Edgar Filing: WASHINGTON TRUST BANCORP INC

def14a20090311.htm

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

SCHEDULE 14A

(Rule 14a-101)

INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION

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Exchange Act of 1934 (Amendment No. )

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WASHINGTON TRUST BANCORP, INC.

(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

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WASHINGTON TRUST BANCORP, INC.

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

To Be Held April 28, 2009

To the Shareholders of

Washington Trust Bancorp, Inc.:

NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of WASHINGTON TRUST BANCORP, INC., a Rhode Island corporation (the “Corporation”), will be held at the Granite Theater, 1 Granite Street, Westerly, Rhode Island on Tuesday, the 28th of April, 2009 at 11:00 a.m. (local time) for the purpose of considering and acting upon the following:

The election of four directors, nominated by the Board of Directors, for three year terms, each to serve until their successors are duly elected and qualified;

The ratification of the selection of independent auditors to audit the Corporation’s consolidated financial statements for the year ending December 31, 2009;

The approval of an amendment and restatement of the Corporation’s 2003 Stock Incentive Plan;

To consider a shareholder proposal to eliminate all references to the Board of Directors being classified into three classes and to provide that the Board of Directors shall be elected annually; and

Such other business as may properly come before the meeting, or any adjournment thereof.

Proposal No. 1 relates solely to the election of the four directors nominated by the Board of Directors and does not include any other matters relating to the election of directors, including without limitation the election of directors nominated by any shareholder of the Corporation.

Only shareholders of record at the close of business on March 3, 2009 will be entitled to notice of and to vote at the Annual Meeting. The transfer books of the Corporation will not be closed.

IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AND VOTED WHETHER OR NOT YOU PLAN TO BE PRESENT AT THE ANNUAL MEETING. THEREFORE, IF YOU DO NOT EXPECT TO BE PRESENT, PLEASE SIGN, DATE, AND FILL IN THE ENCLOSED PROXY AND RETURN IT BY MAIL IN THE ENCLOSED ADDRESSED ENVELOPE OR VOTE YOUR SHARES THROUGH THE INTERNET OR BY TELEPHONE AS DESCRIBED IN THE ENCLOSED PROXY CARD. IF YOU WISH TO VOTE YOUR SHARES IN PERSON AT THE ANNUAL MEETING, YOUR PROXY MAY BE REVOKED.

Important Notice Regarding the Availability of Proxy Materials for the Annual Shareholder Meeting To Be Held on April 28, 2009: The Corporation’s 2009 Proxy Statement, Form 10-K and Annual Report for 2008 are available at www.washtrust.com/proxy. These documents are also available by calling the Corporation’s toll-free number (800) 475-2265 or by contacting Elizabeth B. Eckel, Senior Vice President by email at investor.relations@washtrust.com.

Free parking is available at the Washington Trust parking garage at 23 Broad Street, Westerly, Rhode Island. The Granite Theatre is handicapped accessible. Shareholders may call 401-348-1566 for questions regarding accessibility.

By order of the Board of Directors,

/s/ David V. Devault

David V. Devault, Secretary

This proxy statement is dated March 11, 2009 and was first mailed to the Corporation’s shareholders on or about March 13, 2009.

WASHINGTON TRUST BANCORP, INC.

23 Broad Street, Westerly, RI 02891 Telephone: 401-348-1200

PROXY STATEMENT

The accompanying proxy is solicited by and on behalf of the Board of Directors of Washington Trust Bancorp, Inc. (the “Corporation” or “Washington Trust”) for use at the Annual Meeting of Shareholders to be held at the Granite Theater, 1 Granite Street, Westerly, Rhode Island on Tuesday, the 28th of April, 2009 at 11:00 a.m. (local time) (the “Annual Meeting”), and any adjournment thereof, and may be revoked at any time before it is exercised by submission of another proxy bearing a later date, by voting through the Internet or by telephone, by attending the Annual Meeting and voting in person, or by notifying the Corporation of the revocation in writing to the Secretary of the Corporation, 23 Broad Street, Westerly, Rhode Island 02891. If not revoked, the proxy will be voted at the Annual Meeting in accordance with the instructions indicated by the shareholder or, if no instructions are indicated, all shares represented by valid proxies received pursuant to this solicitation (and not revoked before they are voted) will be voted FOR Proposal Nos. 1, 2 and 3 and AGAINST Proposal No. 4.

This Proxy Statement is dated March 11, 2009 and was first mailed to our shareholders on or about March 13, 2009.

Important Notice Regarding the Availability of Proxy Materials for the Annual Shareholder Meeting To Be Held on April 28, 2009: Our 2009 Proxy Statement, our Form 10-K and our Annual Report for 2008 are available at www.washtrust.com/proxy. These documents are also available by calling our toll-free number (800) 475-2265 or by contacting Elizabeth B. Eckel, Senior Vice President, by email at investor.relations@washtrust.com.

As of March 3, 2009, the record date for determining shareholders entitled to notice of and to vote at the Annual Meeting, there were 15,970,618 shares of our common stock, $0.0625 par value (the “Common Stock”), issued and outstanding. Each share of Common Stock is entitled to one vote per share on all matters to be voted upon at the Annual Meeting, with all holders of Common Stock voting as one class. A majority of the outstanding shares of Common Stock entitled to vote, represented in person or by proxy, will constitute a quorum for the transaction of business at the Annual Meeting. Abstentions and broker non-votes will be counted for purposes of determining if a quorum is present.

With regard to the election of directors, votes may be cast for or against or to abstain from voting on such matter. Abstentions on the election of directors will have the same effect as a vote against a nominee. With regard to the approval of an amendment and restatement of the 2003 Stock Incentive Plan, the ratification of the selection of independent auditors and the shareholder proposal to declassify the Board of Directors, votes may be cast in favor or against such matters or to abstain from voting on such matters. Abstentions on the ratification of the approval of an amendment and restatement of the 2003 Stock Incentive Plan, the selection of independent auditors and on the shareholder proposal to declassify the Board of Directors will have the same effect as a vote against such matters. If a beneficial owner does not give a proxy to his or her nominee with instructions as to how to vote the shares, the nominee may still vote those shares on “routine” matters, such as the election of directors and the ratification of KPMG LLP as our independent auditors but not on the amendment and restatement of the 2003 Stock Incentive Plan

and the shareholder proposal to declassify the Board of Directors. Shares voted in this manner by a nominee are counted for the purpose of establishing a quorum and also will be counted for the purpose of determining the outcome of such “routine” proposals. In the event a nominee indicates on a proxy that it does not have discretionary authority to vote certain shares on a particular matter, referred to as a “broker non-vote,” then those shares will not be considered entitled to vote with respect to that matter, but will be treated as shares present for the purpose of determining the presence of a quorum to transact business at the Annual Meeting.

We know of no matters to be brought before the Annual Meeting other than those referred to in this Proxy Statement. If any other business should properly come before the Annual Meeting, the persons named in the proxy will vote in accordance with their best judgment.

ELECTION OF DIRECTORS (PROPOSAL NO. 1)

Our Board of Directors is divided into three approximately equal classes, with each class serving staggered terms of three years, so that only one class is elected in any one year. Notwithstanding such three-year terms, pursuant to our by-laws, any director who reaches his or her 70th birthday agrees to resign from the Board of Directors as of the next Annual Meeting of Shareholders following such director’s 70th birthday. There are presently 14 directors. Larry J. Hirsch, Esq. will reach the age of 70 prior to the Annual Meeting and, pursuant to our by-laws, will resign from the Board of Directors effective as of the Annual Meeting.

This year, based on the recommendation of our Nominating and Corporate Governance Committee (the “Nominating Committee”), a total of four nominees for election to the Board of Directors have been nominated to be elected at the Annual Meeting to serve until the 2012 Annual Meeting of Shareholders and until their respective successors are elected and qualified. If all four nominees are elected, the Board of Directors will consist of 13 directors. Directors are elected by the affirmative vote of holders of a majority of the shares of Common Stock represented in person or by proxy at the Annual Meeting and entitled to vote thereon (provided that a quorum is present).

Based on the recommendation of our Nominating Committee, the Board of Directors has nominated Steven J. Crandall, Victor J. Orsinger II, Esq., Patrick J. Shanahan, Jr., and Neil H. Thorp for election at the Annual Meeting. Each of the nominees for director is presently a director of the Corporation. Each of the nominees has consented to being named a nominee in this Proxy Statement and has agreed to serve as a director if elected at the Annual Meeting. In the event that any nominee is unable to serve, the persons named in the proxy have discretion to vote for other persons if the Board of Directors designates such other persons. The Board of Directors has no reason to believe that any of the nominees will be unavailable for election.

The Board of Directors unanimously recommends that shareholders vote “FOR” this proposal.

NOMINEE AND DIRECTOR INFORMATION Biographies of directors, including business experience for past 5 years:		Director Since
Gary P. Bennett	Age 67; Consultant. Former Chairman and Chief Executive Officer, Analysis & Technology, until 1999 (interactive multimedia training, information systems, engineering services).	1994

Steven J. Crandall	Age 56; Vice President, Ashaway Line & Twine Manufacturing Co. (manufacturer of sporting goods products and medical threads).	1983

Larry J. Hirsch, Esq.	Age 70; Attorney. Former President, Westerly Jewelry Co., Inc. (retailer) (retired 1999).	1994

Barry G. Hittner, Esq.	Age 62; Attorney. Of Counsel, Cameron & Mittleman, LLP (law firm), 2003 to present. Of Counsel, Edwards & Angell, LLP (law firm), 1999-2003.	2003

Katherine W. Hoxsie, CPA	Age 60; Retired. Former Vice President, Hoxsie Buick-Pontiac-GMC Truck, Inc., until 2008 (automotive dealership).	1991

Mary E. Kennard, Esq.	Age 54; Vice President, General Counsel and Secretary, The American University.	1994

Edward M. Mazze, Ph.D.	Age 68; Former Dean, College of Business Administration and The Alfred J. Verrecchia-Hasbro Inc. Leadership Chair in Business, University of Rhode Island, 1998-2006. Distinguished University Professor of Business Administration, University of Rhode Island, since 2006.	2000

Kathleen E. McKeough	Age 58; Retired. Former Senior Vice President, Human Resources, GTECH Corporation, 2000 to 2004 (lottery industry and financial transaction processing).	2003

Victor J. Orsinger II, Esq.	Age 62; Attorney. Partner, Orsinger & Nardone, Attorneys at Law.	1983

H. Douglas Randall, III	Age 61; President, HD Randall, Realtors (real estate).	2000

Patrick J. Shanahan, Jr.	Age 64; Retired. Former Chairman and Chief Executive Officer, First Financial Corp. (bank).	2002

Neil H. Thorp	Age 69; Chairman, Thorp & Trainer, Inc. (insurance agency).	1983

John F. Treanor	Age 61; President and Chief Operating Officer of the Corporation and The Washington Trust Company, since 1999.	2001

John C. Warren	Age 63; Chairman and Chief Executive Officer of the Corporation and The Washington Trust Company, since 1999.	1996

None of our director nominees or incumbents, with the exception of Edward M. Mazze, Ph.D., serves as a director of any other company with a class of securities registered pursuant to Section 12 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or registered as an investment company under the Investment Company Act of 1940, as amended. Dr. Mazze is a director of Technitrol, Inc., a manufacturer of electrical equipment, and the Barrett Growth Fund.

The following table presents all Washington Trust stock-based holdings, as of March 3, 2009, of the directors and certain executive officers of the Corporation and the Corporation’s subsidiary, The Washington Trust Company (the “Bank”). The table also presents the stock-based holdings of David W. Wallace and the Jean and David W. Wallace Foundation, who we believe to be beneficial owners of more than 5% of our outstanding Common Stock as of February 13, 2009. The stock ownership information for Mr. Wallace and the Jean and David W. Wallace Foundation is based on certain filings made under Section 13 of the Exchange Act. All such information was provided by the shareholders listed below.

	Term Expiring In	Common Stock (a)	Exercisable Options (b)	Vested Restricted Stock Units (c)	Total	Percentage Of Class
Nominees and Directors:
Steven J. Crandall	2012 (d)	3,956	11,688	500	16,144	0.10%
Victor J. Orsinger II, Esq.	2012 (d)	12,253	8,688	500	21,441	0.13%
Patrick J. Shanahan, Jr.	2012 (d)	39,330	6,000	500	45,830	0.28%
Neil H. Thorp	2012 (d)	39,960	11,688	500	52,148	0.32%
Gary P. Bennett	2011	8,088	11,688	500	20,276	0.12%
Larry J. Hirsch, Esq. (e)	2011	12,286	7,000	1,100	20,386	0.12%
Mary E. Kennard, Esq.	2011	3,636	2,000	500	6,136	0.04%
H. Douglas Randall, III	2011	12,319	10,000	500	22,819	0.14%
John F. Treanor	2011	12,848	72,927	3,900	89,675	0.54%
Barry G. Hittner, Esq.	2010	4,500	2,000	500	7,000	0.04%
Katherine W. Hoxsie, CPA	2010	132,913	11,688	500	145,101	0.88%
Edward M. Mazze, Ph.D.	2010	1,700	5,500	500	7,700	0.05%
Kathleen E. McKeough	2010	1,520	2,000	500	4,020	0.02%
John C. Warren	2010	57,335	95,788	6,500	159,623	0.97%
Certain Executive Officers:
Galan G. Daukas		2,000	32,315	0	34,315	0.21%
David V. Devault		31,403	57,085	0	88,488	0.54%
James M. Vesey		879	17,570	0	18,449	0.11%
All directors and executive officers as a group (25 persons)		428,947	543,770	17,000	989,717	5.99%
Beneficial Owners:
David W. Wallace (f) 680 Steamboat Road, Greenwich, CT 06830		1,991,972	0	0	1,991,972	12.05%
Jean and David W. Wallace Foundation (g) 680 Steamboat Road, Greenwich, CT 06830		913,000	0	0	913,000	5.52%

(a)	Includes 381; 610 and 247 Common Stock equivalents held by Messrs. Randall, Treanor and Vesey, respectively, in our Nonqualified Deferred Compensation Plan.

