form10-q20090630.htm
 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

 

(Mark One)
x
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended JUNE 30, 2009 or

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

Commission file number:  001-32991
 
WASHINGTON TRUST BANCORP, INC.
 
(Exact name of registrant as specified in its charter)

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

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

(401) 348-1200
(Registrant’s telephone number, including area code)

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
oYes           oNo

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer, or a smaller reporting company.  See definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.  (Mark one)
 
Large accelerated filer o
Accelerated filer x
Non-accelerated filer o
Smaller reporting company o
(Do not check if a smaller reporting company)
  

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

The number of shares of common stock of the registrant outstanding as of August 3, 2009 was 16,019,352.
 
FORM 10-Q
WASHINGTON TRUST BANCORP, INC. AND SUBSIDIARIES
For the Quarter Ended June 30, 2009
     
   
Page
   
Number
     
 
   
 
   
 
 
     
 
 
     
 
 
     
   
   
   
   
 
   
   
   
   
   
   
   
Exhibit 10.2 Form of Change in Control Agreement  
   
 
   
 
   
 


 
 
WASHINGTON TRUST BANCORP, INC. AND SUBSIDIARIES
(Dollars in thousands)

           
   
June 30,
    
December 31,
  
   
2009
    
2008
  
Assets:
            
Cash and noninterest-bearing balances due from banks
   $ 29,355     $ 11,644  
Interest-bearing balances due from banks
     17,875       41,780  
Federal funds sold and securities purchased under resale agreements
     –       2,942  
Other short-term investments
     3,031       1,824  
Mortgage loans held for sale
     6,139       2,543  
Securities available for sale, at fair value;
                
amortized cost $772,283 in 2009 and $869,433 in 2008
     776,435       866,219  
Federal Home Loan Bank stock, at cost
     42,008       42,008  
Loans:
                
Commercial and other
     947,238       880,313  
Residential real estate
     618,859       642,052  
Consumer
     325,157       316,789  
Total loans
     1,891,254       1,839,154  
Less allowance for loan losses
     26,051       23,725  
Net loans
     1,865,203       1,815,429  
Premises and equipment, net
     25,520       25,102  
Accrued interest receivable
     9,883       11,036  
Investment in bank-owned life insurance
     44,053       43,163  
Goodwill
     58,114       58,114  
Identifiable intangible assets, net
     9,536       10,152  
Other assets
     32,656       33,510  
Total assets
   $ 2,919,808     $ 2,965,466  
                 
Liabilities:
                
Deposits:
                
Demand deposits
   $ 187,830     $ 172,771  
NOW accounts
     187,014       171,306  
Money market accounts
     356,726       305,879  
Savings accounts
     192,484       173,485  
Time deposits
     959,666       967,427  
Total deposits
     1,883,720       1,790,868  
Dividends payable
     3,365       3,351  
Federal Home Loan Bank advances
     688,431       829,626  
Junior subordinated debentures
     32,991       32,991  
Other borrowings
     22,039       26,743  
Accrued expenses and other liabilities
     46,969       46,776  
Total liabilities
     2,677,515       2,730,355  
                 
Shareholders’ Equity:
                
Common stock of $.0625 par value; authorized 30,000,000 shares;
                
issued 16,023,009 shares in 2009 and 16,018,868 shares in 2008
     1,001       1,001  
Paid-in capital
     81,831       82,095  
Retained earnings
     165,591       164,679  
Accumulated other comprehensive loss
     (5,579 )     (10,458 )
Treasury stock, at cost; 21,077 shares in 2009 and 84,191 shares in 2008
     (551 )     (2,206 )
Total shareholders’ equity
     242,293       235,111  
Total liabilities and shareholders’ equity
   $ 2,919,808     $ 2,965,466  
                 
                 
                 
The accompanying notes are an integral part of these unaudited consolidated financial statements.
  
WASHINGTON TRUST BANCORP, INC. AND SUBSIDIARIES
  
(Dollars and shares in thousands,
  
 
except per share amounts)
  
   
Three Months
    
Six Months
  
Periods ended June 30,
  
2009
    
2008
    
2009
    
2008
  
Interest income:
                        
Interest and fees on loans
   $ 24,147     $ 24,406     $ 48,286     $ 49,376  
Interest on securities:
Taxable
     7,588       8,302       16,037       16,718  
 
Nontaxable
     778       786       1,558       1,566  
Dividends on corporate stock and Federal Home Loan Bank stock
     55       489       127       1,109  
Other interest income
     9       50       26       190  
Total interest income
     32,577       34,033       66,034       68,959  
Interest expense:
                                
Deposits
     8,481       9,248       18,028       21,147  
Federal Home Loan Bank advances
     7,112       7,794       14,339       15,093  
Junior subordinated debentures
     479       509       958       847  
Other interest expense
     244       275       489       589  
Total interest expense
     16,316       17,826       33,814       37,676  
Net interest income
     16,261       16,207       32,220       31,283  
Provision for loan losses
     3,000       1,400       4,700       1,850  
Net interest income after provision for loan losses
     13,261       14,807       27,520       29,433  
Noninterest income:
                                
Wealth management services:
                                
Trust and investment advisory fees
     4,402       5,321       8,524       10,663  
Mutual fund fees
     993       1,445       1,908       2,786  
Financial planning, commissions and other service fees
     559       884       935       1,459  
Wealth management services
     5,954       7,650       11,367       14,908  
Service charges on deposit accounts
     1,201       1,208       2,314       2,368  
Merchant processing fees
     2,086       1,914       3,435       3,186  
Income from bank-owned life insurance
     447       453       891       900  
Net gains on loan sales and commissions on loans originated for others
     1,552       433       2,596       924  
Net realized gains on securities
     257       1,096       314       1,909  
Net unrealized gains on interest rate swaps
     341       26       401       145  
Other income
     465       528       884       870  
Noninterest income, excluding other-than-temporary impairment losses
     12,303       13,308       22,202       25,210  
Total other-than-temporary impairment losses on securities
     –       (1,149 )     (4,244 )     (2,007 )
Portion of loss recognized in other comprehensive income (before taxes)
     –       –       2,253       –  
Net impairment losses recognized in earnings
     –       (1,149 )     (1,991 )     (2,007 )
Total noninterest income
     12,303       12,159       20,211       23,203  
Noninterest expense:
                                
