliminates the exemption from applying SFAS No. 133 to interests in securitized financial assets so that similar instruments are accounted for similarly regardless of the form of the instruments. This Statement also allows a preparer to elect fair value measurement at acquisition, at issuance, or when a previously recognized financial instrument is subject to a remeasurement event, on an instrument-by-instrument basis, in cases in which a derivative would otherwise have to be bifurcated. SFAS No. 155 is effective for all financial instruments acquired or issued after the beginning of an entity’s first fiscal year that begins after September 15, 2006. Provisions of this Statement may be applied to instruments that an entity holds at the date of adoption on an instrument-by-instrument basis. Prior periods should not be restated. The adoption of SFAS No. 155 did not have a material impact on the Corporation’s financial position or results of operations.

In March 2006, the FASB issued SFAS No. 156, “Accounting for Servicing of Financial Assets – an amendment of FASB Statement No. 140.” This Statement requires that all separately recognized servicing assets and servicing liabilities be initially measured at fair value. SFAS No. 156 permits, but does not require, the subsequent measurement of servicing assets and servicing liabilities at fair value. An entity that used derivative instruments to mitigate the risks inherent in servicing assets and servicing liabilities is required to account for those derivative instruments at fair value. SFAS No. 156 is effective as of the beginning of the first fiscal year that begins after September 15, 2006. The adoption of SFAS No. 156 did not have a material impact on the Corporation’s financial position or results of operations.

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WASHINGTON TRUST BANCORP INC. AND SUBSIDIARIES	(Continued)
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Effective January 1, 2007, the Corporation adopted the provisions of FASB Interpretation No. 48, "Accounting for Uncertainty in Income Taxes - An Interpretation of FASB Statement No. 109" ("FIN 48"). FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise's financial statements in accordance with FASB Statement No. 109, "Accounting for Income Taxes." FIN 48 also prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. In addition, FIN 48 provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. The adoption of FIN 48 did not have a material impact on the Corporation’s financial position or results of operations.

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements”. This Statement defines fair value, establishes a framework for measuring fair value and expands disclosures of fair value measurements. SFAS No. 157 applies to the accounting principles that currently use fair value measurement, and does not require any new fair value measurements. The expanded disclosures focus on the inputs used to measure fair value as well as the effect of the fair value measurements on earnings. This Statement is effective as of the beginning of the first fiscal year beginning after November 15, 2007 and interim periods within that fiscal year. The Corporation believes the adoption of SFAS No. 157 will not have a material impact on the Corporation’s financial position or results of operations.

In September 2006, the FASB issued SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Post Retirement Plans (an amendment of FASB Statements No. 87, 88, 106 and 132R)”. The recognition and disclosure provisions of SFAS No. 158 were adopted by the Corporation for the year ended December 31, 2006. Upon adoption, the funded status of an employer’s postretirement benefit plan was recognized in the statement of financial position and the changes in funded status of the defined benefit plan, including actuarial gains and losses and prior service costs and credits were recognized in comprehensive income. The requirement to measure the plan’ assets and obligations as of the employers fiscal year end is effective for fiscal years ending after December 15, 2008. The Corporation is currently evaluating the impact the measurement date provisions of SFAS No. 158 will have on its consolidated financial statements.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Liabilities – Including an amendment to FASB No. 115”. This Statement permits entities to choose to measure eligible items at fair value at specified election dates. Unrealized gains and losses on items for which the fair value option has been elected are reported in earnings at each subsequent reporting date. The fair value option (i) may be applied instrument-by-instrument with certain exceptions, (ii) is irrevocable (unless a new election date occurs) and (iii) is applied only to entire instruments and not to portions of instruments. This Statement is effective as of the beginning of the first fiscal year that begins after November 15, 2007. Early adoption is permitted as of the beginning of a fiscal year that begins on or before November 15, 2007, provided the entity also elects to apply the provisions of SFAS No. 157, “Fair Value Instruments.” Retrospective application is allowed for early adopters, prohibited for others. The choice to adopt early must be made within 120 days of the beginning of the fiscal year of adoption, provided the entity has not yet issued financial statements. This Statement permits application to eligible items existing at the effective date (or early adoption date). The Corporation is currently evaluating the impact that SFAS No. 159 will have on its consolidated financial statements. See further discussion on SFAS No. 159 in Note 16.