(b)	Stock options that are or will become exercisable within 60 days of March 3, 2009.

(c)	Restricted stock units that are or will become exercisable within 60 days of March 3, 2009.

(d)	If elected.

(e)	Larry J. Hirsch, Esq., will reach the age of 70 prior to the Annual Meeting. Pursuant to our by-laws, Mr. Hirsch will resign from the Board of Directors effective as of the Annual Meeting.

(f)

Based on information set forth in an Amendment No. 10 to a Schedule 13G/A filed with the Securities and Exchange Commission on February 13, 2009. Includes 134,000 shares owned by Mr. Wallace’s spouse and 913,000 shares held by the Jean and David W. Wallace Foundation, of which Mr. Wallace serves as Trustee.

(g)	Based on information set forth in an Amendment No. 10 to a Schedule 13G/A filed with the Securities and Exchange Commission on February 13, 2009. These shares are also included in the shares owned by David W. Wallace as discussed in more detail in footnote (f) above.

_________________

BOARD OF DIRECTORS AND COMMITTEES

The Corporation’s Board of Directors (the “Corporation’s Board”) held 15 meetings in 2008. The Board of Directors of the Bank (the “Bank’s Board”), the members of which included all of the Corporation’s Board members, held 13 meetings in 2008. During 2008, each member of the Corporation’s Board attended at least 75% of the aggregate number of meetings of the Corporation’s Board, the Bank’s Board and the committees of the Corporation’s Board of which such person was a member except Mary E. Kennard. While we do not have a formal policy related to Board member attendance at Annual Meetings of Shareholders, directors are encouraged to attend each Annual Meeting to the extent reasonably practicable. Each of our directors attended the 2008 Annual Meeting of Shareholders.

Director Independence

In 2008, the committees of the Corporation’s Board consisted of an Executive Committee, a Nominating and Corporate Governance Committee (the “Nominating Committee”), an Audit Committee and a Compensation and Human Resources Committee (the “Compensation Committee”).

Executive Committee

Members of the Executive Committee are currently directors Orsinger (Chairperson), Bennett, Hittner, Hoxsie, Thorp, Treanor and Warren. James P. Sullivan, CPA, also served on the Executive Committee until his retirement from the Corporation’s Board at the 2008 Annual Meeting of Shareholders. Each of the non-employee directors (including Mr. Sullivan) on the Executive Committee is considered “independent” within the meaning of Rule 4200(a)(15) of the National Association of Securities Dealers’ listing standards and the rules of the SEC. The Executive Committee met twice in 2008, and when the Corporation’s Board is not in session, is entitled to exercise all the powers and duties of the Corporation’s Board.

Nominating Committee

Members of the Nominating Committee are directors Orsinger (Chairperson), Bennett, Hittner, Hoxsie, and Thorp. Mr. Sullivan also served on the Nominating Committee until his retirement from the Corporation’s Board at the 2008 Annual Meeting of Shareholders. No member of the Nominating Committee (including Mr. Sullivan) is an employee of the Corporation and each is considered “independent” within the meaning of Rule 4200(a)(15) of the National Association of Securities Dealers’ listing standards and the rules of the SEC. The members of the Nominating Committee regularly meet in executive session without the presence of employee directors or management. The Corporation’s Board has designated the Chairperson of the Nominating Committee to serve as the “Lead Director” to preside over Board meetings when the Corporation’s Board meets in executive session without the presence of employee directors.

The Nominating Committee, which met eight times in 2008, is responsible for identifying individuals qualified to become Board members, consistent with criteria approved by the Corporation’s Board, and recommending that the Corporation’s Board select the director nominees recommended by the Nominating Committee for election at each Annual Meeting of Shareholders. The Nominating Committee is also responsible for developing and recommending to the Corporation’s Board a set of corporate governance guidelines, recommending any changes to such guidelines, and overseeing the evaluation of the Corporation’s Board and management. We have adopted Corporate Governance Guidelines, which are available on our website at www.washtrust.com under Investor Relations – Governance Documents. A copy of the Nominating Committee Charter is also available on our website at www.washtrust.com under Investor Relations – Governance Documents.

At a minimum, each nominee, whether proposed by a shareholder or any other party, must (1) have the highest personal and professional integrity, demonstrate sound judgment and effectively interact with other members of the Corporation’s Board to serve the long-term interests of the Corporation and our shareholders; (2) have previous experience on other boards; (3) have experience at a strategic or policy-making level in a business, government, not-for-profit or academic organization of high standing; (4) have a record of distinguished accomplishment in his or her field; (5) be well regarded in the community and have a long-term reputation for the highest ethical and moral standards; (6) have sufficient time and availability to devote to the affairs of the Corporation, particularly in light of the number of boards on which the nominee may serve; and (7) to the extent such nominee serves or has previously served on other boards, have a demonstrated history of actively contributing at board meetings.

The Nominating Committee will evaluate all such proposed nominees in the same manner, without regard to the source of the initial recommendation of such proposed nominee. In seeking candidates to consider for nomination to fill a vacancy on the Corporation’s Board, the Nominating Committee may solicit recommendations from a variety of sources, including current directors, our Chief Executive Officer and other executive officers. The Nominating Committee may also engage a search firm to identify or evaluate or assist in identifying or evaluating candidates.

The Nominating Committee will consider nominees recommended by shareholders. Shareholders who wish to submit recommendations for candidates to the Nominating Committee must submit their recommendations in writing to the Secretary of the Corporation at 23 Broad Street, Westerly, RI 02891, who will forward all recommendations to the Nominating Committee. For a shareholder recommendation to be considered by the Nominating Committee at the 2010 Annual Meeting of Shareholders, it must be submitted to the Corporation by November 11, 2009. All shareholder recommendations for nominees must include the following information: (1) the name and address of record of the shareholder; (2) a representation that the shareholder is a record holder of our securities, or if the shareholder is not a record holder, evidence of ownership in accordance with Rule 14a-8(b)(2) of the Exchange Act; (3) the name, age, business and residential address, educational background, current principal occupation or employment, and principal occupation or employment for the preceding five full fiscal years of the proposed nominee; (4) a description of the qualifications and background of the proposed nominee that addresses the minimum qualifications and other criteria for board membership approved by the Corporation’s Board; (5) a description of all arrangements or understandings between the shareholder and the proposed nominee; (6) the consent of the proposed nominee to (a) be named in the proxy statement relating to our Annual Meeting of Shareholders, and (b) serve as a director if elected at such Annual Meeting; and (7) any other information regarding the proposed nominee that is required to be included in a proxy statement filed pursuant to the rules of the SEC.

Shareholder nominations that are not being submitted to the Nominating Committee for consideration may be made at an Annual Meeting of Shareholders in accordance with the procedures set forth in clause (e) of Article Eighth of our Restated Articles of Incorporation, as amended. Specifically, advanced written notice of any nominations must be received by the Secretary not less than 14 days nor more than 60 days prior to any meeting of shareholders called for the election of directors (provided that if fewer than 21 days’ notice of the meeting is given to shareholders, notice of the proposed nomination must be received by the Secretary not later than the 10th day following the day on which notice of the meeting was mailed to shareholders).

We have not paid a fee to any third parties to identify or evaluate Board or committee nominees.

The Nominating Committee recommended that Messrs. Crandall, Orsinger, Shanahan and Thorp be nominated for election to serve as directors until the 2012 Annual Meeting of Shareholders.

Audit Committee

Members of the Audit Committee are currently directors Hoxsie (Chairperson), Crandall, Hittner, Mazze, and Shanahan. Mr. Sullivan also served on the Audit Committee until his retirement from the Corporation’s Board at the 2008 Annual Meeting of Shareholders. No member of the Audit Committee (including Mr. Sullivan) is an employee of the Corporation and each is considered “independent” within the meaning of Rule 4200(a)(15) of the National Association of Securities Dealers’ listing standards and Rule 10A–3(b)(1) under the Exchange Act. The Corporation’s Board has determined that Ms. Hoxsie qualifies as the “audit committee financial expert” under the Exchange Act. The Audit Committee has a written charter that is available on our website at www.washtrust.com under Investor Relations – Governance Documents.

The Audit Committee, which met ten times in 2008, is directly responsible for the appointment, compensation and oversight of the work of our independent auditors. The Audit Committee is also responsible for, among other things, reviewing the adequacy of our system of internal controls, our audit program, the performance and findings of our internal audit staff and action to be taken by management, reports of our independent auditors, the independence of our independent auditors, our audited financial statements and discussing such results with our management, considering the range of audit and non-audit fees and services and the pre-approval thereof, and performing such other oversight functions as the Corporation’s Board may request from time to time. While the Audit Committee oversees our financial reporting process for the Corporation’s Board consistent with the Audit Committee Charter, management has primary responsibility for this process, including our system of internal controls, and for the preparation of our consolidated financial statements in accordance with U.S. generally accepted accounting principles. In addition, our independent auditors, and not the Audit Committee, are responsible for auditing those financial statements. The Audit Committee’s report on our audited financial statements for the fiscal year ended December 31, 2008 appears elsewhere in this Proxy Statement.

The Audit Committee is also responsible for loan review for the Bank. The loan review process includes oversight of the Bank’s procedures for determining the adequacy of the allowance for loan losses, administration of its internal credit rating systems and the reporting and monitoring of credit granting standards.

Compensation Committee

Members of the Compensation Committee are currently directors Bennett (Chairperson), Hirsch, Kennard, Mazze, McKeough and Orsinger, each of whom is considered “independent” within the meaning of Rule 4200(a)(15) of the National Association of Securities Dealers’ listing standards and the rules of the SEC. The Compensation Committee met ten times in 2008.

The Compensation Committee has a written charter that is available on our website at www.washtrust.com under Investor Relations – Governance Documents. Generally, the Compensation Committee is responsible for all compensation decisions, and reports all actions to the members of the Corporation’s Board. The Compensation Committee’s responsibilities and authorities, which are discussed in detail in its charter, include, among other things:

▪	Establishing and reviewing our compensation philosophy and policies.

▪	Reviewing and analyzing the compensation structure and vehicles provided to all employees and directors.

▪	Determining the base salaries of the named executive officers and other senior executives, as well as establishing guidelines for determining base salaries of other employees.

▪	Establishing and reviewing cash incentive programs for all employees, and approving incentive payments to the named executive officers and other senior executives.

▪	Establishing fee and retainer schedules for our directors.

▪	Approval of equity compensation awards and the terms of such awards to employees and directors.

▪	Administering our equity compensation plans.

▪	Administering our retirement and benefit plans, programs, and policies.

A schedule of meetings and preliminary agenda are established each December for the coming fiscal year. The agenda for Compensation Committee meetings is determined by its Chairperson with the assistance of the head of our Human Resources department. Compensation Committee meetings are regularly attended by the Chief Executive Officer and other members of the senior management team. As appropriate, the Compensation Committee may meet in executive session without the presence of employee directors and management. The Compensation Committee met in executive session seven times during 2008.

The Compensation Committee has authority under its charter to select, retain, terminate, and approve the fees of advisors, counsel or other experts or consultants, as it deems appropriate. The Compensation Committee has engaged Pearl Meyer & Partners, an independent compensation consulting firm, to assist in fulfillment of its duties. The compensation consultant advises the Compensation Committee with respect to compensation and benefit trends, best practices, market analysis, plan design, and establishing targets for individual compensation awards. The use of an independent compensation consultant provides additional assurance that our executive compensation programs

are reasonable and consistent with our philosophy and objectives. The compensation consultant reports directly to the Compensation Committee. The Compensation Committee meets with the compensation consultant from time to time in executive session without the presence of employee directors and management.

During 2008, Pearl Meyer & Partners received total remuneration of $62,257 for consulting services related to compensation analysis and planning. We did not engage Pearl Meyer & Partners for any services other than those related to executive and director compensation consulting.

The Compensation Committee may delegate authority to fulfill certain administrative duties regarding the compensation and benefit programs to our senior management team. Although members of management generally attend Compensation Committee meetings, employees are not present during executive session deliberations regarding their own compensation. The Compensation Committee solicits the input and recommendations of the Chief Executive Officer for compensation awards to other officers. Such awards are further discussed in executive session, with decisions made by the Compensation Committee without the Chief Executive Officer’s involvement.

The Compensation Committee’s report on executive compensation appears elsewhere in this Proxy Statement.

Please note, the information contained on our website is not incorporated by reference in, or considered to be a part of, this Proxy Statement.