Salaries and employee benefits
     10,359       10,411       20,834       20,754  
Net occupancy
     1,122       1,064       2,348       2,202  
Equipment
     1,036       977       2,011       1,921  
Merchant processing costs
     1,780       1,598       2,923       2,666  
Outsourced services
     568       742       1,354       1,378  
Legal, audit and professional fees
     664       430       1,339       973  
FDIC deposit insurance costs
     2,143       251       2,794       507  
Advertising and promotion
     491       467       792       853  
Amortization of intangibles
     308       326       616       652  
Other expenses
     1,858       1,788       3,708       3,290  
Total noninterest expense
     20,329       18,054       38,719       35,196  
Income before income taxes
     5,235       8,912       9,012       17,440  
Income tax expense
     1,470       2,817       2,577       5,529  
Net income
   $ 3,765     $ 6,095     $ 6,435     $ 11,911  
Weighted average shares outstanding – basic
     15,983.6       13,381.1       15,963.2       13,369.6  
Weighted average shares outstanding – diluted
     16,037.4       13,567.0       16,009.1       13,550.9  
Per share information:
Basic earnings per share
   $ 0.24     $ 0.45     $ 0.40     $ 0.89  
 
Diluted earnings per share
   $ 0.23     $ 0.45     $ 0.40     $ 0.88  
 
Cash dividends declared per share
   $ 0.21     $ 0.21     $ 0.42     $ 0.41  
   
The accompanying notes are an integral part of these unaudited consolidated financial statements.
  
WASHINGTON TRUST BANCORP, INC. AND SUBSIDIARIES
  
(Dollars in thousands)
  
     
Six months ended June 30,
  
2009
    
2008
  
Cash flows from operating activities:
            
Net income
   $ 6,435     $ 11,911  
Adjustments to reconcile net income to net cash provided by operating activities:
                
Provision for loan losses
     4,700       1,850  
Depreciation of premises and equipment
     1,575       1,505  
Net amortization of premium and discount
     229       520  
Net amortization of intangibles
     616       652  
Share-based compensation
     398       186  
Earnings from bank-owned life insurance
     (891 )     (900 )
Net gains on loan sales and commissions on loans originated for others
     (2,596 )     (924 )
Net realized gains on securities
     (314 )     (1,909 )
Net impairment losses recognized in earnings
     1,991       2,007  
Net unrealized gains on interest rate swap contracts
     (401 )     (145 )
Proceeds from sales of loans
     167,015       35,406  
Loans originated for sale
     (167,604 )     (35,563 )
Decrease in accrued interest receivable, excluding purchased interest
     1,169       990  
Decrease (increase) in other assets
     (2,685 )     (682 )
Increase (decrease) in accrued expenses and other liabilities
     617       (3,980 )
Other, net
     –       (9 )
Net cash provided by operating activities
     10,254       10,915  
Cash flows from investing activities:
                
Purchases of:
Mortgage-backed securities available for sale
     –       (170,332 )
 
Other investment securities available for sale
     (204 )     (1,025 )
Proceeds from sale of:
Mortgage-backed securities available for sale
     –       61,237  
 
Other investment securities available for sale
     1,604       –  
Maturities and principal payments of:
Mortgage-backed securities available for sale
     88,564       50,125  
 
Other investment securities available for sale
     7,000       7,012  
Purchase of Federal Home Loan Bank stock
     –       (10,283 )
Net increase in loans
     (50,615 )     (108,041 )
Proceeds from sale of portfolio loans
     –       18,047  
Purchases of loans, including purchased interest
     (4,154 )     (42,086 )
Proceeds from the sale of property acquired through foreclosure or repossession
     367       –  
Purchases of premises and equipment
     (1,993 )     (1,255 )
Equity investment in capital trusts
     –       (310 )
Payment of deferred acquisition obligation
     (2,509 )     (8,065 )
Net cash provided by (used in) investing activities
     38,060       (204,976 )
Cash flows from financing activities:
                
Net increase (decrease) in deposits
     92,852       (36,663 )
Net (decrease) increase in other borrowings
     (2,195 )     1,989  
Proceeds from Federal Home Loan Bank advances
     224,170       705,421  
Repayment of Federal Home Loan Bank advances
     (365,359 )     (476,531 )
Issuance of treasury stock, including deferred compensation plan activity
     19       43  
Net proceeds from the issuance of common stock under dividend reinvestment plan
     555       295  
Net proceeds from the exercise of stock options and issuance of other
                
compensation-related equity instruments
     117       112  
Tax benefit from stock option exercises and issuance of other compensation-related equity instruments
     303       192  
Proceeds from the issuance of junior subordinated debentures
     –       10,016  
Cash dividends paid
     (6,705 )     (5,355 )
Net cash (used in) provided by financing activities
     (56,243 )     199,519  
Net (decrease) increase in cash and cash equivalents
     (7,929 )     5,458  
Cash and cash equivalents at beginning of period
     58,190       41,112  
Cash and cash equivalents at end of period
   $ 50,261     $ 46,570  
 
Noncash Investing and Financing Activities:
Loans charged off
   $ 2,509     $ 326  
 
Net transfer from loans to other real estate owned
     236       –  
 
Securities proceeds due from broker
     –       3,084  
 
Reclassification of other-than-temporary impairment
                
 
charge effective January 1, 2009 (see Note 4)
     1,859       –  
Supplemental Disclosures:
Interest payments
     33,588       36,687  
 
Income tax payments
     5,168       6,868  
The accompanying notes are an integral part of these unaudited consolidated financial statements.
  