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WASHINGTON TRUST BANCORP INC. AND SUBSIDIARIES	(Continued)
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(3) Securities

Securities available for sale are summarized as follows:

(Dollars in thousands)	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
March 31, 2007
U.S. Treasury obligations and obligations
of U.S. government-sponsored agencies	$	164,394	$	846	$	(551	)	$	164,689
Mortgage-backed securities		300,793		1,085		(4,189	)		297,689
Trust preferred securities		36,161		281		(151	)		36,291
Corporate bonds		24,983		81		(20	)		25,044
Corporate stocks		14,319		4,071		(161	)		18,229
Total		540,650		6,364		(5,072	)		541,942
December 31, 2006
U.S. Treasury obligations and obligations
of U.S. government-sponsored agencies		157,383		778		(876	)		157,285
Mortgage-backed securities		298,038		923		(5,174	)		293,787
Trust preferred securities		30,571		208		(205	)		30,574
Corporate bonds		24,998		83		(47	)		25,034
Corporate stocks		14,976		4,915		(175	)		19,716
Total	$	525,966	$	6,907	$	(6,477	)	$	526,396

Securities held to maturity are summarized as follows:

(Dollars in thousands)	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
March 31, 2007
U.S. Treasury obligations and obligations
of U.S. government-sponsored agencies	$	22,000	$	–	$	(246	)	$	21,754
Mortgage-backed securities		66,319		496		(1,351	)		65,464
States and political subdivisions		76,145		108		(497	)		75,756
Total		164,464		604		(2,094	)		162,974
December 31, 2006
U.S. Treasury obligations and obligations
of U.S. government-sponsored agencies		42,000		–		(422	)		41,578
Mortgage-backed securities		69,340		440		(1,604	)		68,176
States and political subdivisions		66,115		88		(588	)		65,615
Total	$	177,455	$	528	$	(2,614	)	$	175,369

Securities available for sale and held to maturity with a fair value of $555.2 million and $557.4 million were pledged in compliance with state regulations concerning trust powers and to secure Treasury Tax and Loan deposits, borrowings, and certain public deposits at March 31, 2007 and December 31, 2006, respectively. In addition, securities available for sale and held to maturity with a fair value of $9.3 million and $9.6 million were collateralized for the discount window at the Federal Reserve Bank at March 31, 2007 and December 31, 2006, respectively. There were no borrowings with the Federal Reserve Bank at either date. Securities available for sale with a fair value of $2.1 million were designated in a rabbi trust for a nonqualified retirement plan at March 31, 2007 and December 31, 2006. As of March 31, 2007, securities available for sale with a fair value of $20.4 million were pledged as collateral to secure securities sold under agreements to repurchase.

At March 31, 2007 and December 31, 2006, the available for sale and held to maturity securities portfolio included $200 thousand and $1.7 million of net pretax unrealized losses, respectively. Included in these net amounts were gross unrealized losses amounting to $7.2 million and $9.1 million at March 31, 2007 and December 31, 2006, respectively.

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WASHINGTON TRUST BANCORP INC. AND SUBSIDIARIES	(Continued)
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following tables summarize, for all securities in an unrealized loss position at March 31, 2007 and December 31, 2006, respectively, the aggregate fair value and gross unrealized loss by length of time those securities have been continuously in an unrealized loss position.

(Dollars in thousands)	Less than 12 Months						12 Months or Longer						Total
			Fair		Unrealized				Fair		Unrealized				Fair		Unrealized
At March 31, 2007		#	Value		Losses			#	Value		Losses			#	Value		Losses
U.S. Treasury obligations
and obligations of U.S. government-sponsored agencies		6	$	35,884	$	82		13	$	82,765	$	715		19	$	118,649	$	797
Mortgage-backed securities		10		27,705		74		69		230,984		5,466		79		258,689		5,540
States and
political subdivisions		62		49,347		343		12		6,758		154		74		56,105		497
Trust preferred securities		–		–		–		6		13,896		151		6		13,896		151
Corporate bonds		3		11,148		8		1		3,002		12		4		14,150		20
Subtotal, debt securities		81		124,084		507		101		337,405		6,498		182		461,489		7,005
Corporate stocks		5		5,834		107		4		1,505		54		9		7,339		161
Total temporarily
impaired securities		86	$	129,918	$	614		105	$	338,910	$	6,552		191	$	468,828	$	7,166