COMPENSATION DISCUSSION AND ANALYSIS

The Compensation and Human Resources Committee (for purposes of this analysis, the “Committee”) has responsibility for establishing, implementing and continually monitoring adherence with our compensation philosophy. The Committee, among other things, ensures that the total compensation paid to senior executives is fair, reasonable and competitive.

Compensation Philosophy and Objectives

Our success is highly dependent on hiring, developing and retaining qualified people who are motivated to perform for the benefit of our shareholders, the community, and customers. The Committee believes that an effective executive compensation program must be designed to reward the achievement of specific annual, long-term and strategic goals, and align executive interests with shareholders, with the ultimate objective of enhancing shareholder value. The goal of our compensation program is to compensate senior leadership in a manner that elicits superior corporate performance, defined as at or above the top third of our peer group.

Our compensation plan places emphasis on (1) attracting and retaining the best talent in the financial services industry; (2) providing overall compensation for key executives that is competitive with similarly-sized financial institutions; (3) motivating executives to achieve the goals set in our strategic plan; and (4) returning a fair value to shareholders. To that end, the Committee believes that compensation packages provided to executives, including the named executive officers listed in this Proxy Statement, should include both cash and stock-based compensation that reward performance as measured against established goals.

Compensation Process

Prior to the beginning of the fiscal year, the Committee consulted with Pearl Meyer & Partners, an independent compensation consulting firm, to assess the competitiveness and effectiveness of our executive compensation program. The compensation consultant provided an analysis of base salary, short-term incentive, long-term incentive and benefit practices of comparable companies in the banking industry. In performing this analysis, the compensation consultant considered individual compensation elements as well as the total compensation package, and reviewed the correlation of pay to performance for the Corporation versus its peer group. The compensation consultant’s report was based on a peer group of banking institutions of generally similar asset size and regional location, selected in consultation with the Committee. The peer group used in the report presented for consideration of 2008 compensation decisions consisted of the following financial institutions:

Arrow Financial Corporation	Bancorp Rhode Island, Inc.	Berkshire Hills Bancorp, Inc.
Boston Private Financial Holdings, Inc.	Brookline Bancorp, Inc.	Century Bancorp, Inc.
Community Bank System, Inc.	Harleysville National Corporation	Hudson Valley Holding Corporation
Independent Bank Corp.	Lakeland Bancorp, Inc.	National Penn Bancshares, Inc.
Omega Financial Corporation	Partners Trust Financial Group, Inc.	Peapack-Gladstone Financial Corporation
Provident New York Bancorp	S & T Bancorp, Inc.	Sandy Spring Bancorp, Inc.
Sterling Financial Corporation	Tompkins Financial Corporation	TrustCo Bank Corp NY
Univest Corporation of Pennsylvania

Because a peer group analysis is limited to those positions for which compensation information is disclosed publicly, these studies typically include only the five most highly compensated officers at each company. Therefore, the compensation consultant also relied upon published compensation surveys to supplement information on these positions, as well as to provide the basis for analysis for other company executives. Total compensation is generally targeted at the 50th percentile or above for each position. As would be expected, specific pay positioning varies by executive. Differences may reflect individual roles, performance, experience and leadership ability. Compensation also may vary annually due to corporate performance, business unit performance and/or economic conditions.

In determining compensation for the Chief Executive Officer and the Chief Operating Officer, the Committee considers the compensation consultant’s analysis, compensation survey data, corporate performance, economic conditions, and the assessment of the executive’s performance by the independent directors of the Corporation’s Board. For all other senior executives, the Committee considers the compensation consultant’s analysis, compensation survey data, corporate and business unit performance, economic conditions, and the Chief Executive Officer’s assessment of the executive’s performance. The Committee solicits the input and recommendations of the Chief Executive Officer for compensation awards to other officers. The Committee is responsible for all compensation decisions and reports all actions to the Corporation’s Board.

Setting Executive Compensation

After the Committee has established targeted overall compensation for each executive, compensation is allocated among base salary, performance-based cash incentive, and equity compensation. Generally, our compensation package consists of approximately 50% to 70% base salary, 20% to 30% cash incentive, and 10% to 20% equity compensation. As a result, 30% to 50% of compensation is provided through performance-based forms of compensation. We believe that this mix will drive individual performance, short-term profitability and long-term stock performance. Additionally, we provide retirement and other benefits to attract and retain our employees.

Base Salary

In reviewing the Chief Executive Officer’s and Chief Operating Officer’s base salaries and the base salary recommendations made by the Chief Executive Officer for other executives, the Committee primarily considers:

▪	the compensation consultant’s analysis and compensation survey data;

▪	the executive’s compensation relative to other officers;

▪	recent and expected performance of the executive;

▪	our recent and expected overall performance; and

▪	our overall budget for base salary increases.

Base salaries for all executive officers are determined by the Committee. The 2008 base salary for Mr. Warren, Chairman and Chief Executive Officer, was $483,000. The Committee increased Mr. Warren’s salary to $500,000 for 2009, which positioned Mr. Warren’s salary in a manner consistent with the general guidelines outlined earlier. The 2008 base salaries for Messrs. Treanor, Devault, Daukas and Vesey were $367,000; $220,000; $310,000; and $168,000, respectively. The Committee increased the salaries of Messrs. Treanor, Devault, Daukas and Vesey for 2009 to $380,000; $228,000; $320,000; and $180,000, respectively.

Equity Compensation

The granting of stock-based incentives is viewed as a desirable long-term incentive compensation strategy because it closely links the interest of management with shareholder value, aids in employee retention, and motivates executives to improve the long-term stock market performance of our Common Stock. Equity grants also provide an opportunity for increased equity ownership.

When granting stock-based incentives to senior executives, the Committee considers the compensation consultant’s analysis, as described earlier. The Committee also considers the Chief Executive Officer’s recommendations for other executives, which are based on each officer’s level of responsibility and contribution towards achievement of our business plan and objectives.

In determining the form of equity to be granted, the Committee considers many factors including the ability to drive corporate performance, tax and accounting treatment and the impact on dilution. Equity in the form of stock options is generally considered to be a better motivator for executives who are expected to have a longer tenure, whereas stock or stock unit grants may be an equally motivating but less dilutive form of equity for those executives who are closer to retirement.

Generally, stock-based incentives have been granted on an annual basis. Employee grants, including grants to newly hired employees, have historically been made at a regularly-scheduled Committee meeting. All stock option awards are made at the closing price for our Common Stock on the grant date. All grants are effective either on the date of the Committee meeting or at a specific future date coinciding with a triggering event such as the employee’s date of hire. Equity grants to non-employee directors occur annually at the Committee meeting shortly before the date of the Annual Meeting of Shareholders, and are effective on the date of the Annual Meeting of Shareholders for directors continuing service after such date.

Equity grants typically become vested after three to five years of service. Unvested equity grants are typically forfeited upon separation from employment. Employees may become vested in a pro-rata share of equity grants upon retirement or disability, and fully vested in equity grants upon death, subject to the terms of the specific grant. Directors may become fully vested in equity grants in the event of retirement or death, subject to the terms of the specific grant. All equity grants become fully vested in a change in control of the Corporation.

Performance Share Unit Awards in 2008

During 2008, the Committee worked with the compensation consultant to design a performance share unit award for Messrs. Warren and Treanor. The grant is intended to motivate and reward executives by positioning total compensation to be competitive with market for meeting defined performance goals, with opportunity to enhance pay by driving superior corporate performance. The program was designed to position total compensation at the 50th percentile for 50th percentile performance with opportunities for upward and downward adjustment based upon actual corporate performance, providing true pay-for performance opportunities through the leveraging of equity grants.

Mr. Warren’s target award is 6,007 shares, with an opportunity to earn from 0% to 200% of the target award depending on the Corporation’s performance versus that of the peer group during the performance measurement period. Typically, equity grants are earned over a three year period. However, Mr. Warren’s grant will be earned over the twenty-two month period ending on his normal retirement date in April 2010, and his target grant was prorated accordingly. Mr. Treanor’s target award is 6,086 shares, with an opportunity to earn from 0% to 200% of the target award, again depending on the Corporation’s performance. This grant will become vested on the third year anniversary of the grant. Both grants will become fully vested in the event of a change in control or death, and vested on a pro-rata basis in the event of disability or retirement prior to the vesting date. Except as outlined above, the grant is subject to forfeiture in the event of the executive’s termination of employment prior to the vesting date.

Selecting and defining the performance measurements for the performance share unit awards was a critical decision for the Committee. Measures needed to reflect our strategic plan and growth strategy, as well as shareholder expectations. In addition, measures had to be within the control and influence of the grantees so that there is a true correlation between actual contribution and reward. After reviewing a number of performance metrics, the Committee decided to base performance on core return on equity (“Core ROE”) and core earnings per share growth (“Core EPS Growth”), with the two metrics having equal weighting.

The number of shares to be issued upon vesting is based on relative Core ROE and Core EPS Growth performance, using an industry index of publicly-traded banks and thrifts located in New England and Mid-Atlantic with assets of $1 billion to $5 billion (excluding institutions in Puerto Rico) based on information published by SNL Financial. The Corporation must achieve threshold performance at the 25th percentile for each metric in order to qualify for any award. Shares will be issued at the target award level for performance at the 50th percentile, with a payout range of 50% to 200% of the target award level based on a straight line interpolation for performance from 25th percentile to 100th percentile.

Performance will be assessed for each calendar year in the performance measurement period. The Corporation’s relative performance ranking in each calendar year in the performance measurement period will be averaged to determine the final ranking. The performance period includes calendar years 2008 and 2009 for Mr. Warren; and calendar years 2008, 2009, and 2010 for Mr. Treanor. Generally, shares earned under the performance share unit awards will not be issued until the vesting date, which is April 30, 2010 for Mr. Warren, and June 16, 2011 for Mr. Treanor. In the event of a change in control, death, retirement, or permanent disability, the performance period will be shortened to include annual performance during each completed calendar year and for any partial years, year-to-date performance through the completed calendar quarter immediately preceding or coinciding with the acceleration event. Performance for a partial year will be weighted accordingly.

Mr. Treanor has announced his intention to retire in October 2009, and in such case, he would become vested in a pro rata share of this grant further modified by the Corporation’s performance during 2008 and year-to-date 2009.

Dividend equivalents will be paid retroactively in cash once the award vests and the final shares are actually issued.

The grant contains a ‘clawback’ provision that provides that, in the event the Corporation is required to prepare an accounting restatement due to the material noncompliance with any financial reporting requirement under the Federal securities laws, the executive is required to reimburse the Corporation for the value of shares of Common Stock issued under this award that would not have been earned based on the restated financial results.

2008 Equity Awards to Other Executives

In June 2008, the Committee granted time-based nonqualified stock options and/or restricted stock units to other key employees including Messrs. Devault, Daukas and Vesey. Restricted stock unit awards included dividend equivalent rights. The grant is subject to three year cliff vesting, subject to accelerated vesting in the event of change in control or the executive’s death, and pro-rated vesting in the event of retirement.

Cash Incentive

The Committee believes that cash incentives are instrumental in motivating and rewarding executives for achievement of corporate and division goals. All of our named executive officers participate in our Annual Performance Plan. In addition, Mr. Daukas participates in our Wealth Management Business Building Incentive Plan, which rewards achievement of growth targets for the wealth management product line.

Annual Performance Plan

The Annual Performance Plan provides for the payment of additional cash compensation based on corporate performance and the achievement of individual objectives by each participant in order to provide a link between performance and compensation. The percentages allocated to the corporate performance component and the individual performance component are 70% and 30%, respectively, for the Chief Executive Officer and the Chief Operating Officer, and 60% and 40%, respectively, for all other executive officers.

In determining corporate performance, the Annual Performance Plan focuses primarily on three financial metrics - net income, fully diluted earnings per share, and return on equity, with each metric receiving equal weighting. At the beginning of each year, the Corporation’s Board establishes performance targets based upon our strategic objectives. At the end of each year, the actual performance for each of the financial metrics is measured separately against its target. Performance exceeding a threshold of 80% of the performance target will result in progressively higher payment levels, ranging from 50% to 150% of the target payment for the corporate performance component.

The individual performance component for the Chief Executive Officer and the Chief Operating Officer is determined with consideration of matters such as leadership of the senior management team, strategic planning and

implementation, corporate governance, and ability to focus the Corporation on the long-term interests of our shareholders. For the other named executive officers, individual performance is determined with consideration of matters such as leadership, strategic planning, and achievement of business unit operational and/or production goals. In order to qualify for an individual performance component award, the weighted average of the financial metrics must be at least 80%. Once that threshold level is achieved, actual payments will be based on an assessment of employee performance against expectations established at the beginning of each year. The Committee relies upon the assessment of the performance of the Chief Executive Officer and the Chief Operating Officer by the independent directors of Corporation’s Board, and considers the Chief Executive Officer’s assessment of the performance of all other senior executives. Amounts not paid as a result of an employee not fully meeting individual performance expectations may be reallocated to any other employee who demonstrated extraordinary performance.

The target bonus opportunity is determined as a percentage of regular base salary earnings, and varies by level of responsibility. The target bonus percentage is 45% for Mr. Warren; 40% for Mr. Treanor; and 30% for Messrs. Devault, Daukas, and Vesey.