WASHINGTON TRUST BANCORP, INC. AND SUBSIDIARIES

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

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

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

In the opinion of management, the accompanying consolidated financial statements reflect all adjustments (consisting of normal recurring adjustments) and disclosures necessary to present fairly the Corporation’s financial position as of June 30, 2009 and December 31, 2008, respectively, and the results of operations and cash flows for the interim periods presented.  Interim results are not necessarily reflective of the results of the entire year.  The unaudited consolidated financial statements of the Corporation presented herein have been prepared pursuant to the rules of the Securities and Exchange Commission (“SEC”) for quarterly reports on Form 10-Q and do not include all of the information and note disclosures required by GAAP.  The accompanying consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Annual Report on Form 10-K for the year ended December 31, 2008.  The Corporation has evaluated subsequent events through the filing date of this quarterly report.

(2) Recently Issued Accounting Pronouncements
Effective January 1, 2009, Washington Trust adopted FASB Staff Position No. Emerging Issues Task Force No. 03-6-1, “Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities” (“FSP No. EITF No. 03-6-1-2”).  FSP No. EITF No. 03-6-1 required unvested share-based payments that contain nonforfeitable rights and dividends or dividend equivalents to be treated as participating securities and be included in the calculation of Earnings Per Share (“EPS”) pursuant to the two-class method.  The adoption of FSP No. EITF No. 03-6-1 did not have a material impact on the Corporation’s financial position or results of operations.
 
In May 2009, the FASB issued SFAS No. 165, “Subsequent Events” (“SFAS No. 165”).  SFAS No. 165 established general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued.  In particular, SFAS No. 165 set forth: (1) the period after the balance sheet date during which management of a reporting entity should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements, (2) the circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its financial statements and (3) the disclosures that an entity should make about events or transactions that occurred after the balance sheet date.  SFAS No. 165 is effective for interim and annual financial periods ending after June 15, 2009.  The adoption of SFAS No. 165 did not have a material impact on the Corporation’s financial position or results of operations.

-6-

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

In June 2009, the FASB issued SFAS No. 166, “Accounting for Transfers of Financial Assets – an amendment of FASB Statement No. 140” (“SFAS No. 166”).  The FASB issued SFAS No. 166 to improve the relevance, representational faithfulness, and comparability of the information that a reporting entity provides in its financial statements about a transfer of financial assets; the effects of a transfer on its financial position, financial performance, and cash flows; and a transferor’s continuing involvement, if any, in transferred financial assets.  The FASB undertook this project to address (1) practices that have developed since the issuance of FASB Statement No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities” (“SFAS No. 140”), that are not consistent with the original intent and key requirements of SFAS No. 140 and (2) concerns of financial statement users that many of the financial assets (and related obligations) that have been derecognized should continue to be reported in the financial statements of transferors.  SFAS No. 166 must be applied as of the beginning of each reporting entity’s first annual reporting period that begins after November 15, 2009, for interim periods within that first annual reporting period and for interim and annual reporting periods thereafter.  Earlier application is prohibited.  SFAS No. 166 must be applied to transfers occurring on or after the effective date.  Additionally, on and after the effective date, the concept of a qualifying special-purpose entity is no longer relevant for accounting purposes.  Therefore, formerly qualifying special-purpose entities (as defined under previous accounting standards) should be evaluated for consolidation by reporting entities on and after the effective date in accordance with the applicable consolidation guidance.  If the evaluation on the effective date results in consolidation, the reporting entity should apply the transition guidance provided in the pronouncement that requires consolidation.  Additionally, the disclosure provisions of SFAS No. 166 should be applied to transfers that occurred both before and after the effective date of SFAS No. 166.  The Corporation is currently evaluating the impact the adoption of SFAS No. 166 will have on its consolidated financial statements.
 
In June 2009, the FASB issued SFAS No. 167, “Amendments to FASB Interpretation No. 46(R)” (“SFAS No. 167”).  The FASB issued SFAS No. 167 to improve financial reporting by enterprises involved with variable interest entities. The FASB undertook this project to address (1) the effects on certain provisions of FASB Interpretation No. 46 (revised December 2003), “Consolidation of Variable Interest Entities” (“FIN 46-R”), as a result of the elimination of the qualifying special-purpose entity concept in SFAS No. 166, and (2) constituent concerns about the application of certain key provisions of FIN 46(R), including those in which the accounting and disclosures under FIN 46(R) do not always provide timely and useful information about an enterprise’s involvement in a variable interest entity.  SFAS No. 167 shall be effective as of the beginning of each reporting entity’s first annual reporting period that begins after November 15, 2009, for interim periods within that first annual reporting period, and for interim and annual reporting periods thereafter.  Earlier application is prohibited.  The Corporation is currently evaluating the impact the adoption of SFAS No. 167 will have on its consolidated financial statements.

In June 2009, the FASB issued SFAS No. 168, “The FASB Accounting Standards CodificationTM and the Hierarchy of Generally Accepted Accounting Principles – a replacement of FASB Statement No. 162” (“SFAS No. 168”).  The FASB Accounting Standards CodificationTM (“Codification”) will become the source of authoritative GAAP recognized by the FASB to be applied by nongovernmental entities.  Rules and interpretive releases of the SEC under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants.  On the effective date of SFAS No. 168, the Codification will supersede all then-existing non-SEC accounting and reporting standards.  All other nongrandfathered non-SEC accounting literature not included in the Codification will become nonauthoritative.  SFAS No. 168 is effective for financial statements issued for interim and annual periods ending after September 15, 2009.  The FASB believes that the issuance of SFAS No. 168 will not change GAAP.