(Dollars in thousands)	Less than 12 Months						12 Months or Longer						Total
			Fair		Unrealized				Fair		Unrealized				Fair		Unrealized
At December 31, 2006		#	Value		Losses			#	Value		Losses			#	Value		Losses
U.S. Treasury obligations
and obligations of U.S. government-sponsored agencies		8	$	52,751	$	211		14	$	94,393	$	1,087		22	$	147,144	$	1,298
Mortgage-backed securities		7		20,620		122		69		240,457		6,656		76		261,077		6,778
States and
political subdivisions		61		45,948		419		12		6,747		169		73		52,695		588
Trust preferred securities		–		–		–		7		14,840		205		7		14,840		205
Corporate bonds		2		6,130		34		1		3,006		13		3		9,136		47
Subtotal, debt securities		78		125,449		786		103		359,443		8,130		181		484,892		8,916
Corporate stocks		5		5,823		110		4		1,494		65		9		7,317		175
Total temporarily
impaired securities		83	$	131,272	$	896		107	$	360,937	$	8,195		190	$	492,209	$	9,091

For those debt securities whose amortized cost exceeds fair value, the primary cause is related to interest rates. The majority of debt securities reported in an unrealized loss position at March 31, 2007 were purchased during 2005, 2004 and 2003, during which time interest rates were at or near historical lows. The Corporation believes that the nature and duration of impairment on its debt security holdings are primarily a function of interest rate movements and changes in investment spreads, and does not consider full repayment of principal on the reported debt obligations to be at risk. The Corporation has the ability and intent to hold these investments to full recovery of the cost basis. The debt securities in an unrealized loss position at March 31, 2007 consisted of 182 debt security holdings. The largest loss percentage of any single holding was 4.50% of its amortized cost.

Causes of conditions whereby the fair value of corporate stock equity securities is less than cost include the timing of purchases and changes in valuation specific to individual industries or issuers. The relationship between the level of market interest rates and the dividend rates paid on individual equity securities may also be a contributing factor. The Corporation believes that the nature and duration of impairment on its equity securities holdings are considered to be a function of general financial market movements and industry conditions. The equity securities in an unrealized loss position at March 31, 2007 consisted of 9 holdings of financial and commercial entities.

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WASHINGTON TRUST BANCORP INC. AND SUBSIDIARIES	(Continued)
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(4) Loan Portfolio

The following is a summary of loans:

(Dollars in thousands)	March 31, 2007					December 31, 2006
	Amount		%			Amount		%
Commercial:
Mortgages (1)	$	271,817		18	%	$	282,019		19	%
Construction and development (2)		33,092		2	%		32,233		2	%
Other (3)		294,261		21	%		273,145		19	%
Total commercial		599,170		41	%		587,397		40	%

Residential real estate:
Mortgages (4)		577,823		39	%		577,522		40	%
Homeowner construction		11,742		1	%		11,149		–	%
Total residential real estate		589,565		40	%		588,671		40	%

Consumer
Home equity lines		142,548		10	%		145,676		10	%
Home equity loans		94,521		6	%		93,947		6	%
Other		44,396		3	%		44,295		4	%
Total consumer		281,465		19	%		283,918		20	%
Total loans (5)	$	1,470,200		100	%	$	1,459,986		100	%

(1)	Amortizing mortgages, primarily secured by income producing property.

(2)	Loans for construction of residential and commercial properties and for land development.

(3)	Loans to businesses and individuals, a substantial portion of which are fully or partially collateralized by real estate.

(4)	A substantial portion of these loans is used as qualified collateral for FHLB borrowings (See Note 8 for additional discussion of FHLB borrowings).

(5)	Net of unamortized loan origination fees, net of costs, totaling $80 thousand and $277 thousand at March 31, 2007 and December 31, 2006, respectively. Also includes $300 thousand and $342 thousand of premium, net of discount, on purchased loans at March 31, 2007 and December 31, 2006, respectively.

(5) Allowance for Loan Losses

The following is an analysis of the allowance for loan losses:

(Dollars in thousands)

Three months ended March 31,	2007			2006
Balance at beginning of period	$	18,894		$	17,918
Provision charged to expense		300			300
Recoveries of loans previously charged off		191			67
Loans charged off		(25	)		(38	)
Balance at end of period	$	19,360		$	18,427

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WASHINGTON TRUST BANCORP INC. AND SUBSIDIARIES	(Continued)
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(6) Goodwill and Other Intangibles

The changes in the carrying value of goodwill and other intangible assets for the nine months ended March 31, 2007 are as follows:

Goodwill

Wealth

(Dollars in thousands)

Commercial

Management

Banking

Service

Segment

Total

Balance at December 31, 2006

22,591

21,967

44,558

Additions to goodwill during the period

–

Impairment recognized

–

Balance at March 31, 2007

22,591

21,967

44,558

Other Intangible Assets

	Core Deposit		Advisory		Non-compete
	Intangible		Contracts		Agreements		Total
Balance at December 31, 2006	$	650	$	11,937	$	229	$	12,816
Amortization		50		306		12		368
Balance at March 31, 2007	$	600	$	11,631	$	217	$	12,448

Amortization of intangible assets for the three months ended March 31, 2007 totaled $368 thousand. Estimated annual amortization expense of current intangible assets with finite useful lives, absent any impairment or change in estimated useful lives, is summarized below.