The terms of the Annual Performance Plan, including the target bonus levels and relationship of payouts to achievement of profitability measures, were established by the Committee in consultation with the compensation consultant. Annually, the Committee reviews the plan to ensure that it is designed in a manner that continues to motivate employees to achieve our profitability goals. Regardless of the actual award determined by the plan parameters, the Committee has the authority to modify any award.

While reviewing the 2008 budget in late 2007, management and the Committee realized the challenges facing the Corporation in 2008. During the prior year, in order to reduce expense to improve our financial performance for our shareholders, management and directors had foregone equity compensation grants. This was considered for 2008, but, ultimately, the Committee decided that the elimination of equity compensation for two consecutive years was not in line with our compensation philosophy. Instead, the Committee opted to reduce bonus targets to 91.45% of the target bonus percentage, which held the plan’s budgeted expense for 2008 at 2007 levels. This reduced the 2008 target bonus percentage to 41.15% for Mr. Warren; 36.58% for Mr. Treanor; and 27.44% for Messrs. Devault, Daukas, and Vesey. All other plan provisions remained in force.

In 2008, the target ranges for the financial metrics related to a full payout under the corporate performance component of the Annual Performance Plan were: (i) net income: $24,326,300 to $25,573,700; (ii) fully diluted earnings per share: $1.77 to $1.86; and (iii) return on equity: 12.55% to 13.18%. For 2008, the Corporation reported net income of $22,172,000; fully diluted earnings per share of $1.57; and return on equity of 11.12%, which entitled the executive officers to a payout of 66.7% for the corporate performance component. Annual Performance Plan awards for the named executive officers are outlined below:

▪

Mr. Warren fully met his individual performance expectations. In consideration of both individual and corporate performance, Mr. Warren received a bonus payment of $154,297, which is 77.6% of the reduced target bonus of $198,726 (71.0% of the target bonus under the normal terms of the plan). This includes a discretionary adjustment of $1,894.

▪

Mr. Treanor fully met his individual performance expectations. In consideration of both individual and corporate performance, Mr. Treanor received a bonus payment of $116,147, which is 86.5% of the reduced target bonus of $134,225 (79.1% of the target bonus under the normal terms of the plan). This includes a discretionary adjustment of $13,210.

▪

Mr. Devault fully met his individual performance expectations. In consideration of both individual and corporate performance, Mr. Devault received a bonus payment of $48,516, which is 80.4% of the reduced target bonus of $60,347 (73.5% of the target bonus under the normal terms of the plan). This includes a discretionary adjustment of $226.

▪

Mr. Daukas fully met his individual performance expectations. In consideration of both individual and corporate performance, Mr. Daukas received a bonus payment of $67,907, which is 79.8% of the reduced target bonus of $85,053 (73.0% of the target bonus under the normal terms of the plan). He also received a payment under the Wealth Management Business Building Incentive Plan, which is discussed below.

▪

Mr. Vesey fully met his individual performance expectations. In consideration of both corporate and individual performance, Mr. Vesey received a bonus payment of $38,866, which is 84.3% of the reduced target bonus of $46,087 (77.1% of the target bonus under the normal terms of the plan). This includes a discretionary adjustment of $1,987.

The conditions that challenged our economy and financial markets during 2008 are expected to continue into 2009. In order to improve our financial performance for our shareholders, the Committee plans to reduce 2009 bonus targets to 80% of the target bonus percentage. This will reduce the 2009 target bonus percentage to 36% for Mr. Warren; 32% for Mr. Treanor; and 24% for Messrs. Devault, Daukas, and Vesey.

Wealth Management Business Building Incentive Plan

Mr. Daukas is eligible for an additional bonus payment based upon the performance of the wealth management division. This incentive is intended to drive growth in the wealth management product line, which is an important contributor to our net income. The target payment is $200,000, with a range of 0% to 150% based upon actual performance. Plan performance is measured in terms of division pre-tax earnings, revenues, and net new assets under management, with each metric having equal weighting. Net new assets under management is inclusive of all cash flows excluding investment income. Goal achievement for the three metrics first must average at least 80% in order to qualify for a plan payment. Once this threshold is met, plan payment is determined by assessing achievement of each metric individually against its target. Performance exceeding a threshold of 80% of the performance target will result in progressively higher payment levels, ranging from 50% to 150% of the target payment.

In 2008, plan targets were: (i) pre-tax earnings of $16,277,195; (ii) revenues of $32,070,929; and (iii) net new assets under management of $120,000,000. During 2008, the wealth management division met 83.4% of the pre-tax earnings goal, 88.3% of the revenue goal, and 111.7% of the net new assets under management goal. This performance resulted in a total bonus payment of $175,000 to Mr. Daukas under this plan.

The market declined significantly during the final months of 2008. As wealth management asset values declined, the division’s revenues and pre-tax earnings declined accordingly, but the wealth management division’s strong performance in the first half of 2008 coupled with strong new business activity resulted in an 87.5% payout as described above. The full year effect of the market decline will be reflected in 2009 revenues and pre-tax earnings. As a result, the Committee modified the business building incentive for 2009 to provide for a reduced payout of $100,000 only upon full achievement of revenue, pre-tax earnings, and net new assets under management goals. Mr. Daukas has the opportunity to increase this payout to $200,000 if the wealth management division is able to achieve 2009 revenue and pre-tax earning results that equal or exceed the 2008 results detailed above, and he meets the net new assets under management goal for 2009 established by the Committee.

Retirement and Other Benefits

Pension Plan

The Bank offers a tax-qualified defined benefit Pension Plan for the benefit of most employees. The Committee reviewed the Bank’s retirement program, benefit trends, and best practices, and made a strategic decision to shift retirement benefits from the Pension Plan to the 401(k) Plan. Effective October 1, 2007, the Pension Plan was amended to freeze plan entry to new hires and rehires. Existing employees hired prior to October 1, 2007, including all named executive officers, continue to accrue benefits under the Pension Plan.

The annual pension benefit for an employee retiring at normal retirement age is the sum of (1) 1.2% of average annual pension compensation plus (2) 0.65% of average annual pension compensation in excess of the Social Security covered compensation level, multiplied by the number of years of service limited to 35 years. Pension compensation consists of base salary plus payments pursuant to the Annual Performance Plan, the Wealth Management Business Building Incentive Plan, and other cash-based payments. In 2008, the Social Security covered compensation level was $56,484 for a participant retiring at age 65.

Pension benefits are available at normal retirement age, typically age 65. Participants may commence reduced benefits as early as age 55 with ten years of service. Messrs. Warren and Vesey are the only named executive officers who currently meet the age and service requirements to commence pension benefits.

The Pension Plan was amended in 2005 to eliminate a special early retirement benefit available to participants who had combined age and years of benefit service of 85 or more (the “Magic 85 Provision”). The plan amendment provided that the Magic 85 Provision would still be available to qualifying grandfathered employees retiring from active service on or after age 60. Under the Magic 85 Provision, the pension benefit of qualifying participants is not subject to reduction for early benefit commencement. Additionally, qualifying participants are eligible for a temporary payment through age 62, which is equal to the participant’s estimated Social Security benefit at age 62. Mr. Devault is the only named executive officer who is expected to qualify for the Magic 85 Provision.

Supplemental Pension Plan

The Bank also offers a Supplemental Pension Plan, which provides for payments of certain amounts that would have been received under the Pension Plan in the absence of IRS limits. We believe this Supplemental Pension Plan helps to retain and attract executives whose benefits under the Pension Plan are otherwise limited by the IRS. Benefits payable under the Supplemental Pension Plan are an unfunded obligation of Washington Trust.

In 2007, the Supplemental Pension Plan was restated to comply with Section 409A of the Internal Revenue Code. Among other things, this restatement defined the benefit commencement date as separation from service after age 65 or after age 55 with at least ten years of service. In addition, the plan was amended to impose a six-month delay of payments to a ‘specified employee’ within the meaning of Section 409A(a)(2)(B)(i) of the Internal Revenue Code. Delayed payments will be credited with interest.

This plan covers substantially all employees who are impacted by IRS limits under the Pension Plan. Messrs. Warren and Treanor are not eligible to participate in this plan as further explained under “Executive Pension Plan” below. Mr. Vesey is the only named executive officer who currently meets the age and service requirements to commence benefits.

Executive Pension Plan

We also maintain an Executive Pension Plan for the benefit of Messrs. Warren and Treanor. Benefits provided under the Executive Pension Plan are deemed necessary to attract and retain our top executives who were hired later in their career. Our compensation consultant considers the benefits provided under the Executive Pension Plan in its compensation analysis, and has determined that the benefits are in line with market practice. Benefits payable under the Executive Pension Plan are an unfunded obligation of Washington Trust.

The Executive Pension Plan provides a benefit of 30% of average annual pension compensation plus 2% for each year of service up to a maximum of 55%. Benefits are offset by benefits provided by the Pension Plan, Social Security, and any defined benefit pension plan of a prior employer. A participant must have at least five years of service to earn a benefit under the Executive Pension Plan. There is a minimum benefit of $1,000 for each year of plan participation, up to a maximum of $10,000.

In 2007, the Executive Pension Plan was restated to comply with Section 409A of the Internal Revenue Code. Among other things, this restatement defined the benefit commencement date as separation from service after age 65 or after age 55 with at least ten years of service. In addition, the plan was amended to impose a six-month delay of payments to a ‘specified employee’ within the meaning of Section 409A(a)(2)(B)(i) of the Internal Revenue Code. Delayed payments will be credited with interest.

Further, the Supplemental Pension Plan and Executive Pension Plan must be treated as one plan for purposes of Section 409A of the Internal Revenue Code. Instead of amending the plans to act in tandem, the Committee decided to exclude Messrs. Warren and Treanor from participation in the Supplemental Pension Plan. All supplemental retirement benefits for Messrs. Warren and Treanor are provided through the Executive Pension Plan. This did not result in a substantive increase or decrease in the aggregate amounts of plan benefits or expense.

Mr. Warren is the only participant who currently meets the age and service requirements to commence benefits.

401(k) Plan

The Bank maintains a 401(k) Plan that covers substantially all employees. The 401(k) Plan is an essential part of the retirement package needed to attract and retain employees in the banking industry. The 401(k) Plan provides for

deferral of up to the lesser of 25% of plan compensation or the annual dollar limit prescribed by the Internal Revenue Code.

Effective January 1, 2008, the 401(k) Plan was amended to promote shared responsibility for retirement through personal savings, as well as to serve as the primary retirement plan for employees who were hired or rehired after September 30, 2007. Plan provisions include automatic enrollment at 3% of plan compensation, and annual automatic increase by 1% to a maximum of 6%. The Bank matches 100% of each participant’s first 1% of voluntary salary deferrals and 50% of each participant’s next 4% of salary deferrals up to a maximum match of 3%. Additionally, certain eligible employees who are hired or rehired after September 30, 2007, and, therefore, are excluded from participation in the Pension Plan, are eligible for a non-elective employer contribution of 4% of plan compensation. No named executive officers are eligible for the non-elective contribution. Employees hired after September 30, 2007 are subject to two-year cliff vesting of employer contributions. All named executive officers are fully vested in employer contributions.

Nonqualified Deferred Compensation Plan

We provide a Nonqualified Deferred Compensation Plan that permits key employees, including the named executive officers, to defer salary and bonus with the opportunity for supplemental retirement and tax benefits. Directors are also eligible to participate by the deferral of retainer and meeting fees.

The Nonqualified Deferred Compensation Plan also provides for credits of certain amounts that would have been matched by the Bank under the 401(k) Plan, but for the deferral under the Nonqualified Deferred Compensation Plan and IRS limitations on annual compensation under qualified plans. Directors are not eligible for employer contributions. Employees hired after September 30, 2007 are subject to two-year cliff vesting of employer contributions. All named executive officers are fully vested in employer contributions.

Deferrals are credited with earnings/losses based upon the participant’s selection of investment measurement options. The investment measurements include publicly-traded mutual funds. Because these investment measurements are publicly traded securities, we do not consider any of the earnings credited under the Nonqualified Deferred Compensation Plan to be “above market”. The investment measurements are described further under the heading “Nonqualified Deferred Compensation” beginning on page 25 of this Proxy Statement.

The Nonqualified Deferred Compensation Plan is compliant with Section 409A of the Internal Revenue Code. Benefits payable under this plan are an unfunded obligation of the Bank.

Welfare Benefits

In order to attract and retain employees, we provide certain welfare benefit plans to our employees, which include medical and dental insurance benefits. The named executive officers participate in the medical and dental insurance plans under the same terms as our other full-time employees. All full-time employees, including the named executive officers, are offered cash-in-lieu of medical and dental coverage that would otherwise have been provided. During 2008, no named executive officers elected to receive cash in lieu of benefit coverage.

We provide two times base salary in life and accidental death and dismemberment insurance for our full-time employees, including the named executive officers. This is provided through a combination of group life insurance contracts and split dollar arrangements under Bank-owned life insurance policies. The life insurance benefit provided to the named executive officers does not exceed the benefit levels offered to other full-time employees.

We also provide disability insurance to our full-time employees including the named executive officers, which provides up to 60% of base salary income replacement after six months of qualified disability. In order to obtain a competitive group rate, the group disability policy limits covered base salary to $250,000. This group plan limit does not fully cover Messrs. Warren, Treanor and Daukas’ base salaries. In order to provide a benefit that is commensurate with the benefits provided to other full-time employees, we have purchased a supplemental disability insurance policy for Messrs. Warren and Treanor and we reimburse Mr. Daukas for a pro-rata share of his personal disability insurance policy.