(3) Federal Home Loan Bank Stock
The Corporation is required to maintain a level of investment in Federal Home Loan Bank of Boston ("FHLB") stock based on the level of its FHLB advances.  As of June 30, 2009 and December 31, 2008, the Corporation’s investment in FHLB stock totaled $42.0 million.  At June 30, 2009, the Corporation’s investment in FHLB stock exceeded its required investment by $6 million.  No market exists for shares of the FHLB.  FHLB stock may be redeemed at par value five years following termination of FHLB membership, subject to limitations which may be imposed by the FHLB or its regulator, the Federal Housing Finance Board, to maintain capital adequacy of the FHLB.  While the Corporation currently has no intentions to terminate its FHLB membership, the ability to redeem its investment in FHLB stock is subject to the conditions imposed by the FHLB.  On April 10, 2009, the FHLB reiterated to its members that it is focusing on preserving capital in response to ongoing market volatility including the suspension of its quarterly dividend and the extension of a moratorium on excess stock repurchases.
-7-
WASHINGTON TRUST BANCORP, INC. AND SUBSIDIARIES
(Continued)
CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
  

On May 20, 2009, the FHLB filed its Form 10-Q with the SEC, for the three months ended March 31, 2009.  The FHLB reported a net loss of $83.4 million for its first quarter 2009. Additionally, it reported a decrease in total capital of $838.0 million and an increase in capital stock of $19.8 million during the three months ended March 31, 2009.  Despite these negative trends, the FHLB exceeded the regulatory capital requirements promulgated by the Federal Home Loan Banks Act and the Federal Housing Financing Agency.  The FHLB has the capacity to issue additional debt if necessary to raise cash.  If needed, the FHLB also has the ability to secure funding available to government-sponsored entities ("GSEs") through the U.S. Treasury.  Based on the capital adequacy and the liquidity position of the FHLB, management believes there is no impairment related to the carrying amount of the Corporation’s FHLB stock as of June 30, 2009.  Further deterioration of the FHLB’s capital levels may require the Corporation to deem its restricted investment in FHLB stock to be other-than-temporarily impaired. If evidence of impairment exists in the future, the FHLB stock would reflect fair value using either observable or unobservable inputs.

(4) Securities
Securities are summarized as follows:
 
(Dollars in thousands)
                        
   
Amortized
    
Unrealized
    
Unrealized
    
Fair
  
June 30, 2009
  
Cost (1)
    
Gains
    
Losses
    
Value
  
Securities Available for Sale:
                        
U.S. Treasury obligations and obligations
                        
of U.S. government-sponsored agencies
   $ 51,545     $ 3,817     $ −     $ 55,362  
Mortgage-backed securities issued by U.S. government
                                
agencies and U.S. government-sponsored agencies
     586,196       18,116       (956 )     603,356  
States and political subdivisions
     80,669       976       (554 )     81,091  
Trust preferred securities:
                                
Individual name issuers
     30,544       −       (13,640 )     16,904  
Collateralized debt obligations
     6,142       −       (4,261 )     1,881  
Corporate bonds
     13,174       1,223       −       14,397  
Common stocks
     659       −       (40 )     619  
Perpetual preferred stocks
     3,354       −       (529 )     2,825  
Total securities available for sale
   $ 772,283     $ 24,132     $ (19,980 )   $ 776,435  
 
 (1)
 Net of other-than-temporary impairment write-downs recognized in earnings, other than such noncredit-related amounts reversed on January 1, 2009 in accordance with the adoption of FASB Staff Position Nos. FAS 115-2 and FAS 124-2.

 
(Dollars in thousands)
                        
   
Amortized
    
Unrealized
    
Unrealized
    
Fair
  
December 31, 2008
  
Cost (1)
    
Gains
    
Losses
    
Value
  
Securities Available for Sale:
                        
U.S. Treasury obligations and obligations
                        
of U.S. government-sponsored agencies
   $ 59,022     $ 5,355     $ −     $ 64,377  
Mortgage-backed securities issued by U.S. government
                                
agencies and U.S. government-sponsored agencies
     675,159       12,543       (4,083 )     683,619  
States and political subdivisions
     80,680       1,348       (815 )     81,213  
Trust preferred securities:
                                
Individual name issuers
     30,525       −       (13,732 )     16,793  
Collateralized debt obligations
     5,633       −       (3,693 )     1,940  
Corporate bonds
     12,973       603       −       13,576  
Common stocks
     942       50       −       992  
Perpetual preferred stocks
     4,499       2       (792 )     3,709  
Total securities available for sale
   $ 869,433     $ 19,901     $ (23,115 )   $ 866,219  
 
 (1)
Net of other-than-temporary impairment write-downs recognized in earnings.
-8-
WASHINGTON TRUST BANCORP, INC. AND SUBSIDIARIES
(Continued)
CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
  

Securities available for sale with a fair value of $639.9 million and $712.8 million were pledged in compliance with state regulations concerning trust powers and to secure Treasury Tax and Loan deposits, borrowings, and certain public deposits at June 30, 2009 and December 31, 2008, respectively.  In addition, securities available for sale with a fair value of $21.8 million and $16.1 million were pledged for potential use at the Federal Reserve Bank discount window at June 30, 2009 and December 31, 2008, respectively.  There were no borrowings from the Federal Reserve Bank at either date.  Securities available for sale with a fair value of $8.2 million and $9.0 million were designated in rabbi trusts for nonqualified retirement plans at June 30, 2009 and December 31, 2008, respectively.  In addition, securities available for sale with a fair value of $1.5 million and $569 thousand were pledged as collateral to secure certain interest rate swap agreements at June 30, 2009 and December 31, 2008, respectively.