(Dollars in thousands)
	Core		Advisory		Non-compete
Estimated amortization expense:	Deposits		Contracts		Agreements		Total
2007 (full year)	$	140	$	1,194	$	49	$	1,383
2008		120		1,111		49		1,280
2009		120		1,040		49		1,209
2010		120		922		49		1,091
2011		120		768		33		921

The components of intangible assets at March 31, 2007 are as follows:

(Dollars in thousands)
	Core		Advisory		Non-compete
	Deposits		Contracts		Agreements		Total
Gross carrying amount	$	2,997	$	13,657	$	1,147	$	17,801
Accumulated amortization		2,397		2,026		930		5,353
Net amount	$	600	$	11,631	$	217	$	12,448

(7) Income Taxes

Effective January 1, 2007, the Corporation adopted FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes (FIN 48). The adoption of FIN 48 did not result in any adjustment to retained earnings as of January 1, 2007.

As of the adoption date, the Corporation had gross tax affected unrecognized tax benefits of $1.2 million. If recognized this amount would be recorded as a component of income tax expense. There have been no significant changes to these amounts during the quarter ended March 31, 2007.

The Corporation recognizes potential accrued interest related to unrecognized tax benefits in income tax expense in the Consolidated Statements of Income. As of the adoption date of January 1, 2007, accrued interest amounted to

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WASHINGTON TRUST BANCORP INC. AND SUBSIDIARIES	(Continued)
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

$70 thousand. To the extent interest is not assessed with respect to uncertain tax positions, amounts accrued will be reduced and reflected as a reduction of the overall income tax provision. Penalties, if incurred, would be recognized as a component of income tax expense.

The Corporation files income tax returns in the U.S. federal jurisdiction and various state jurisdictions. The Corporation is no longer subject to U.S. federal income tax examinations by tax authorities for years before 2003. With a few exceptions, the Corporation is no longer subject to state income tax examinations by tax authorities for years before 2000.

(8) Borrowings

Federal Home Loan Bank Advances

Advances payable to the Federal Home Loan Bank (“FHLB”) are summarized as follows:

(Dollars in thousands)	March 31,		December 31,
	2007		2006
FHLB advances	$	457,145	$	474,561

During the first quarter of 2007, the Corporation prepaid $26.5 million in advances payable to the FHLB resulting in a debt prepayment penalty charge, recorded in noninterest expense, of $1.1 million. See additional discussion in Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations, under the caption “Noninterest Expense.”

In addition to outstanding advances, the Corporation also has access to an unused line of credit amounting to $8.0 million at March 31, 2007. Under an agreement with the FHLB, the Corporation is required to maintain qualified collateral, free and clear of liens, pledges, or encumbrances that, based on certain percentages of book and market values, has a value equal to the aggregate amount of the line of credit and outstanding advances (“FHLB borrowings”). The FHLB maintains a security interest in various assets of the Corporation including, but not limited to, residential mortgages loans, U.S. government or agency securities, U.S. government-sponsored agency securities, and amounts maintained on deposit at the FHLB. The Corporation maintained qualified collateral in excess of the amount required to collateralize the line of credit and outstanding advances at March 31, 2007. Included in the collateral were securities available for sale and held to maturity with a fair value of $432.1 million and $451.5 million that were specifically pledged to secure FHLB borrowings at March 31, 2007 and December 31, 2006, respectively. Unless there is an event of default under the agreement with the FHLB, the Corporation may use, encumber or dispose of any portion of the collateral in excess of the amount required to secure FHLB borrowings, except for that collateral that has been specifically pledged.