Perquisites and Other Personal Benefits

We provide named executive officers with perquisites and other personal benefits that the Committee believes are reasonable and consistent with our overall compensation program. Perquisites include transportation benefits, country club memberships, and relocation benefits (as applicable). Annually, the Committee reviews the levels of perquisites and other personal benefits provided to named executive officers. In addition, on an annual basis the Chairperson of the Committee reviews the expense reports of the named executive officers to ensure that all reimbursements are reasonable and appropriate. On February 9, 2009, this review was completed with respect to 2008 expense reimbursements and no exceptions were noted.

Deductibility of Executive Compensation

As part of its role, the Committee reviews and considers the deductibility of executive compensation under Section 162(m) of the Internal Revenue Code, which provides that we may not deduct compensation of more than $1,000,000 that is paid to certain individuals. Compensation that qualifies as performance-based compensation is not subject to the deduction limit imposed by Section 162(m). Where circumstances warrant, we plan to structure our cash and equity incentive compensation to our executives in a manner that would qualify such compensation as performance-based compensation. During 2008, no employee received taxable compensation in excess of $1,000,000, and, therefore, all such compensation was fully deductible for federal income tax purposes.

Stock Ownership Requirements

We have previously adopted Corporate Governance Guidelines that required each director to maintain a minimum ownership in our Common Stock of 1,000 shares within three years of joining the Corporation’s Board. In March 2008, this minimum ownership requirement was increased to 2,000 shares of our Common Stock. Existing directors must meet the increased ownership requirement by the 2011 Annual Meeting of Shareholders.

Change in Control Agreements

We have entered into Change in Control Agreements (collectively, the “Change in Control Agreements”) with certain key employees, including the named executive officers. The Change in Control Agreements are designed to promote stability and continuity of senior management. The Committee believes that the interests of shareholders will be best served if the interests of senior management are aligned with them. The Committee further believes that providing change in control benefits should eliminate, or at least reduce, the reluctance of senior management to pursue potential change in control transactions that may be in the best interests of shareholders.

In the event of a change in control, the named executive officers would be eligible for (a) a severance payment equal to a multiple of the sum of base salary in effect at the time of termination plus the highest bonus paid in the 2-year period prior to the change in control; (b) benefit continuation for a period of additional months of medical, dental and life insurance coverage, as well as additional months of benefit accrual under the Corporation’s or Bank’s supplemental retirement plans; and (c) payment to cover the impact of the 20% excise tax imposed by Section 280G of the Internal Revenue Code in the event the named executive officer becomes subject to such excise tax. The terms vary for each executive, as set forth in the following table.

	Multiple of Base and Bonus	Length of Benefit Continuation
Messrs. Warren and Treanor	3	36 months
Messrs. Devault, Daukas, and Vesey	2	24 months

Payments under the Change in Control Agreements would be triggered if:

▪

in the event of a change in control (as defined in the Change in Control Agreements) of the Corporation or Bank, (a) the Corporation or Bank terminates the executive for reasons other than for Cause (as defined in the Change in Control Agreements) or death or disability of the executive within 13 months after such change in control; or (b) within 12 months of a change in control, the executive resigns for Good Reason (as defined in the Change in Control Agreements), which includes a substantial adverse change in the nature or scope of the executive’s responsibilities and duties, a reduction in the executive’s salary and benefits, relocation, a failure of the Corporation or Bank to pay deferred compensation when due, or a failure of the Corporation or Bank to obtain an effective agreement from any successor to assume the Change in Control Agreements; or

▪	the executive resigns for any reason during the 13th month after the change in control; or

▪

the executive is terminated by the Corporation or Bank for any reason other than Cause, death or disability during the period of time after the Corporation and/or the Bank enters into a definitive agreement to consummate a transaction involving a change in control and before the transaction is consummated so long as a change in control actually occurs.

The Change in Control Agreements require a six-month delay in payments to a ‘specified employee’ within the meaning of Section 409A(a)(2)(B)(i) of the Internal Revenue Code. If a six-month delay is required, we have agreed, upon the executive’s termination of employment, to make an irrevocable contribution to a grantor trust on behalf of the executive in the amount of the severance, plus interest at the short-term applicable federal rate.

Further analysis of payments triggered by a change in control is provided under the heading “Potential Post-Employment Payments” on page 26 of this Proxy Statement.

COMPENSATION COMMITTEE REPORT

The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis report beginning on page 8 of this Proxy Statement with management. Based on that review and discussion, the Compensation Committee recommended to the Corporation’s Board that the Compensation Discussion and Analysis be included in this Proxy Statement.

The foregoing report has been furnished by the members of the Compensation Committee:

Gary P. Bennett (Chairperson)	Edward M. Mazze, Ph.D.
Larry J. Hirsch, Esq.	Kathleen E. McKeough
Mary E. Kennard, Esq.	Victor J. Orsinger II, Esq.

EXECUTIVE COMPENSATION

Summary Compensation Table

The following table shows, for the fiscal years ended December 31, 2008, December 31, 2007 and December 31, 2006, the compensation of the person who served as Chief Executive Officer of the Corporation, Chief Financial Officer of the Corporation, and each of the three most highly compensated executive officers of the Corporation and/or the Bank, other than the Chief Executive Officer and Chief Financial Officer, whose total compensation exceeded $100,000 in each year. The presentation below includes compensation for Mr. Vesey only for fiscal year ended December 31, 2008, the only year in the last three fiscal years in which he was a named executive officer.

SUMMARY COMPENSATION TABLE
Name and Principal Position	Year	Salary ($)		Bonus ($) (a)	Stock Awards ($) (b)	Option Awards ($) (c)	Non-Equity Incentive Plan Compen- sation ($) (d)		Change in Pension Value & Nonqualified Deferred Compensation Earnings ($)		All Other Compensation ($) (e)	Total ($)
John C. Warren Chairman and Chief Executive Officer	2008	$482,931		$1,894	$137,808	$0	$152,403		$411,068	(f)	$38,472	$1,224,576
	2007	$465,000		$6,217	$134,695	$0	$178,783		$547,420	(g)	$43,103	$1,375,218
	2006	$439,173	(h)	$36,719	$133,526	$7,310	$163,281		$402,807	(i)	$40,899	$1,223,715
John F. Treanor President and Chief Operating Officer	2008	$366,935		$13,210	$84,334	$0	$102,937		$218,032	(f)	$34,452	$819,900
	2007	$350,000		$5,384	$79,643	$0	$119,616		$244,959	(g)	$33,244	$832,846
	2006	$320,000		$32,000	$78,614	$4,310	$128,000		$105,587	(i)	$31,764	$700,275
David V. Devault Executive Vice President, Secretary and Chief Financial Officer	2008	$219,923		$226	$6,097	$7,491	$48,290		$136,490	(f)	$6,802	$425,319
	2007	$200,000		$3,488	$6,886	$0	$52,512		$61,733	(g)	$6,192	$330,811
	2006	$193,000		$2,100	$11,805	$2,262	$57,900		$58,438	(i)	$5,978	$331,483
Galan G. Daukas Executive Vice President, Wealth Management	2008	$309,962		$0	$36,330	$10,573	$242,907		$37,874	(f)	$27,168	$664,814
	2007	$300,000		$2,232	$27,620	$0	$220,368	(j)	$27,041	(g)	$26,100	$603,361
	2006	$285,000		$0	$27,620	$0	$360,500	(k)	$30,759	(i)	$216,461	$920,340
James M. Vesey Executive Vice President & Chief Credit Officer	2008	$167,954		$1,987	$9,146	$0	$36,879	(l)	$58,038	(f)	$5,212	$279,216

(a)

Bonus payments were accrued in the year indicated and paid in the succeeding fiscal year. Thus, the 2008 bonus was paid in fiscal 2009, the 2007 bonus was paid in fiscal 2008 and the 2006 bonus was paid in fiscal 2007. Bonus payments in 2008 include discretionary awards to Messrs. Warren, Treanor, Devault, and Vesey discussed in the Compensation Discussion and Analysis earlier in this Proxy Statement. Bonus payments in 2007 include discretionary awards to Messrs. Warren, Treanor, Devault, and Daukas discussed in our Proxy Statement dated March 14, 2008 for the 2008 Annual Meeting of Shareholders (the “2008 Proxy Statement”). Bonus payments in 2006 include discretionary awards to Messrs. Warren, Treanor, and Devault discussed in our Proxy Statement dated March 15, 2007 for the 2007 Annual Meeting of Shareholders (the “2007 Proxy Statement”).

(b)

Amount listed reflects the dollar amount recognized for financial statement reporting purposes in 2008, 2007 and 2006, as applicable, in accordance with SFAS No. 123R of restricted stock, restricted stock unit awards, and performance share unit awards, and thus includes amounts from awards granted in and prior to the year indicated. For 2008, assumptions related to the financial reporting of restricted stock, restricted stock units, and performance shares units are presented in Footnote 16 to the Consolidated Financial Statements presented in our Annual Report on Form 10-K for the fiscal year ended December 31, 2008 (the “2008 Form 10-K”). For 2007, assumptions related to the financial reporting of restricted stock and restricted stock units are presented in Footnote 17 to the Consolidated Financial Statements presented in our Annual Report on Form 10-K for the fiscal year ended December 31, 2007 (the “2007 Form 10-K”). For 2006, assumptions related to the financial

reporting of restricted stock and restricted stock units are presented in Footnote 17 to the Consolidated Financial Statements presented in our Annual Report on Form 10-K for the fiscal year ended December 31, 2006 (the “2006 Form 10-K”).

(c)

Amount listed reflects the dollar amount recognized for financial statement reporting purposes in the year indicated, as applicable, in accordance with SFAS No. 123R on unexercisable stock option awards, and thus includes amounts from awards granted in and prior to the year indicated. For 2008, assumptions related to the financial reporting of stock options are presented in Footnote 16 to the Consolidated Financial Statements presented in the 2008 Form 10-K. For 2006, assumptions related to the financial reporting of stock options are presented in Footnote 17 to the Consolidated Financial Statements presented in the 2006 Form 10-K.

(d)

Amount listed reflects payments under the Annual Performance Plan and Wealth Management Business Building Incentive Plan as outlined earlier in this Proxy Statement for 2008, in the 2008 Proxy Statement for 2007 and in the 2007 Proxy Statement for 2006. Bonus payments were accrued in the year indicated and paid in the succeeding fiscal year. Thus, the 2008 bonus was paid in fiscal 2009, the 2007 bonus was paid in fiscal 2008 and the 2006 bonus was paid in fiscal 2007.

(e)	The following table shows the components of this column for 2008:

Named Executive Officer	Life Insurance Premiums	Disability Insurance Premiums	Employer Match Under the 401(k) Plan	Employer Credits Under Nonqualified Deferred Compensation Plan	Country Club Membership	Company Provided Vehicle or Auto Allowance	Non-cash Items and Related Tax Gross-up Payment (1)	Total
Warren	$228	$4,008	$6,900	$7,588	$7,293	$12,455	$0	$38,472
Treanor	$228	$3,016	$6,900	$4,108	$11,100	$9,100	$0	$34,452
Devault	$204	$0	$6,598	$0	$0	$0	$0	$6,802
Daukas	$228	$632	$6,900	$2,399	$9,000	$7,900	$109	$27,168
Vesey	$173	$0	$5,039	$0	$0	$0	$0	$5,212

(1) Non-cash items reflect the cash value of promotional merchandise received during the year.

(f)

Amount reflects 12/15ths of the difference between the Present Value of Accumulated Benefits under the Pension Plan, Supplemental Pension Plan, and Executive Pension Plan at December 31, 2008 and the Present Value of Accumulated Benefits at September 30, 2007. The 12/15ths adjustment reflects the change in measurement date from September 30 to December 31 that was used for our financial disclosures under SFAS No. 158. The amount represents the increase due to an additional year of service; increases in average annual compensation; the increase due to a reduction in the discounting period; and the increase or decrease due to changes in assumptions. Assumptions are described in footnotes to the Pension Benefits Table included later in this Proxy Statement. Amounts are based upon the earliest retirement age at which the individual can receive unreduced benefits, which for Mr. Devault is age 60 and for all others is age 65. The present value calculations assume payment in the normal form, which is a life annuity under the Pension Plan and Supplemental Pension Plan, and a 50% joint and survivor annuity with 120 guaranteed monthly payments under the Executive Pension Plan.

(g)

Amount reflects aggregate change in the value of accumulated benefits under the Pension Plan, Supplemental Pension Plan, and Executive Pension Plan between September 30, 2006 and September 30, 2007. The amount represents the increase due to an additional year of service; increases in average annual compensation; the increase due to a reduction in the discounting period; the increase or decrease due to changes in assumptions; and the transfer of liability from the Supplemental Pension Plan to the Executive Pension Plan for Messrs. Warren and Treanor as described in the Compensation Discussion and Analysis earlier in this Proxy Statement. Assumptions are described in footnotes to the Pension Benefits Table included in the 2008 Proxy Statement. Amounts are based upon the earliest retirement age at which the individual can receive unreduced benefits, which for Mr. Devault is age 60 and for all others is age 65. The present value calculations assume payment in the normal form, which is a life annuity under the Pension Plan and Supplemental Pension Plan, and a 50% joint and survivor annuity with 120 guaranteed monthly payments under the Executive Pension Plan.