Washington Trust elected to early adopt the provisions of FASB Staff Position Nos. FAS 115-2 and FAS 124-2, “Recognition and Presentation of Other-Than-Temporary Impairments” (“FSP Nos. FAS 115-2 and FAS 124-2”).  FSP Nos. FAS 115-2 and FAS 124-2 applied to existing and new debt securities held by the Corporation as of January 1, 2009, the beginning of the interim period in which it was adopted.  For those debt securities for which the fair value of the security is less than its amortized cost, the Corporation does not intend to sell such security and it is more likely than not that it will not be required to sell such security prior to the recovery of its amortized cost basis less any current period credit losses, FSP Nos. FAS 115-2 and FAS 124-2 requires that the credit-related portion of other-than-temporary impairment losses be recognized in earnings while the noncredit-related portion is recognized in other comprehensive income, net of related taxes.  As a result of the adoption of FSP Nos. FAS 115-2 and FAS 124-2 and as more fully described below, in the first quarter of 2009 a $1.350 million credit-related impairment loss was recognized in earnings and a $2.3 million noncredit-related impairment loss was recognized in other comprehensive income for a pooled trust preferred debt security not expected to be sold.  Also in accordance with FSP Nos. FAS 115-2 and FAS 124-2, Washington Trust reclassified the noncredit-related portion of an other-than-temporary impairment loss previously recognized in earnings in the fourth quarter of 2008.  This reclassification was reflected as a cumulative effect adjustment of $1.2 million after taxes ($1.9 million before taxes) that increased retained earnings and decreased accumulated other comprehensive loss.  The amortized cost basis of this debt security for which an other-than-temporary impairment loss was recognized in the fourth quarter of 2008 was adjusted by the amount of the cumulative effect adjustment before taxes.

The following table summarizes other-than-temporary impairment losses on securities recognized in earnings in the periods indicated:
 
(Dollars in thousands)
            
   
Three Months
    
Six Months
  
Periods ended June 30,
  
2009
    
2008
    
2009
    
2008
  
Trust preferred debt securities:
                        
Collateralized debt obligations
   $ –     $ –     $ (1,350 )   $ –  
Common and perpetual preferred stocks:
                                
Common stock (financials)
     –       –       (146 )     –  
Fannie Mae and Freddie Mac perpetual preferred stocks
     –       (430 )     –       (430 )
Other perpetual preferred stocks (financials)
     –       (719 )     (495 )     (1,577 )
Total
   $ –     $ (1,149 )   $ (1,991 )   $ (2,007 )

The following table presents a roll-forward of the balance of credit-related impairment losses on debt securities held at June 30, 2009 for which a portion of an other-than-temporary impairment was recognized in other comprehensive income:
 
(Dollars in thousands)
  
Three
    
Six
  
   
Months
    
Months
  
Periods ended June 30,
  
2009
    
2009
  
Balance at beginning of period
   $ –     $ –  
Credit-related impairment loss on debt securities for which an
                
other-than-temporary impairment was not previously recognized
     –       1,350  
Balance at end of period
   $ –     $ 1,350  
WASHINGTON TRUST BANCORP, INC. AND SUBSIDIARIES
(Continued)
CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
  

During the first quarter of 2009, a $1.350 million credit-related impairment loss was recognized in earnings for a pooled trust preferred debt security not intended or expected to be sold prior to the recovery of its amortized cost basis.  In accordance with FSP Nos. FAS 115-2 and FAS 124-2, the anticipated cash flows expected to be collected from this debt security were discounted at the rate equal to the yield used to accrete the current and prospective beneficial interest for the security.  Significant inputs included estimated cash flows and prospective deferrals, defaults and recoveries.  Estimated cash flows are generated based on the underlying seniority status and subordination structure of the pooled trust preferred debt tranche at the time of measurement.  Prospective deferral, default and recovery estimates affecting projected cash flows were based on analysis of the underlying financial condition of individual issuers, and took into account capital adequacy, credit quality, lending concentrations, and other factors.  All cash flow estimates were based on the underlying security’s tranche structure and contractual rate and maturity terms.  The present value of the expected cash flows was compared to the current outstanding balance of the tranche to determine the ratio of the estimated present value of expected cash flows to the total current balance for the tranche.  This ratio was then multiplied by the principal balance of Washington Trust’s holding to determine the credit-related impairment loss.

The following table summarizes temporarily impaired securities as of June 30, 2009, segregated by length of time the securities have been in a continuous unrealized loss position.
 
(Dollars in thousands)
  
Less than 12 Months
    
12 Months or Longer
    
Total
  
         
Fair
    
Unrealized
          
Fair
    
Unrealized
          
Fair
    
Unrealized
  
At June 30, 2009
     #    
Value
    
Losses
       #    
Value
    
Losses
       #    
Value
    
Losses
  
Mortgage-backed securities
                                                            
issued by U.S. government agencies and U.S. government-sponsored enterprises
     5     $ 1,253     $ 7       25     $ 46,967     $ 949       30     $ 48,220     $ 956  
States and
                                                                        
political subdivisions
     10       9,287       89       14       12,028       465       24       21,315       554  
Trust preferred securities:
                                                                        
Individual name issuers
     –       –       –       11       16,904       13,640       11       16,904       13,640  
Collateralized debt obligations
     –       –       –       2       1,881       4,261       2       1,881       4,261  
Subtotal, debt securities
     15       10,540       96       52       77,780       19,315       67       88,320       19,411  
Common stocks
     1       619       40       –       –       –       1       619       40  
Perpetual preferred stocks
     2       570       180       4       2,255       349       6       2,825       529  
Subtotal, equity securities
     3       1,189       220       4       2,255       349       7       3,444       569  
Total temporarily
                                                                        
impaired securities
     18     $ 11,729     $ 316       56     $ 80,035     $ 19,664       74     $ 91,764     $ 19,980  

-10-
WASHINGTON TRUST BANCORP, INC. AND SUBSIDIARIES
(Continued)
CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
  
 
The following table summarizes temporarily impaired securities as of December 31, 2008, segregated by length of time the securities have been in a continuous unrealized loss position.
 