Other Borrowings

The following is a summary of other borrowings:

(Dollars in thousands)	March 31,		December 31,
	2007		2006
Treasury, Tax and Loan demand note balance	$	2,121	$	3,863
Deferred acquisition obligations		3,769		10,372
Securities sold under repurchase agreements		19,500		–
Other		402		449
Other borrowings	$	25,792	$	14,684

In the first quarter of 2007, securities sold under repurchase agreements of $19.5 million were executed. The securities sold under agreements to repurchase are callable at the issuer’s option, at one time only, in one year and mature in five years. The securities underlying the agreements are held in safekeeping by the counterparty in the name of the Corporation and are repurchased when the agreement matures. Accordingly, these underlying securities are included in securities available for sale and the obligations to repurchase such securities are reflected as a liability.

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WASHINGTON TRUST BANCORP INC. AND SUBSIDIARIES	(Continued)
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Stock Purchase Agreement for the August 2005 acquisition of Weston Financial provides for the payment of contingent purchase price amounts based on operating results in each of the years in the three-year earn-out period ending December 31, 2008. Contingent payments are added to goodwill and recorded as deferred acquisition liabilities at the time the payments are determinable beyond a reasonable doubt. Deferred acquisition obligations amounted to $3.8 million at March 31, 2007 compared to $10.4 million at December 31, 2006. In the first quarter of 2007 the Corporation paid approximately $6.7.million in earn-out payments.

(9) Shareholders’ Equity

Stock Repurchase Plan:

Under the Corporation’s 2006 stock repurchase plan, 61,100 shares of stock were repurchased at a total cost of $1.7 million during the three months ended March 31, 2007. In addition, 11,180 shares were acquired pursuant to the Nonqualified Deferred Compensation Plan.

Regulatory Capital Requirements:

The following table presents the Corporation’s and the Bank’s actual capital amounts and ratios at March 31, 2007 and December 31, 2006, as well as the corresponding minimum regulatory amounts and ratios:

(Dollars in thousands)	Actual					For Capital Adequacy Purposes					To Be Well Capitalized Under Prompt Corrective Action Provisions
	Amount		Ratio			Amount		Ratio			Amount		Ratio
As of March 31, 2007:
Total Capital (to Risk-Weighted Assets):
Corporation	$	163,382		10.84	%	$	120,581		8.00	%	$	150,727		10.00	%
Bank	$	164,163		10.90	%	$	120,508		8.00	%	$	150,635		10.00	%
Tier 1 Capital (to Risk-Weighted Assets):
Corporation	$	142,772		9.47	%	$	60,291		4.00	%	$	90,436		6.00	%
Bank	$	143,564		9.53	%	$	60,254		4.00	%	$	90,381		6.00	%
Tier 1 Capital (to Average Assets): (1)
Corporation	$	142,772		6.14	%	$	92,944		4.00	%	$	116,180		5.00	%
Bank	$	143,564		6.18	%	$	92,900		4.00	%	$	116,125		5.00	%

As of December 31, 2006:
Total Capital (to Risk-Weighted Assets):
Corporation	$	161,076		10.96	%	$	117,538		8.00	%	$	146,922		10.00	%
Bank	$	168,235		11.46	%	$	117,465		8.00	%	$	146,832		10.00	%
Tier 1 Capital (to Risk-Weighted Assets):
Corporation	$	140,568		9.57	%	$	58,769		4.00	%	$	88,153		6.00	%
Bank	$	147,738		10.06	%	$	58,733		4.00	%	$	88,099		6.00	%
Tier 1 Capital (to Average Assets): (1)
Corporation	$	140,568		6.01	%	$	93,487		4.00	%	$	116,858		5.00	%
Bank	$	147,738		6.32	%	$	93,437		4.00	%	$	116,797		5.00	%

(1)	Leverage ratio

The Corporation’s capital ratios at March 31, 2007 place the Corporation in the “well-capitalized” category according to regulatory standards.

(10) Financial Instruments with Off-Balance Sheet Risk and Derivative Financial Instruments

The Corporation is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers and to manage the Corporation’s exposure to fluctuations in interest rates. These financial instruments include commitments to extend credit, standby letters of credit, financial guarantees, and commitments to originate and commitments to sell fixed rate mortgage loans. These instruments involve, to varying degrees, elements of credit risk in excess of the amount recognized in the Corporation’s Consolidated Balance Sheets. The contract or notional amounts of these instruments reflect the extent of involvement the Corporation has in particular classes of financial instruments. The Corporation uses the same credit policies in making commitments and

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WASHINGTON TRUST BANCORP INC. AND SUBSIDIARIES	(Continued)
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

conditional obligations as it does for on-balance sheet instruments. The contractual and notional amounts of financial instruments with off-balance sheet risk are as follows:

(Dollars in thousands)	March 31, 2007		December 31, 2006
Financial instruments whose contract amounts represent credit risk:
Commitments to extend credit:
Commercial loans	$	156,944	$	122,376
Home equity lines		182,290		185,483
Other loans		11,906		10,671
Standby letters of credit		8,898		9,401
Financial instruments whose notional amounts exceed the amount of credit risk:
Forward loan commitments:
Commitments to originate fixed rate mortgage loans to be sold		4,868		2,924
Commitments to sell fixed rate mortgage loans		6,988		5,066

Commitments to Extend Credit

Commitments to extend credit are agreements to lend to a customer as long as there are no violations of any conditions established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since some of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. Each borrower’s creditworthiness is evaluated on a case-by-case basis. The amount of collateral obtained is based on management’s credit evaluation of the borrower.

Standby Letters of Credit

Standby letters of credit are conditional commitments issued to guarantee the performance of a customer to a third party. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. Under the standby letters of credit, the Corporation is required to make payments to the beneficiary of the letters of credit upon request by the beneficiary contingent upon the customer’s failure to perform under the terms of the underlying contract with the beneficiary. Standby letters of credit extend up to five years. At March 31, 2007 and December 31, 2006, the maximum potential amount of undiscounted future payments, not reduced by amounts that may be recovered, totaled $8.9 million and $9.4 million, respectively. At March 31, 2007 and December 31, 2006, there was no liability to beneficiaries resulting from standby letters of credit. Fee income on standby letters of credit for the three months ended March 31, 2007 and 2006 was insignificant.

At March 31, 2007, a substantial portion of the standby letters of credit were supported by pledged collateral. The collateral obtained is determined based on management’s credit evaluation of the customer. Should the Corporation be required to make payments to the beneficiary, repayment from the customer to the Corporation is required.

Forward Loan Commitments

Commitments to originate and commitments to sell fixed rate mortgage loans are derivative financial instruments. Accordingly, the fair value of these commitments is recognized in other assets on the balance sheet and changes in fair value of such commitments are recorded in current earnings in the income statement. The carrying value of such commitments as of March 31, 2007 and December 31, 2006 and the respective changes in fair values for the three months ended March 31, 2007 and 2006 were insignificant.

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WASHINGTON TRUST BANCORP INC. AND SUBSIDIARIES	(Continued)
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(11) Defined Benefit Pension Plans

Components of Net Periodic Benefit Costs:

(Dollars in thousands)	Qualified						Non-Qualified
	Pension Plan						Retirement Plans
Three months ended March 31,	2007			2006			2007		2006
Service cost	$	503		$	517		$	86	$	88
Interest cost		462			413			130		116
Expected return on plan assets		(496	)		(450	)		-		-
Amortization of transition asset		(1	)		(1	)		-		-
Amortization of prior service cost		(9	)		(8	)		16		16
Recognized net actuarial loss		47			79			54		54
Net periodic benefit cost	$	506		$	550		$	286	$	274

Assumptions:

The measurement date and weighted-average assumptions used to determine net periodic benefit cost for the three months ended March 31, 2007 and 2006 were as follows:

	Qualified						Non-Qualified
	Pension Plan						Retirement Plans
	2006			2005			2006			2005
Measurement date	Sept. 30, 2006			Sept. 30, 2005			Sept. 30, 2006			Sept. 30, 2005
Discount rate		5.90	%		5.50	%		5.90	%		5.50	%
Expected long-term return on plan assets		8.25	%		8.25	%		-			-
Rate of compensation increase		4.25	%		4.25	%		4.25	%		4.25	%

As discussed in Note 2, the SFAS No. 158 requirement to measure the plan’s assets and obligations as of the employer’s fiscal year end is effective December 31, 2008.

Employer Contributions:

The Corporation previously disclosed in its financial statements for the year ended December 31, 2006 that it expected to contribute $1.3 million to its qualified pension plan and $369 thousand in benefit payments to its non-qualified retirement plans in 2007. As of March 31, 2007, approximately $1.9 million of contributions have been made to the qualified pension plan and $84 thousand in benefit payments have been made to the non-qualified retirement plans. The Corporation presently anticipates contributing an additional $251 thousand in benefit payments to the non-qualified retirement plans in 2007.