(h)

Mr. Warren was on a medical leave of absence during 2006, and did not earn his full base salary of $445,000. Amount listed reflects $362,846 in salary earnings and $76,327 in salary continuation benefits. Salary continuation benefits are available to all full-time employees and provide up to 26 weeks of salary continuation for qualifying medical absence. Salary continuation benefits, including the benefits payable to Mr. Warren, are offset by any amounts received through other disability programs including the Rhode Island Temporary Disability Insurance Program. The amount listed is net of such offsets.

(i)

Amount reflects aggregate change in the value of accumulated benefits under the Pension Plan, Supplemental Pension Plan, and Executive Pension Plan between September 30, 2005 and September 30, 2006. The amount represents the increase due to an additional year of service; increases in average annual compensation; the increase due to a reduction in the discounting period; and the increase or decrease due to changes in assumptions. Assumptions are described in footnotes to the Pension Benefits Table included in the 2007 Proxy Statement. Amounts are based upon the earliest retirement age at which the

individual can receive unreduced benefits, which for Mr. Devault is age 60 and for all others is age 65. The present value calculations assume payment in the normal form, which is a life annuity under the Pension Plan and Supplemental Pension Plan, and a 50% joint and survivor annuity with 120 guaranteed monthly payments under the Executive Pension Plan.

(j)	Includes $22,260 deferred under the Nonqualified Deferred Compensation Plan during 2008.

(k)	Includes $36,050 deferred under the Nonqualified Deferred Compensation Plan during 2007.

(l)	Includes $19,912 deferred under the Nonqualified Deferred Compensation Plan during 2009.

_________________

Grants of Plan-Based Awards

The following table contains information concerning grants of plan based awards under our cash and equity incentive plans to the named executive officers during the year ended December 31, 2008.

GRANTS OF PLAN-BASED AWARDS

Estimated Possible Payouts Under Non-Equity Incentive Plan Awards

Estimated Future Payouts Under Equity Incentive Plan Awards

All Other Stock Awards: Number of Shares of Stock or Units(#)

All Other Option Awards: Number of Securities Underlying Options (#)

Exercise or Base Price of Option Awards ($/Sh)

Grant Date Fair Value Of Stock And Option Awards

Name

Grant

Date

Threshold ($)

Target

($)

Maximum

($)

Threshold (#)

Target

(#)

Maximum

(#)

Warren

12/17/07

$129,172

$198,726

$268,280 (a)

6/16/08

3,004

6,007

12,014 (b)

$72,456

(c)

Treanor

12/17/07

$87,246

$134,225

$181,204 (a)

6/16/08

3,043

6,086

12,172 (b)

$73,397

(c)

Devault

12/17/07

$42,243

$60,347

$78,451 (a)

6/16/08

1,400 (d)

$33,768

6/16/08

5,100 (e)

$24.12

$41,257

Daukas

12/17/07

$59,537

$85,053

$110,569 (a)

12/17/07

$100,000

$200,000

$300,000 (f)

6/16/08

2,000 (d)

$48,240

6/16/08

7,200 (e)

$24.12

$58,245

Vesey

12/17/07

$32,261

$46,087

$59,913 (a)

6/16/08

2,100 (d)

$50,652

(a)

Reflects the 2008 threshold, target and maximum award available under the Annual Performance Plan. Plan targets were adjusted to 91.45% of the normal target to decrease expense and improve corporate performance as discussed in the Compensation Discussion and Analysis earlier in this Proxy Statement. The Annual Performance Plan is based upon achievement of both corporate and individual goals. Threshold awards assume corporate performance at 80% of plan (resulting in a 50% payout on the corporate performance component) and individual performance at 100%. This plan is described in detail in the Compensation Discussion and Analysis earlier in this Proxy Statement. Actual awards are reflected in the Summary Compensation Table. The grant date represents the date that the terms of the awards for 2008 under this plan were approved by the Compensation Committee.

(b)	Reflects the threshold, target and maximum number of shares available under the performance share unit award granted on June 16, 2008. This grant is described in detail in the Compensation Discussion and Analysis earlier in this Proxy Statement.

(c)

As of the date of this Proxy Statement, the Core ROE and Core EPS Growth for the peer group has not yet been determined. These amounts reflect the grant date fair value of the performance share unit award, assuming the award becomes vested at the threshold. The actual number of shares that will vest will depend on the Corporation’s performance versus that of the peer group during the performance measurement period and, therefore, actual amounts may be different.

(d)

Reflects a restricted stock unit grant on June 16, 2008. This grant will become fully vested upon the earliest of June 16, 2011, the executive's death, or change in control of the Corporation. The grant will be vested on a pro-rated basis upon the executive's retirement. This grant included dividend equivalent rights.

(e)	Reflects a nonqualified stock option grant on June 16, 2008. This grant will become fully vested upon the earliest of June 16, 2011, the executive's death, or change in control of the Corporation. The grant will be vested on a pro-rated basis upon the executive's retirement.

(f)

Reflects the 2008 threshold, target and maximum award available under the Wealth Management Business Building Incentive Plan. This plan is described in detail in the Compensation Discussion and Analysis earlier in this Proxy Statement. Actual awards are reflected in the Summary Compensation Table. The grant date represents the date that the terms of the award for 2008 under this plan were approved by the Compensation Committee.

_______________________

Outstanding Equity Awards at Fiscal Year-End

The following table sets forth information with respect to the named executive officers concerning unexercised stock option awards and unvested stock awards as of December 31, 2008.

OUTSTANDING EQUITY AWARDS AT FISCAL YEAR END
Name	Number of Securities Underlying Unexercised Options (#) Exercisable	Number of Securities Underlying Unexercised Options (#) Unexercisable	Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#)	Option Exercise Price ($)	Option Expiration Date	Number of Shares or Units of Stock That Have Not Vested(#)		Market Value of Shares or Units of Stock That Have Not Vested ($) (a)	Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)		Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) (a)

John C. Warren	12,703	-	-	$15.25	5/15/2010
	28,000	-	-	$17.80	4/23/2011
	26,960	-	-	$20.03	4/22/2012
	28,125	-	-	$20.00	5/12/2013
						6,500	(b)	$128,375	-		-
						-		-	3,004	(c)	$59,329
John F. Treanor	5,147	-	-	$16.38	4/1/2009
	9,642	-	-	$17.50	5/17/2009
	13,968	-	-	$15.25	5/15/2010
	16,000	-	-	$17.80	4/23/2011
	11,605	-	-	$20.03	4/22/2012
	16,565	-	-	$20.00	5/12/2013
						3,900	(b)	$77,025	-		-
						-		-	3,043	(d)	$60,099
David V. Devault	8,400	-	-	$17.50	5/17/2009
	10,100	-	-	$15.25	5/15/2010
	9,045	-	-	$17.80	4/23/2011
	8,440	-	-	$20.03	4/22/2012
	8,700	-	-	$20.00	5/12/2013
	6,200	-	-	$26.81	6/13/2015
	6,200	-	-	$28.16	12/12/2015
	-	5,100 (e)	-	$24.12	6/16/2018
						1,400	(f)	$27,650	-		-
Galan G. Daukas	20,000	-	-	$27.62	8/30/2015
	12,315	-	-	$28.16	12/12/2015
	-	7,200 (e)	-	$24.12	6/16/2018
						5,000	(g)	$98,750	-		-
						2,000	(f)	$39,500	-		-
James M. Vesey	4,905	-	-	$20.03	4/22/2012
	5,065	-	-	$20.00	5/12/2013
	3,800	-	-	$26.81	6/13/2015
	3,800	-	-	$28.16	12/12/2015
						2,100	(f)	$41,475	-		-

(a)	Based upon December 31, 2008 fair market value of $19.75.

(b)	This restricted stock unit grant will vest on April 25, 2009.

(c)

This performance share unit award vests on April 30, 2010 based on achievement of certain performance criteria, which are described in the Compensation Discussion and Analysis earlier in this Proxy Statement. The actual number of shares that will vest will depend on the Corporation’s performance versus that of the peer group during the performance measurement period. As of the date of this Proxy Statement, the Core ROE and Core EPS Growth for the peer group has not yet been determined and, therefore, the amounts included in this table reflect the threshold amounts. Actual results may be different.

(d)

This performance share unit award vests on June 16, 2011 based on achievement of certain performance criteria, which are described in the Compensation Discussion and Analysis earlier in this Proxy Statement. The actual number of shares that will vest will depend on the Corporation’s performance versus that of the peer group during the performance measurement period. As of the date of this Proxy Statement, the Core ROE and Core EPS Growth for the peer group has not yet been determined and, therefore, the amounts included in this table reflect the threshold amounts. Actual results may be different.

(e)	This nonqualified stock option grant vests on June 16, 2011.

(f)	This restricted stock unit grant vests on June 16, 2011.

(g)	This restricted stock grant vests on August 30, 2010.

_______________________

Option Exercises and Stock Vested

The following table sets forth information with respect to the named executive officers concerning the exercise of stock options and stock awards that vested during the year ended December 31, 2008.

OPTION EXERCISES AND STOCK VESTED

	Option Awards			Stock Awards
Named Executive Officer	Number of Shares Acquired on Exercise (#)		Value Realized on Exercise ($)	Number of Shares Acquired on Vesting (#)		Value Realized on Vesting ($)
John C. Warren	17,106	(a)	$167,290	5,800	(b)	$139,200
John F. Treanor	6,975	(a)	$78,643	3,400	(b)	$81,600
David V. Devault	0		$0	0		$0
Galan G. Daukas	0		$0	0		$0
James M. Vesey	0		$0	0		$0

(a)	Amounts shown represent the number of options exercised. Taking into consideration shares exchanged for option exercise price and tax withholding, Messrs. Warren and Treanor acquired net amounts of 4,830 and 2,845 shares, respectively.

(b)	Amounts shown represent the number of stock units vested during the year. Taking into consideration shares withheld for payment of applicable taxes, Messrs. Warren and Treanor acquired net amounts of 3,860 and 2,263 shares, respectively.

_______________________

Pension Benefits

The following table sets forth information with respect to the pension benefits of the named executive officers under the Pension Plan, Supplemental Pension Plan and Executive Pension Plan. Information about these plans can be found under the heading “Compensation Discussion and Analysis - Retirement and Other Benefits” earlier in this Proxy Statement.

PENSION BENEFITS

Named Executive Officer	Plan Name	Number of Years Credited Service (#)	Present Value of Accumulated Benefit ($) (a)	Payments During Last Fiscal Year ($)
John C. Warren	Pension Plan	12.9	$457,664	-
	Executive Pension Plan (b)	12.9	$2,461,829	-
John F. Treanor	Pension Plan	9.8	$303,970	-
	Executive Pension Plan (c)	9.8	$668,909	-
David V. Devault	Pension Plan (d)	22.2	$628,597	-
	Supplemental Pension Plan	22.2	$210,366	-
Galan G. Daukas	Pension Plan	3.3	$39,494	-
	Supplemental Pension Plan	3.3	$65,648	-
James M. Vesey	Pension Plan	10.0	$248,848	-
	Supplemental Pension Plan	10.0	$29,360	-

(a)

Present value of accumulated benefits under the Pension Plan, Supplemental Pension Plan, and Executive Pension Plan as of December 31, 2008, determined using mortality assumptions based on the 1994 Group Annuity Reserve tables with no mortality assumption prior to benefit commencement and other assumptions consistent with those presented in Footnote 15 to the Consolidated Financial Statements presented in the 2008 Form 10-K, except that retirement age is based upon the earliest retirement age at which the named executive officer can receive unreduced benefits. For Mr. Devault, this represents retirement under the Magic 85 Provision at age 60 and for all other named executive officers this represents normal retirement at age 65. Present value is expressed as a lump-sum; however, the plans do not provide for payment of benefits in a lump-sum, but rather are payable only in the form of an annuity with monthly benefit payments. The present value calculations assume payment in the normal form, which is a life annuity under the Pension Plan and Supplemental Pension Plan, and a 50% joint and survivor annuity with 120 guaranteed monthly payments under the Executive Pension Plan. Also included are amounts that the named executive officer may not currently be entitled to receive because such amounts are not vested.

(b)

In the calculation of Mr. Warren’s Executive Pension Plan benefits, the following offset benefits are assumed: annual pension benefits payable under the Pension Plan; estimated annual Social Security benefits of $24,852 payable at age 65; and estimated annual pension benefits payable as a life annuity at age 65 totaling $83,192 from defined benefit pension plans of prior employers.

(c)

In the calculation of Mr. Treanor’s Executive Pension Plan benefits, the following offset benefits are assumed: annual pension benefits payable under the Pension Plan; estimated annual Social Security benefits of $26,904 payable at age 65; and estimated annual pension benefits payable as a life annuity at age 65 totaling $114,855 from defined benefit pension plans of prior employers.

(d)	Mr. Devault’s Pension Plan benefit includes a temporary payment provided under the Magic 85 Provision that is payable between ages 60 and 62. The Magic 85 Provision, including this special payment, is discussed in detail earlier in this Proxy Statement.