(Dollars in thousands)
  
Less than 12 Months
    
12 Months or Longer
    
Total
  
         
Fair
    
Unrealized
          
Fair
    
Unrealized
          
Fair
    
Unrealized
  
At December 31, 2008
     #    
Value
    
Losses
       #    
Value
    
Losses
       #    
Value
    
Losses
  
Mortgage-backed securities
                                                            
issued by U.S. government agencies and U.S. government-sponsored enterprises
     64     $ 124,387     $ 2,140       22     $ 34,350     $ 1,943       86     $ 158,737     $ 4,083  
States and
                                                                        
political subdivisions
     25       18,846       523       7       7,423       292       32       26,269       815  
Trust preferred securities:
                                                                        
Individual name issuers
     –       –       –       11       16,793       13,732       11       16,793       13,732  
Collateralized debt obligations
     –       –       –       1       1,307       3,693       1       1,307       3,693  
Subtotal, debt securities
     89       143,233       2,663       41       59,873       19,660       130       203,106       22,323  
Perpetual preferred stocks
     –       –       –       5       2,062       792       5       2,062       792  
Total temporarily
                                                                        
impaired securities
     89     $ 143,233     $ 2,663       46     $ 61,935     $ 20,452       135     $ 205,168     $ 23,115  

Unrealized losses on debt securities generally occur as a result of increases in interest rates since the time of purchase, a structural change in an investment or from deterioration in credit quality of the issuer.  Management evaluates impairments in value whether caused by adverse interest rates or credit movements to determine if they are other-than-temporary.

Further deterioration in credit quality of the companies backing the securities, further deterioration in the condition of the financial services industry, a continuation of the current imbalances in liquidity that exist in the marketplace, a continuation or worsening of the current economic recession, or additional declines in real estate values, among other things, may further affect the fair value of these securities and increase the potential that certain unrealized losses be designated as other-than-temporary in future periods, and the Corporation may incur additional write-downs.

Mortgage-backed securities issued by U.S. government agencies and U.S. government-sponsored enterprises:
The unrealized losses on mortgage-backed securities issued by U.S. government agencies or U.S. government-sponsored enterprises amounted to $1.0 million at June 30, 2009 and were attributable to a combination of factors, including relative changes in interest rates since the time of purchase and decreased liquidity for investment securities in general.  The contractual cash flows for these securities are guaranteed by U.S. government agencies and U.S. government-sponsored enterprises.  Based on its assessment of these factors, management believes that the unrealized losses on these debt security holdings are a function of changes in investment spreads and interest rate movements and not changes in credit quality.  Management expects to recover the entire amortized cost basis of these securities.  Furthermore, Washington Trust does not intend to sell these securities and it is not more likely than not that Washington Trust will be required to sell these securities before recovery of their cost basis, which may be maturity.  Therefore, management does not consider these investments to be other-than-temporarily impaired at June 30, 2009.

Debt securities issued by states and political subdivisions:
The unrealized losses on debt securities issued by states and political subdivisions amounted to $554 thousand at June 30, 2009.  The unrealized losses on state and municipal holdings included in this analysis are attributable to a combination of factors, including a general decrease in liquidity and an increase in risk premiums for credit-sensitive securities since the time of purchase.  Based on its assessment of these factors, management believes that unrealized losses on these debt security holdings are a function of changes in investment spreads and liquidity and not changes in credit quality.  Management expects to recover the entire amortized cost basis of these securities.  Furthermore, Washington Trust does not intend to sell these securities and it is not more likely than not that Washington Trust will be required to sell these securities before recovery of their cost basis, which may be maturity.  Therefore, management does not consider these investments to be other-than-temporarily impaired at June 30, 2009.

-11-
WASHINGTON TRUST BANCORP, INC. AND SUBSIDIARIES
(Continued)
CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
  
 
Trust preferred debt securities of individual name issuers:
Included in debt securities in an unrealized loss position at June 30, 2009 were 11 trust preferred security holdings issued by seven individual name companies (reflecting, where applicable, the impact of mergers and acquisitions of issuers subsequent to original purchase) in the financial services/banking industry.  The aggregate unrealized losses on these debt securities amounted to $13.6 million at June 30, 2009.  Management believes the decline in fair value of these trust preferred securities primarily reflected increased investor concerns about recent and potential future losses in the financial services industry related to subprime lending and other credit related exposure.  These concerns resulted in a substantial decrease in market liquidity and increased risk premiums for securities in this sector.  Credit spreads for issuers in this sector have remained wide during recent months, causing prices for these securities holdings to decline.  All individual name trust preferred debt securities held in our portfolio continue to accrue and make payments as expected.  As of June 30, 2009, trust preferred debt securities with a carrying value of $6.2 million and unrealized losses of $5.6 million were rated below investment grade by Standard & Poors, Inc. (“S&P”).  Management reviewed the collectibility of these securities taking into consideration such factors as the financial condition of the issuers, reported regulatory capital ratios of the issuers, credit ratings including ratings in effect as of the reporting period date as well as credit rating changes between the reporting period date and the filing date of this quarterly report and other information.  We noted no additional downgrades to below investment grade between the reporting period date and the filing date of this quarterly report.  Based on these analyses, management concluded that it expects to recover the entire amortized cost basis of these securities.  Furthermore, Washington Trust does not intend to sell these securities and it is not more likely than not that Washington Trust will be required to sell these securities before recovery of their cost basis, which may be maturity.  Therefore, management does not consider these investments to be other-than-temporarily impaired at June 30, 2009.

Trust preferred debt securities in the form of collateralized debt obligations:
At June 30, 2009, Washington Trust had two pooled trust preferred holdings in the form of collateralized debt obligations with unrealized losses of $4.3 million.  These pooled trust preferred holdings consist of trust preferred obligations of banking industry companies and, to a lesser extent, insurance industry companies.  For both of these pooled trust preferred securities, Washington Trust’s investment is senior to one or more subordinated tranches which have first loss exposure.  Valuations of the pooled trust preferred holdings are dependent in part on cash flows from underlying issuers.  Unexpected cash flow disruptions could have an adverse impact on the fair value and performance of pooled trust preferred securities.  Management believes the unrealized losses on these pooled trust preferred securities primarily reflect increased investor concerns about recent and potential future losses in the financial services industry related to subprime lending and other credit related exposure.  These concerns resulted in a substantial decrease in market liquidity and increased risk premiums for securities in this sector.  Credit spreads for issuers in this sector have remained wide during recent months, causing prices for these securities holdings to decline.