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WASHINGTON TRUST BANCORP INC. AND SUBSIDIARIES	(Continued)
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(12) Business Segments

Washington Trust segregates financial information in assessing its results among two operating segments: Commercial Banking and Wealth Management Services. The amounts in the Corporate column include activity not related to the segments, such as the investment securities portfolio, wholesale funding activities and administrative units. The Corporate column is not considered to be an operating segment. The methodologies and organizational hierarchies that define the business segments are periodically reviewed and revised. Results may be restated, when necessary, to reflect changes in organizational structure or allocation methodology. The following table presents the statement of operations and total assets for Washington Trust’s reportable segments.

(Dollars in thousands)
	Commercial Banking				Wealth Management Services						Corporate						Consolidated Total
Three months ended March 31,	2007		2006		2007			2006			2007			2006			2007		2006
Net interest income (expense)	$	13,201	$	13,396	$	(8	)	$	(24	)	$	1,677		$	2,043		$	14,870	$	15,415
Noninterest income		2,889		2,749		6,894			6,440			1,465			331			11,248		9,520
Total income		16,090		16,145		6,886			6,416			3,142			2,374			26,118		24,935

Provision for loan losses		300		300		–			–			–			–			300		300
Depreciation and amortization expense		616		558		436			419			44			157			1,096		1,134
Other noninterest expenses		8,643		8,315		4,298			4,342			3,072			1,913			16,013		14,570
Total noninterest expenses		9,559		9,173		4,734			4,761			3,116			2,070			17,409		16,004
Income before income taxes		6,531		6,972		2,152			1,655			26			304			8,709		8,931
Income tax expense (benefit)		2,301		2,425		834			658			(401	)		(225	)		2,734		2,858
Net income	$	4,230	$	4,547	$	1,318		$	997		$	427		$	529		$	5,975	$	6,073

Total assets at period end		1,540,794		1,499,729		36,726			33,145			822,442			899,891			2,399,962		2,432,765
Expenditures for long-lived assets	$	886		788		69			254			90			56			1,045		1,098

Management uses certain methodologies to allocate income and expenses to the business lines. A funds transfer pricing methodology is used to assign interest income and interest expense to each interest-earning asset and interest-bearing liability on a matched maturity funding basis. Certain indirect expenses are allocated to segments. These include support unit expenses such as technology and processing operations and other support functions. Taxes are allocated to each segment based on the effective rate for the period shown.

Commercial Banking

The Commercial Banking segment includes commercial, commercial real estate, residential and consumer lending activities; mortgage banking, secondary market and loan servicing activities; deposit generation; merchant credit card services; cash management activities; and direct banking activities, which include the operation of ATMs, telephone and internet banking services and customer support and sales.

Wealth Management Services

Wealth Management Services includes asset management services provided for individuals and institutions; personal trust services, including services as executor, trustee, administrator, custodian and guardian; corporate trust services, including services as trustee for pension and profit sharing plans; and other financial planning and advisory services.

Corporate

Corporate includes the Treasury Unit, which is responsible for managing the wholesale investment portfolio and wholesale funding needs. It also includes income from bank-owned life insurance as well as administrative and executive expenses not allocated to the business lines and the residual impact of methodology allocations such as funds transfer pricing offsets.

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WASHINGTON TRUST BANCORP INC. AND SUBSIDIARIES	(Continued)
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(13) Comprehensive Income

(Dollars in thousands)

Three months ended March 31,	2007			2006

Net income	$	5,975		$	6,073

Unrealized holding gains (losses) on securities available for sale, net of $664 income
tax expense in 2007 and $1,754 income tax benefit in 2006		1,234			(3,211	)
Reclassification adjustments for gains arising during the period, net of $371 income tax
expense in 2007 and $20 income tax expense in 2006		(665	)		(39	)
Change in funded status of defined benefit plans related to the amortization of net
actuarial losses, net prior service credit and net transition asset, net of $37 income
tax expense in 2007		70			-
Total comprehensive income	$	6,614		$	2,823

(14) Earnings Per Share

Basic earnings per share (“EPS”) is calculated by dividing net income by the weighted average common stock outstanding, excluding options and other equity instruments. The dilutive effect of options, nonvested share units, non vested share awards and other items is calculated using the treasury stock method for purposes of weighted average dilutive shares. Diluted EPS is computed by dividing net income by the average number of common stock and common stock equivalents outstanding.