_______________________

In the event of a change in control, the named executive officers would receive additional years of credited service under the Supplemental Pension Plan and Executive Pension Plan as described under the heading “Compensation Discussion and Analysis - Change in Control Agreements” earlier in this Proxy Statement.

Nonqualified Deferred Compensation

We provide executives with the opportunity to defer up to 25% of regular base salary earnings and 100% of annual bonus earnings into the Nonqualified Deferred Compensation Plan. This plan also provides for payments of certain amounts that would have been contributed by the Bank under the 401(k) Plan (“excess match”), as described earlier in this Proxy Statement.

Contributions are credited with earnings/losses based upon the executive’s selection of publicly-traded mutual funds and our Common Stock. The following table summarizes the annual rate of return for the year ended December 31, 2008 for the investment options.

Washington Trust Bancorp, Inc. Common Stock	-18.84%	Russell LifePoints® Conservative Strategy E Fund	-15.41%
Principal Inv Ptr LargeCap Value III R5 Fund	-40.98%	Russell LifePoints® Moderate Strategy E Fund	-23.61%
Principal Inv LargeCap S&P 500 Index R5 Fund	-37.31%	Russell LifePoints® Balanced Strategy E Fund	-29.92%
Principal Inv Ptr LargeCap Growth I R5 Fund	-40.87%	Russell LifePoints® Growth Strategy E Fund	-36.14%
Principal Inv MidCap S&P 400 Index R5 Fund	-36.56%	Russell LifePoints® Equity Growth Strategy E Fund	-42.07%
Principal Inv SmallCap S&P 600 Index R5 Fund	-31.29%	Russell LifePoints® 2010 Strategy R3 Fund	-21.88%
American Funds EuroPacific Growth R3 Fund	-40.71%	Russell LifePoints® 2020 Strategy R3 Fund	-29.22%
Principal Inv Bond & Mortgage Securities R5 Fund	-14.48%	Russell LifePoints® 2030 Strategy R3 Fund	-39.32%
Principal Inv Money Market R5 Fund	2.43%	Russell LifePoints® 2040 Strategy R3 Fund	-39.72%

Investment elections can be changed at any time. Transactions involving our Common Stock are subject to insider trading windows.

As of October 15, 2007, our Common Stock was no longer available as a new benchmark investment. Further, employees and directors who had selected our Common Stock as a benchmark investment (the “Bancorp Stock Fund”) are allowed to transfer from that fund during a transition period that will run through March 14, 2009. After March 14, 2009, employees and directors will not be allowed to make transfers from the Bancorp Stock Fund, and any distributions will be made in whole shares of our Common Stock to the extent of the benchmark investment election in the Bancorp Stock Fund.

The following table outlines employee and employer contributions to the Nonqualified Deferred Compensation Plan during the year ended December 31, 2008. The table also details earnings on plan balances during the year and the aggregate amount of all Nonqualified Deferred Compensation Plan obligations as of December 31, 2008.

NONQUALIFIED DEFERRED COMPENSATION

Named Executive Officer	Executive Contributions in Last FY ($) (a)	Registrant Contributions in Last FY ($) (b)	Aggregate Earnings in Last FY ($)	Aggregate Withdrawals/ Distributions ($)	Aggregate Balance at Last FYE ($) (c)
John C. Warren	$0	$7,588	($170,976)	-	$294,703
John F. Treanor	$0	$4,108	($4,129)	-	$18,624
David V. Devault	$0	$0	$0	-	$0
Galan G. Daukas	$22,260	$2,399	($15,772)	-	$53,155
James M. Vesey	$18,293	$0	($42,813)	-	$141,219

(a)

Reflects deferrals of salary and bonus payments that were accrued under the Nonqualified Deferred Compensation Plan during 2008. Salary amounts are disclosed in the Summary Compensation Table under the year 2008. Bonus amounts are disclosed in the Summary Compensation Table under the year 2007. Mr. Daukas’ executive contribution reflects deferral of his 2007 bonus, which was payable and deferred in 2008 and is detailed in the Summary Compensation Table under the year 2007. Mr. Vesey’s executive contribution reflects deferral of his 2007 bonus which was payable and deferred in 2008. Because he was not a named executive officer for 2007, this bonus is not listed in the Summary Compensation Table.

(b)	Represents credits for amounts that would have been contributed by the Bank under the 401(k) Plan as described earlier in this Proxy Statement. These amounts are disclosed in the Summary Compensation Table, under All Other Compensation in 2008.

(c)	Reflects employee and employer contributions that have been reflected in the Summary Compensation Table in this Proxy Statement and previous proxy statements as outlined in the following table.

Named Executive Officer	2008 ($)	Previous Years ($)	Total ($)
John C. Warren	$7,588	$395,167	$402,755
John F. Treanor	$4,108	$17,217	$21,325
David V. Devault	$0	$0	$0
Galan G. Daukas	$24,659	$40,250	$64,909
James M. Vesey	$0	$67,574	$67,574

_______________________

Upon election to defer income, the individual must also elect distribution timing and form of payment. In-service distributions may be in a lump sum payable in a specific year or in four annual installments commencing in the year a named student reaches age 18. Accounts may also be distributed commencing in the year following retirement in a lump sum or annual installments over five or ten years. Retirement is defined as separation from employment after age 65 or after age 55 with 10 or more years of service for executives, and for directors is termination of directorship after age 55. In the event of pre-retirement separation, accounts become payable in a lump sum in the following year, regardless of distribution election. Excess match accounts are always payable in a lump sum in the year following separation. Distributions are paid in cash except that distributions from the Bancorp Stock Fund may, at the option of the participant, be in the form of our Common Stock. However, after March 14, 2009, distributions from the Bancorp Stock Fund must be made in the form of our Common Stock.

The Nonqualified Deferred Compensation Plan has been restated to comply with Section 409A of the Internal Revenue Code, which imposed new rules on deferred compensation programs. These rules generally apply to amounts deferred after December 31, 2004 and related earnings (“post-409A accounts”). Amounts deferred prior to January 1, 2005 and related earnings (“grandfathered balances”) are subject to the rules applicable prior to the effective date of Section 409A. Participants may change distribution timing and form on grandfathered balances, provided a full calendar year passes between the year in which the change was requested and the new distribution date. Distribution elections on post-409A accounts may only be changed if (a) the new election is made at least 12 months before the first scheduled payment; (b) the distribution or first installment is delayed at least five years from the originally scheduled payment date; and (c) the new election is not effective until at least 12 months have elapsed. Participants can receive an early distribution of grandfathered balances, less a withdrawal penalty equal to 10% of the participant’s total grandfathered balance. In the event of an unforeseeable emergency, executives and directors may receive a distribution from grandfathered balances and/or post-409A accounts, to the extent necessary to meet the emergency and resulting income tax and penalties, subject to certain limitations outlined in the plan.

Potential Post-Employment Payments

The named executive officers are entitled to certain compensation in the event of termination of such executive’s employment. This section is intended to discuss these post-employment payments, assuming separation from employment on December 31, 2008.

Severance Pay and Benefit Continuation

We do not have an employment contract with any named executive officer. Therefore, no severance benefit is payable and there is no continuation of benefit coverage in the event of a named executive officer’s voluntary or involuntary termination, retirement, disability, or death. Severance and benefit continuation are available in the event of a change in control as presented in the Potential Post-Employment Payments table beginning on page 29 of this Proxy Statement.

Vested Equity Awards

Vested stock option grants are outlined in the Outstanding Equity Awards at Fiscal Year End Table earlier in this Proxy Statement. A named executive officer may exercise his vested stock options at any time through his separation from employment date. The right to exercise vested stock options is forfeited following his separation from employment for all reasons other than retirement and death.

In the event of the death of the named executive officer, the right to exercise vested stock option grants would transfer to the named executive officer’s estate and would expire on the three year anniversary of the date of death. In the event of retirement, the named executive officer would have the right to exercise vested nonqualified stock options for three years following retirement and vested incentive stock options for 90 days following retirement. Messrs. Warren and Vesey are the only named executive officers who are eligible to retire on December 31, 2008.

Information regarding the effect on unvested equity grants in a separation from employment is discussed in the Potential Post-Employment Payments Table and accompanying footnotes beginning on page 29 of this Proxy Statement.

Retirement Benefits Payable

In the event of any separation from employment on December 31, 2008, Messrs. Warren, Treanor, Devault, and Vesey would be entitled to their vested benefit in the Pension Plan, Supplemental Pension Plan, and Executive Pension Plan (collectively, the “Defined Benefit Retirement Plans”), as applicable. Mr. Daukas is not vested, and, therefore, would forfeit all benefits under the Defined Benefit Retirement Plans including any benefits to his surviving spouse. Mr. Devault would forfeit his right to the benefit of the Magic 85 Provision under the Pension Plan.

Retirement benefits are not enhanced in the event of any named executive officer’s voluntary or involuntary termination, retirement or death on December 31, 2008.

In the event of a change in control, vested named executive officers receive an enhanced benefit in the form of additional years of benefit service under the Change in Control Agreements as described earlier. The value of this enhancement is outlined in the Potential Post-Employment Payments Table beginning on page 29 of this Proxy Statement. Mr. Warren has qualified for the maximum benefit under the Executive Pension Plan, and therefore, would not receive an enhanced benefit as a result of the crediting of additional months of benefit accrual in the event of a change in control.

The following table outlines the annual benefits available under the Defined Benefit Retirement Plans, assuming separation from service on December 31, 2008 under various termination scenarios:

		Annual Benefit Payable under Defined Benefit Retirement Plans (a)
Named Executive Officer	Retirement Plan	Voluntary or Involuntary Termination	Retirement (b)	Death Benefit Payable to Surviving Spouse		Change in Control (c)
John C. Warren	Pension Plan	$43,195	$43,195	$19,082	(d)	$43,195
	Executive Pension Plan	$199,113	$199,113	$99,556	(e)	$199,113
John F. Treanor	Pension Plan	$35,479	$0	$16,298	(d)	$35,479	(f)
	Executive Pension Plan	$70,585	$0	$39,838	(e)	$75,769
David V. Devault	Pension Plan	$78,646	$0	$35,391	(d)	$78,646
	Supplemental Pension Plan	$19,403	$0	$8,731	(d)	$28,250
Galan G. Daukas	Pension Plan	$0	$0	$0		$0
	Supplemental Pension Plan	$0	$0	$0		$0
James M. Vesey	Pension Plan	$22,375	$22,375	$10,069	(d)	$22,375
	Supplemental Pension Plan	$2,712	$2,712	$1,220	(d)	$7,729

(a)

Unless otherwise noted, amount reflects annual benefit payable in the normal form at age 65 for Messrs. Treanor and Devault and immediately for Messrs. Warren and Vesey (since both were retirement-eligible on December 31, 2008). The benefit for Messrs. Warren and Vesey has been reduced for early commencement. The normal form is a life annuity under the Pension Plan and Supplemental Pension Plan, and is a 50% joint and survivor annuity with 120 guaranteed monthly payments under the Executive Pension Plan. The Executive Pension Plan further provides for 120 guaranteed monthly payments in the normal form under the Pension Plan commencing upon the executive’s death after age 55, offset by actual payments under that plan.

(b)	We consider retirement as separation from service after age 65 or after age 55 with ten years of service. Messrs. Warren and Vesey are the only named executive officers who were eligible to retire on December 31, 2008.

(c)	Assumes change in control and immediate termination under a triggering event as described under the heading “Compensation Discussion and Analysis - Change in Control Agreements” earlier in this Proxy Statement.

(d)

Amount reflects annual pre-retirement death benefit equal to 50% of the qualified 50% joint and survivor annuity. Benefit is payable to the surviving spouse from the executive’s 65th birthday for Messrs. Treanor and Devault and immediately for Messrs. Warren and Vesey. The benefit for Messrs. Warren and Vesey reflects a reduction for early commencement.

(e)

Amount reflects annual pre-retirement death benefit equal to 50% of the qualified 50% joint and survivor annuity with 120 guaranteed monthly payments. Benefit is payable to the surviving spouse immediately, and reflects a reduction for such early commencement. The Executive Pension Plan further provides a temporary additional payment of $12,585 through Mr. Treanor’s 65th birthday, which is intended to equal the death benefit that would have been payable from the Pension Plan if Mr. Treanor were eligible to retire on December 31, 2008. Amounts reflect offsets to the Executive Pension Plan as outlined in the Pension Benefits Table and accompanying footnotes earlier in this Proxy Statement.

(f)

In the event of a change in control, Mr. Treanor meets the criteria for early commencement under the Executive Pension Plan as a result of the additional years of service provided under his Change in Control Agreement and, therefore, Executive Pension Plan benefits are payable immediately. Amount reflects reduction for early commencement.

_______________________

Nonqualified Deferred Compensation Plan

Obligations under the Nonqualified Deferred Compensation Plan generally would become payable in a lump sum in the January following the separation from employment, subject to the six-month delay imposed under Section 409A of the Internal Revenue Code. A separation from service for Messrs. Warren and Vesey would be deemed a retirement and any plan balance would be paid according to the executive’s distribution election under the plan. The aggregate balance of the obligations under this plan is detailed in the Nonqualified Deferred Compensation Table earlier in this Proxy Statement. Plan balances represent accrued liabilities for amounts earned and are not enhanced for any voluntary or involuntary termination.