During the quarter ended March 31, 2009, an adverse change occurred in the expected cash flows for one of the trust preferred collateralized debt obligation securities indicating that, based on cash flow forecasts with regard to timing of deferrals and potential future recovery of deferred payments, default rates, and other matters, the Corporation will not receive all contractual amounts due under the instrument and will not recover the entire cost basis of this security.  As previously described, the Corporation early adopted FSP Nos. FAS 115-2 and FAS 124-2 for the quarter ended March 31, 2009, and recognized a $1.350 million credit-related impairment loss in earnings for this trust preferred collateralized debt security, with a commensurate adjustment to reduce the amortized cost of this security.  This security was downgraded to a below investment grade rating of “Caa3” by Moody’s Investors Service Inc. (“Moody’s”) on March 27, 2009.  This credit rating was considered by management in its assessment of the impairment status of this security and is classified as nonaccrual. This security was current with respect to its quarterly debt service (interest) payments as of the most recent quarterly payment date of July 15, 2009.

During the fourth quarter of 2008, the Corporation’s other trust preferred collateralized debt obligation security began deferring interest payments until future periods and the Corporation recognized an other-than-temporary impairment charge in the fourth quarter of 2008 on this security in the amount of $1.859 million.  Based on cash flow forecasts with regard to timing of deferrals and potential future recovery of deferred payments, default rates, and other matters, the Corporation expects to receive all contractual amounts due under the instrument and expects to recover the entire cost basis of the security.  Based on this assessment and in connection with the early adoption of FSP Nos. FAS 115-2 and FAS 124-2, the Corporation concluded that there was no credit-related loss portion of the other-than-temporary impairment charge as of December 31, 2008.  Washington Trust reclassified this noncredit-related
-12-
WASHINGTON TRUST BANCORP, INC. AND SUBSIDIARIES
(Continued)
CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
  
 
other-than-temporary impairment loss for this security previously recognized in earnings in the fourth quarter of 2008 as a cumulative effect adjustment as of January 1, 2009.  In addition, the amortized cost basis of this security was increased by the $1.859 million amount of the cumulative effect adjustment.  This security was downgraded to a below investment grade rating of “Ca” by Moody’s on March 27, 2009 and is classified as nonaccrual.  This credit rating was considered by management in its assessment of the impairment status of this security.

Based on cash flow forecasts for these securities, management expects to recover the remaining amortized cost of these securities.  Furthermore, Washington Trust does not intend to sell these securities and it is not more likely than not that Washington Trust will be required to sell these securities before recovery of their cost basis, which may be at maturity.  Therefore, management does not consider the unrealized losses on these investments to be other-than-temporary at June 30, 2009.

Perpetual preferred stocks:
In October 2008, the SEC’s Office of the Chief Accountant, after consultation and concurrence with the FASB, concluded that the assessment of other-than-temporary impairment of perpetual preferred securities for filings made after October 14, 2008 can be made using an impairment model (including an anticipated recovery period) similar to a debt security, provided there has been no evidence of a deterioration in credit of the issuer.  Washington Trust has complied with this guidance in its evaluation of other-than-temporary impairment of perpetual preferred stocks.

As of June 30, 2009, the Corporation had 6 perpetual preferred stock holdings of financial and utility companies with a total fair value of $2.8 million and unrealized losses of $529 thousand, or 16% of their aggregate cost.  Causes of conditions whereby the fair value of equity securities is less than cost include the timing of purchases and changes in valuation specific to individual industries or issuers.  The relationship between the level of market interest rates and the dividend rates paid on individual equity securities may also be a contributing factor.  Based on its assessment of these market conditions, management believes that the decline in fair value of its perpetual preferred equity securities was not a function of the financial condition and operating outlook of the issuers but, rather, reflected increased investor concerns about recent losses in the financial services industry related to subprime lending and other credit related exposure.  These concerns resulted in greater volatility in market prices for perpetual preferred stocks in this market sector.  Management evaluated the near-term prospects of the issuers in relation to the severity and duration of the impairment.  Based on that analysis, management expects to recover the entire cost basis of these securities.  Furthermore, Washington Trust does not intend to sell these securities and it is not more likely than not that Washington Trust will be required to sell these securities before recovery of their cost basis. Therefore, management does not consider these perpetual preferred equity securities to be other-than-temporarily impaired at June 30, 2009.
-13-
WASHINGTON TRUST BANCORP, INC. AND SUBSIDIARIES
(Continued)
CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
  

(5) Loan Portfolio
The following is a summary of loans:
 
(Dollars in thousands)
  
June 30, 2009
    
December 31, 2008
 
   
Amount
    
%
    
Amount
    
%
  
Commercial:
                        
Mortgages (1)
   $ 439,182       23 %   $ 407,904       22 %
Construction and development (2)
     64,504       3 %     49,599       3 %
Other (3)
     443,552       24 %     422,810       23 %
Total commercial
     947,238       50 %     880,313       48 %
                                 
Residential real estate:
                                
Mortgages (4)
     606,324       32 %     626,663       34 %
Homeowner construction
     12,535       1 %     15,389       1 %
Total residential real estate
     618,859       33 %     642,052       35 %
                                 
Consumer:
                                
Home equity lines
     195,612       10 %     170,662       9 %
Home equity loans
     70,806       4 %     89,297       5 %
Other
     58,739       3 %     56,830       3 %
Total consumer
     325,157       17 %     316,789       17 %
Total loans (5)
   $ 1,891,254       100 %   $ 1,839,154       100 %
 
 (1)
Amortizing mortgages and lines of credit, primarily secured by income producing property.  $112.2 million of these loans at June 30, 2009 were pledged as collateral for Federal Home Loan Bank borrowings (See Note 7).
 (2)
Loans for construction of residential and commercial properties and for land development.
 (3)
Loans to businesses and individuals, a substantial portion of which are fully or partially collateralized by real estate.  $14.4 million of these loans at June 30, 2009 were pledged as collateral for Federal Home Loan Bank borrowings (See Note 7).
 (4)
A substantial portion of these loans was pledged as collateral for Federal Home Loan Bank borrowings (See Note 7).
 (5)
Net of unamortized loan origination costs, net of fees, totaling $15 thousand at June 30, 2009 and net of unamortized loan origination fees, net of costs $2 thousand at December 31, 2008.  Also includes $213 thousand and $259 thousand of net discounts on purchased loans at both June 30, 2009 and December 31, 2008, respectively.