(Dollars and shares in thousands, except per share amounts)

Three months ended March 31,	2007		2006

Net income	$	5,975	$	6,073

Weighted average basic shares		13,412.1		13,386.8
Dilutive effect of:
Options		244.6		276.2
Other		66.3		35.6
Weighted average diluted shares		13,723.0		13,698.6

Earnings per share:
Basic	$	0.45	$	0.45
Diluted	$	0.44	$	0.44

(15) Litigation

The Corporation is involved in various claims and legal proceedings arising out of the ordinary course of business. Management is of the opinion, based on its review with counsel of the development of such matters to date, that the ultimate disposition of such matters will not materially affect the consolidated financial position or results of operations of the Corporation.

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WASHINGTON TRUST BANCORP INC. AND SUBSIDIARIES	(Continued)
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(16) Subsequent Event

Based on our assessment of the provisions of SFAS No. 159, on April 12, 2007 we decided to implement early adoption of SFAS No. 159. In connection with this, we selected the fair value option for certain U.S. Government sponsored agency and mortgage-backed securities with lower coupons and slower prepayment characteristics in the held to maturity portfolio totaling approximately $61.9 million. A portfolio restructuring plan was also undertaken to reduce interest rate risk and improve net interest margin, which included the sale of these securities. On Friday April 13, 2007 we executed sale trades for these held to maturity securities. At the time of the sales transactions the historical amortized cost basis of the sold securities exceeded the total sales price by $1.7 million. On Monday April 16, 2007 additional information became available regarding clarifications of the interpretation of the application of SFAS No. 159 by applicable regulatory and accounting industry bodies that led us to conclude that the application of SFAS No. 159 to our transactions might be inconsistent with the intent and spirit of SFAS No. 159. Consequently, we decided not to early-adopt SFAS No. 159.

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With respect to the unaudited consolidated financial statements of Washington Trust Bancorp, Inc. and Subsidiaries at March 31, 2007 and for the three months ended March 31, 2007 and 2006, KPMG LLP has made a review (based on the standards of the Public Company Accounting Oversight Board (United States)) and not an audit, set forth in their separate report dated May 7, 2007 appearing below. That report does not express an opinion on the interim unaudited consolidated financial information. KPMG LLP has not carried out any significant or additional audit tests beyond those which would have been necessary if their report had not been included. Accordingly, such report is not a “report” or “part of the Registration Statement” within the meaning of Sections 7 and 11 of the Securities Act of 1933, as amended, and the liability provisions of Section 11 of the Securities Act do not apply.

Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders

Washington Trust Bancorp, Inc.:

We have reviewed the accompanying consolidated balance sheet of Washington Trust Bancorp, Inc. and Subsidiaries (the “Corporation”) as of March 31, 2007, and the related consolidated statements of income and cash flows for the three-month periods ended March 31, 2007 and 2006. These consolidated financial statements are the responsibility of the Corporation’s management.

We conducted our review in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States), the objective of which is the expression of an opinion regarding the consolidated financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material modifications that should be made to the consolidated financial statements referred to above for them to be in conformity with U.S. generally accepted accounting principles.

We have previously audited, in accordance with standards established by the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of Washington Trust Bancorp, Inc. and Subsidiaries as of December 31, 2006, and the related consolidated statements of income, changes in shareholders’ equity and cash flows for the year then ended (not presented herein); 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 consolidated balance sheet as of December 31, 2006, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

KPMG LLP

Providence, Rhode Island

May 7, 2007, except for Note 16 which is as of November 19, 2007

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PART II

Other Information

Item 6. Exhibits

(a) Exhibits. The following exhibits are included as part of this Form 10-Q:

Exhibit Number
15.1	Letter re: Unaudited Interim Financial Information - Filed herewith.
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. – Filed herewith.
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. – Filed herewith.
32.1	Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 – Filed herewith. (1)

(1)	These certifications are not “filed” for purposes of Section 18 of the Exchange Act or incorporated by reference into any filing under the Securities Act or the Exchange Act.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		WASHINGTON TRUST BANCORP, INC.
		(Registrant)


Date: November 19, 2007	By:	/s/ John C. Warren
		John C. Warren
		Chairman and Chief Executive Officer
		(principal executive officer)


Date: November 19, 2007	By:	/s/ David V. Devault
		David V. Devault
		Executive Vice President, Secretary, Treasurer and Chief Financial Officer
		(principal financial and accounting officer)

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Exhibit Index

Exhibit Number
15.1	Letter re: Unaudited Interim Financial Information - Filed herewith.
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. – Filed herewith.
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. – Filed herewith.
32.1	Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 – Filed herewith. (1)

(1)	These certifications are not “filed” for purposes of Section 18 of the Exchange Act or incorporated by reference into any filing under the Securities Act or the Exchange Act.

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