The following table presents potential post-employment payments assuming separation from service on December 31, 2008 under various termination scenarios:

POTENTIAL POST EMPLOYMENT PAYMENTS

Named Executive Officer	Type of Payment	Involuntary or Voluntary Termination	Retirement (a)	Death	Permanent Disability	Change in Control (b)
John C. Warren	Severance (c)	$0	$0	$0	$0	$2,049,000
	Intrinsic Value of Accelerated Equity (d)	$0	$130,635	$188,966	$16,519	$188,966
	Value of Increased Retirement Benefits (e)	$0	$0	$0	$0	$0
	Health Benefits (f)	$0	$0	$0	$0	$28,863
	Gross Up (g)	$0	$0	$0	$0	$0
	Total	$0	$130,635	$188,966	$16,519	$2,266,829
John F. Treanor	Severance (c)	$0	n/a	$0	$0	$1,581,000
	Intrinsic Value of Accelerated Equity (d)	$0	n/a	$138,402	$10,226	$138,402
	Value of Increased Retirement Benefits (e)	$0	n/a	$0	$0	$263,802
	Health Benefits (f)	$0	n/a	$0	$0	$28,863
	Gross Up (g)	$0	n/a	$0	$0	$798,805
	Total	$0	n/a	$138,402	$10,226	$2,810,872
David V. Devault	Severance (c)	$0	n/a	$0	$0	$560,000
	Intrinsic Value of Accelerated Equity (d)	$0	n/a	$27,650	$0	$27,650
	Value of Increased Retirement Benefits (e)	$0	n/a	$0	$0	$47,240
	Health Benefits (f)	$0	n/a	$0	$0	$24,382
	Gross Up (g)	$0	n/a	$0	$0	$0
	Total	$0	n/a	$27,650	$0	$659,272
Galan G. Daukas	Severance (c)	$0	n/a	$0	$0	$1,341,000
	Intrinsic Value of Accelerated Equity (d)	$0	n/a	$39,500	$0	$138,250
	Value of Increased Retirement Benefits (e)	$0	n/a	$0	$0	$0
	Health Benefits (f)	$0	n/a	$0	$0	$24,432
	Gross Up (g)	$0	n/a	$0	$0	$0
	Total	$0	n/a	$39,500	$0	$1,503,682
James M. Vesey	Severance (c)	$0	$0	$0	$0	$412,000
	Intrinsic Value of Accelerated Equity (d)	$0	$6,913	$41,475	$0	$41,475
	Value of Increased Retirement Benefits (e)	$0	$0	$0	$0	$55,510
	Health Benefits (f)	$0	$0	$0	$0	$18,379
	Gross Up (g)	$0	$0	$0	$0	$0
	Total	$0	$6,913	$41,475	$0	$527,364

(a)	We consider retirement as separation from service after age 65 or after age 55 with ten years of service. Messrs. Warren and Vesey are the only named executive officers who were eligible to retire on December 31, 2008.

(b)	Assumes change in control and immediate termination under a triggering event as described under the heading “Compensation Discussion and Analysis - Change in Control Agreements” earlier in this Proxy Statement.

(c)

Severance payments are based on the salary in effect at December 31, 2008 plus the highest bonus paid during the two years prior to December 31, 2008, using the multiple described under the heading “Compensation Discussion and Analysis - Change in Control Agreements” earlier in this Proxy Statement. For Messrs. Warren, Treanor, Devault and Vesey, bonus-related severance payments are based on Annual Performance Plan payments. For Mr. Daukas, bonus-related severance payments are based on payments under the Annual Performance Plan and the Wealth Management Business Building Incentive Plan.

(d)	Reflects the value of accelerated equity based upon market closing price of $19.75 on December 31, 2008, as well as the value of dividend equivalents that would become payable under the performance share unit award grant. Unvested equity

grants are outlined in the Outstanding Equity Awards at Fiscal Year End Table earlier in this Proxy Statement. All unvested awards would be forfeited upon voluntary or involuntary termination. All unvested awards would become fully vested upon a change in control. All unvested awards, except for Mr. Daukas’ restricted stock award, would become vested upon death. All unvested awards for Messrs. Warren and Vesey would be vested on a pro-rated basis upon retirement. The performance share unit award for Messrs. Warren and Treanor would be vested on a pro-rated basis upon permanent disability. For purposes of this table, we have assumed that the Corporation’s performance versus that of the peer group during the performance measurement period resulted in the vesting of the performance share unit awards at the threshold level (i.e., 3,004 shares for Mr. Warren and 3,043 shares for Mr. Treanor). As of the date of this Proxy Statement, the Core ROE and Core EPS Growth for the peer group has not yet been determined and, therefore, the actual number of shares that could vest may be different.

(e)

Reflects the increase in retirement benefits resulting from the additional months of benefit accrual provided for the Supplemental Pension Plan and the Executive Pension Plan under the Change in Control Agreements. Since Mr. Daukas is not vested in the Defined Benefit Retirement Plans, he is not eligible for a retirement benefit and, therefore, would not benefit from additional months of benefit service upon a change in control. Mr. Warren has qualified for the maximum benefit under the Executive Pension Plan and, therefore, would not receive an enhanced benefit as a result of crediting of additional months of benefit accrual.

(f)	Reflects the value of health benefits based upon actual 2009 carrier premiums, increased by 8% for years 2 and 3, as applicable.

(g)	Additional payment to cover the impact of the 20% excise tax imposed by Section 280G of the Internal Revenue Code.

_______________________

DIRECTOR COMPENSATION

We use a combination of cash and stock-based incentive compensation to attract and retain qualified candidates to serve on the Corporation’s Board. Annually, the compensation consultant provides a report on the competitiveness and effectiveness of our director compensation program. In setting director compensation, we consider the role of the directors, amount of time that directors expend in fulfilling their duties as well as the expertise required of Board members.

Cash Compensation Paid to Board Members

For the year ended December 31, 2008, non-employee members of our Board received an annual cash retainer of $20,000. The person serving as both the chair of the Nominating Committee and the Executive Committee received a combined additional annual retainer of $8,000; the chairperson of the Audit Committee received an additional annual retainer of $8,000; and the chairperson of the Compensation Committee received an additional annual retainer of $4,000. All retainers are paid in quarterly installments.

All members of the Corporation’s Board are also members of the Bank’s Board. Members of the Bank’s Board did not receive any additional retainer for their involvement in the Bank’s Board, except the chairperson of the Bank’s Trust Committee, who received an additional annual retainer of $4,000.

For each meeting of the Corporation’s Board and the Bank’s Board attended, non-employee directors received $1,000; however, for meetings of the Corporation’s Board and the Bank’s Board held on the same day, as is the general practice, non-employee directors were paid for only one meeting. In addition, non-employee directors received $800 for each Corporation or Bank Board committee meeting attended in person and $700 for each such committee meeting attended telephonically. Committee chairpersons who do not receive an additional retainer for service as chairperson received an additional $200 per committee meeting.

After reviewing the compensation consultant’s report on director compensation, the Compensation Committee increased Audit Committee meeting fees to $900 per meeting ($800 for each such meeting attended telephonically) beginning in 2009.

Equity Compensation Paid to Directors

In order to align Board interests with shareholders, non-employee directors typically receive an annual equity grant. In determining the form of equity to be granted, the Compensation Committee considers many factors including the ability to drive corporate performance, tax and accounting treatment and the impact on dilution. In 2005, the Compensation Committee concluded that restricted stock units would provide an equally motivating form of equity compensation while permitting us to issue fewer shares, thereby reducing potential dilution.

In 2008, pursuant to the terms of the 2003 Stock Incentive Plan, as amended (“2003 Plan”), the Corporation’s Board voted to suspend the automatic nonqualified stock option award to non-employee directors provided under that plan. In lieu of such automatic award, the Compensation Committee granted to each non-employee director who continued to serve as our director after the 2008 Annual Meeting of Shareholders 600 restricted stock units, which vest upon the earliest of (a) the three year anniversary of the grant; (b) change in control of the Corporation; (c) the death of the director; or (d) retirement from the Corporation’s Board after attainment of age 70. These grants included dividend equivalent rights.

Under the proposed Amended and Restated 2003 Stock Incentive Plan, the provision that provides for automatic annual nonqualified stock option awards to non-employee directors would be eliminated if our shareholders approve the amended and restated plan. Please see the section of this Proxy Statement entitled “Approval of an Amendment and Restatement of the 2003 Stock Incentive Plan (Proposal No. 3)” beginning on page 36 of this Proxy Statement for more information.

Retirement Plans

Directors are not eligible to participate in any defined benefit plan maintained by the Corporation or the Bank. Directors are eligible to defer 100% of retainers and meeting fees into the Nonqualified Deferred Compensation Plan. Directors are not eligible for company contributions. Provisions regarding types of accounts, investment measurements, form and timing of payments, and distributions that apply to employees also apply to directors. Retirement for directors is defined in the Nonqualified Deferred Compensation Plan as termination of directorship after attainment of age 55.

Welfare Benefit Plans

Directors are not eligible for medical, dental, life or disability insurance at our expense. Directors may obtain coverage under the Bank’s group medical and dental insurance plans at their own expense.

Director Summary Compensation Table

The following table summarizes the compensation paid to non-employee directors for the fiscal year ended December 31, 2008. Directors who are employees receive no additional compensation for Board service. The compensation received by the employee directors as employees of the Corporation is shown in the Summary Compensation Table earlier in this Proxy Statement.

DIRECTOR COMPENSATION TABLE

Name	Fees Earned or Paid in Cash ($) (a)	Stock Awards ($) (b)	Option Awards ($) (c)	Non-Equity Incentive Plan Compensation ($)	Total ($) (d)
Gary P. Bennett	$62,500	$9,092	-	-	$71,592
Steven J. Crandall	$50,400	$9,092	-	-	$59,492
Larry J. Hirsch, Esq.	$51,300	$15,546	-	-	$66,846
Barry G. Hittner, Esq.	$57,966	$9,092	-	-	$67,058
Katherine W. Hoxsie, CPA	$60,200	$9,092	-	-	$69,292
Mary E. Kennard, Esq.	$33,800	$9,092	-	-	$42,892
Edward M. Mazze, Ph.D.	$49,100	$9,092	-	-	$58,192
Kathleen E. McKeough	$59,600	$9,092	-	-	$68,692
Victor J. Orsinger II, Esq.	$59,900	$9,092	-	-	$68,992
H. Douglas Randall, III	$54,400	$9,092	-	-	$63,492
Patrick J. Shanahan, Jr.	$59,800	$9,092	-	-	$68,892
James P. Sullivan, CPA (e)	$28,700	$3,650	-	-	$32,350
Neil H. Thorp	$58,600	$10,706	-	-	$69,306

(a)	Total reflects fees and retainers earned. During 2008, Directors Bennett, Hirsch, Hoxsie, and Thorp deferred $6,250; $6,000; $6,020; and $12,720, respectively, into the Nonqualified Deferred Compensation Plan.

(b)

Amount reflects the dollar amount recognized for financial statement reporting purposes in 2008 in accordance with SFAS No. 123R with respect to awards of 500 restricted stock units granted on April 26, 2005; 500 restricted stock units granted on April 25, 2006; and 600 restricted stock units granted on April 14, 2008. All grants will become vested upon the earliest of the three-year anniversary of the grant, change in control of the Corporation, the director’s death, or the director’s retirement from the Corporation’s Board after attainment of age 70. Mr. Sullivan’s grants vested upon his retirement on April 22, 2008. Fair value per share on April 26, 2005 was $25.81, or $12,905 per award; on April 25, 2006 was $26.59, or $13,295 per award; and on April 14, 2008 was $24.20 or $14,520 per award.

(c)	All outstanding stock options were fully vested before 2008.

(d)	There is no Other Income, change in pension value, nor Nonqualified Deferred Compensation Plan earnings required to be disclosed in this table.

(e)	Mr. Sullivan retired from the Corporation’s Board on April 22, 2008.

_______________________

The following table sets forth information with respect to the directors concerning outstanding stock option awards and unvested stock awards as of December 31, 2008.

Name	Grant Date	Number of Securities Underlying Unexercised Options (#) (Exercisable)	Number of Securities Underlying Unexercised Options (#) (Unexercisable)	Option Exercise Price ($)	Number of Shares or Units of Stock That Have Not Vested (#)
Gary P. Bennett	4/27/1999	1,688	-	$19.50
	4/25/2000	2,000	-	$15.50
	4/24/2001	2,000	-	$17.85
	4/23/2002	2,000	-	$20.23
	4/29/2003	2,000	-	$20.62
	4/27/2004	2,000	-	$27.56
	4/25/2006				500
	4/14/2008				600
Steven J. Crandall	4/27/1999	1,688	-	$19.50
	4/25/2000	2,000	-	$15.50
	4/24/2001	2,000	-	$17.85
	4/23/2002	2,000	-	$20.23
	4/29/2003	2,000	-	$20.62
	4/27/2004	2,000	-	$27.56
	4/25/2006				500
	4/14/2008				600
Larry J. Hirsch, Esq.	4/24/2001	1,000	-	$17.85
	4/23/2002	2,000	-	$20.23
	4/29/2003	2,000	-	$20.62
	4/27/2004	2,000	-	$27.56
	4/25/2006				500
	4/14/2008