Nonaccrual Loans
Nonaccrual loans totaled $22.7 million at June 30, 2009, compared to $7.8 million at December 31, 2008. This reflects an $11.2 million increase in nonaccrual commercial loans and a $3.4 million increase in nonaccrual residential mortgages.

(6) Allowance for Loan Losses
The following is an analysis of the allowance for loan losses:
 
(Dollars in thousands)
  
   
Three months
    
Six months
  
Periods ended June 30,
  
2009
    
2008
    
2009
    
2008
  
Balance at beginning of period
   $ 24,498     $ 20,724     $ 23,725     $ 20,277  
Provision charged to expense
     3,000       1,400       4,700       1,850  
Recoveries of loans previously charged off
     36       58       135       162  
Loans charged off
     (1,483 )     (219 )     (2,509 )     (326 )
Balance at end of period
   $ 26,051     $ 21,963     $ 26,051     $ 21,963  
WASHINGTON TRUST BANCORP, INC. AND SUBSIDIARIES
(Continued)
CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
  

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

(Dollars in thousands)
  
June 30,
    
December 31,
  
   
2009
    
2008
  
FHLB advances
   $ 688,431     $ 829,626  

In addition to outstanding advances, the Corporation also has access to an unused line of credit amounting to $8.0 million at June 30, 2009.  Under an agreement with the FHLB, the Corporation is required to maintain qualified collateral, free and clear of liens, pledges, or encumbrances that, based on certain percentages of book and market values, has a value equal to the aggregate amount of the line of credit and outstanding advances.  The FHLB maintains a security interest in various assets of the Corporation including, but not limited to, residential mortgage loans, commercial mortgages and other commercial loans, U.S. government or agency securities, U.S. government-sponsored enterprise securities, and amounts maintained on deposit at the FHLB.  The Corporation maintained qualified collateral in excess of the amount required to collateralize the line of credit and outstanding advances at June 30, 2009.  Included in the collateral were securities available for sale with a fair value of $431.6 million and $512.3 million that were specifically pledged to secure FHLB borrowings at June 30, 2009 and December 31, 2008, respectively.  Unless there is an event of default under the agreement with the FHLB, the Corporation may use, encumber or dispose of any portion of the collateral in excess of the amount required to secure FHLB borrowings, except for that collateral that has been specifically pledged.

Other Borrowings
The following is a summary of other borrowings:
 
(Dollars in thousands)
  
June 30,
    
December 31,
  
   
2009
    
2008
  
Treasury, Tax and Loan demand note balance
   $ 2,199     $ 4,382  
Deferred acquisition obligations
     –       2,506  
Securities sold under repurchase agreements
     19,500       19,500  
Other
     340       355  
Other borrowings
   $ 22,039     $ 26,743  

The Stock Purchase Agreement, as amended, for the August 2005 acquisition of Weston Financial Group, Inc. (“Weston Financial”) provided for the payment of contingent purchase price amounts based on operating results in each of the years in the three-year earn-out period ending December 31, 2008.  Contingent payments were added to goodwill and recorded as deferred acquisition liabilities at the time the payments were determinable beyond a reasonable doubt.  During the first quarter of 2009, the Corporation paid approximately $2.5 million, which represented the final payment pursuant to the Stock Purchase Agreement, as amended.

(8) Shareholders’ Equity
Stock Repurchase Plan:
The Corporation’s 2006 Stock Repurchase Plan authorizes the repurchase of up to 400,000 shares of the Corporation’s common stock in open market transactions.  There were no shares repurchased under the Corporation’s 2006 Stock Repurchase Plan during the six months ended June 30, 2009.  As of June 30, 2009, a cumulative total of 185,400 shares have been repurchased at a total cost of $4.8 million.
-15-
WASHINGTON TRUST BANCORP, INC. AND SUBSIDIARIES
(Continued)
CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
  

Regulatory Capital Requirements:
 
The following table presents the Corporation’s and the Bank’s actual capital amounts and ratios at June 30, 2009 and December 31, 2008, as well as the corresponding minimum and well capitalized regulatory amounts and ratios:
 
(Dollars in thousands)
  
Actual
    
For Capital Adequacy Purposes
    
To Be Well Capitalized Under Prompt Corrective Action Provisions
  
   
Amount
    
Ratio
    
Amount
    
Ratio
    
Amount
    
Ratio
  
As of June 30, 2009:
                                    
Total Capital (to Risk-Weighted Assets):
                                    
Corporation
   $ 239,567       12.23 %   $ 156,715       8.00 %   $ 195,894       10.00 %
Bank
   $ 237,531       12.14 %   $ 156,571       8.00 %   $ 195,713       10.00 %
Tier 1 Capital (to Risk-Weighted Assets):
                                                
Corporation
   $ 215,057       10.98 %   $ 78,358       4.00 %   $ 117,536       6.00 %
Bank
   $ 213,043       10.89 %   $ 78,285       4.00 %   $ 117,428       6.00 %
Tier 1 Capital (to Average Assets): (1)
                                                
Corporation
   $ 215,057       7.53 %   $ 114,294       4.00 %   $ 142,868       5.00 %
Bank
   $ 213,043       7.46 %   $ 114,190       4.00 %   $ 142,738       5.00 %
                                                 
As of December 31, 2008:
                                                
Total Capital (to Risk-Weighted Assets):
   $ 235,728       12.54 %   $ 150,339       8.00 %   $ 187,923