Some of the factors that might cause these differences include the following:
changes in general national, regional or international economic conditions or conditions affecting the banking or financial services industries or financial capital markets, volatility and disruption in national and international financial markets, government intervention in the U.S. financial system, reductions in net interest income resulting from interest rate volatility as well as changes in the balance and mix of loans and deposits, reductions in the market value of wealth management assets under administration, changes in the value of securities and other assets, reductions in loan demand, changes in loan collectibility, default and charge-off rates, changes in the size and nature of the Corporation's competition, changes in legislation or regulation and accounting principles, policies and guidelines, and changes in the assumptions used in making such forward-looking statements. In addition, the factors described under "Risk Factors" in Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2008, as filed with the SEC, may result in these differences. You should carefully review all of these factors, and you should be aware that there may be other factors that could cause these differences. These forward-looking statements were based on information, plans and estimates at the date of this quarterly report, and we assume no obligation to update any forward-looking statements to reflect changes in underlying assumptions or factors, new information, future events or other changes.

Critical Accounting Policies
Accounting policies involving significant judgments and assumptions by management that have, or could have, a material impact on the carrying value of certain assets and impact income are considered critical accounting policies. As disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2008, we have identified the allowance for loan losses, accounting for acquisitions and review of goodwill and intangible assets for impairment, and other-than-temporary impairment of investment securities as critical accounting policies. As a result of the early adoption of FSP No. FAS 115-2 and FAS 124-2 effective January 1, 2009, the Corporation has revised its critical accounting policy pertaining to other-than-temporary impairment of investment securities. FSP No. 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. Therefore, the revised accounting policy below represents the only change in the Corporation's critical accounting policies from those disclosed in our Annual report on Form 10-K for the fiscal year ended December 31, 2008 and applies prospectively beginning January 1, 2009.

Valuation of Investment Securities for Impairment Securities available for sale are carried at fair value, with any unrealized gains and losses, net of taxes, reported as accumulated other comprehensive income or loss in shareholders' equity. The fair values of securities are based on either quoted market prices, third party pricing services or third party valuation specialists. When the fair value of an investment security is less than its amortized cost basis, the Corporation assesses whether the decline in value is other-than-temporary. The Corporation considers whether evidence indicating the cost of the investment is recoverable outweighs evidence to the contrary. Evidence considered in this assessment includes the reasons for impairment, the severity and duration of the impairment, changes in the value subsequent to the reporting date, forecasted performance of the issuer, changes in the dividend or interest payment practices of the issuer, changes in the credit rating of the issuer or the specific security, and the general market condition in the geographic area or industry the issuer operates in.

Future adverse changes in market conditions, continued poor operating results of the issuer, projected adverse changes in cash flows which might impact the collection of all principal and interest related to the security, or other factors could result in further losses that may not be reflected in an investment's current carrying value, possibly requiring an additional impairment charge in the future.

With respect to perpetual preferred stocks, the Corporation's assessment of other-than-temporary impairment is 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.

Debt securities:
In determining whether an other-than-temporary impairment has occurred for debt securities, the Corporation compares the present value of cash flows expected to be collected from the security with the amortized cost of the security. If the present value of expected cash flows is less than the amortized cost of the security, the entire amortized cost of the security will not be recovered, that is, a credit loss exists, and an other-than-temporary impairment shall be considered to have occurred.

With respect to holdings of collateralized debt obligations representing pooled trust preferred debt securities, estimates of cash flows are evaluated upon consideration of information including, but not limited to, past events, current conditions, and reasonable and supporting forecasts for the respective holding. Such information generally includes the remaining payment terms of the security, prepayments speeds, the financial condition of the issuer(s), expected defaults, and the value of any underlying collateral. The estimated cash flows shall be discounted at a rate equal to the current yield used to accrete the beneficial interest.

When an other-than-temporary impairment has occurred, the amount of the other-than-temporary impairment recognized in earnings for a debt security depends on whether the Corporation intends to sell the security or more likely than not will be required to sell the security before recovery of its amortized cost less any current period credit loss. If the Corporation intends to sell the security or more likely than not will be required to sell the security before recovery of its amortized cost, the other-than-temporary impairment shall be recognized in earnings equal to the entire difference between the amortized cost and fair value of the security. If the Corporation does not intend to sell or more likely than not will not be required to sell the security before recovery of its amortized cost, the amount of the other-than-temporary impairment related to credit loss shall be recognized in earnings and the noncredit-related portion of the other-than-temporary impairment shall be recognized in other comprehensive income.

Overview
Washington Trust offers a comprehensive product line of financial services to individuals and businesses including commercial, residential and consumer lending, retail and commercial deposit products, and wealth management services through its offices in Rhode Island, Massachusetts and southeastern Connecticut, ATMs, and its Internet website (www.washtrust.com).

Our largest source of operating income is net interest income, the difference between interest earned on loans and securities and interest paid on deposits and other borrowings. In addition, we generate noninterest income from a number of sources including wealth management services, deposit services, merchant credit card processing, bank-owned life insurance, loan sales, commissions on loans originated for others and sales of investment securities. Our principal noninterest expenses include salaries and employee benefits, occupancy and facility-related costs, merchant processing costs, technology and other administrative expenses.

Our financial results are affected by interest rate volatility, changes in economic and market conditions, competitive conditions within our market area and changes in legislation, regulation and/or accounting principles. During the latter part of 2008 and continuing into 2009, market and economic conditions have been severely impacted by deterioration in credit conditions as well as widespread illiquidity and elevated levels of volatility. Concerns about future economic growth, lower consumer confidence, contraction of credit availability and lower corporate earnings continue to challenge the economy. The rate of unemployment continued to increase, reaching its highest level in several years. Corporate and related counterparty credit spreads widened and heightened concerns about numerous financial services companies adversely impacted the financial markets. As a result of these unparalleled market conditions, federal government agencies initiated several intervention actions in the U.S. financial services industry.

Management believes that the downturn in the local and national economies negatively impacted the credit quality of our loans, particularly in our commercial portfolio. During the first quarter of 2009, we increased the allowance for loan losses in response to this condition as well as growth in the portfolio. In response to these conditions, the Corporation has continued to refine its loan underwriting standards and has continued to enhance its credit monitoring and collection practices. The continued weakness in the financial markets as described above also contributed to declines in the values of holdings in our investment securities portfolio as well as declines in wealth management assets under administration.

Composition of Earnings
Net income for the first quarter of 2009 amounted to $2.7 million, or 17 cents per diluted share; compared to $5.8 million, or 43 cents per diluted share, reported for the first quarter a year earlier. The returns on average equity and average assets for the first quarter of 2009 were 4.50% and 0.36%, respectively, compared to 12.22% and 0.90%, respectively, for the same quarter in 2008. Earnings in first quarter 2009 were influenced by several factors as described below.

Net impairment losses of $2.0 million ($1.3 million after tax; 8 cents per diluted share) were charged to earnings in the first quarter of 2009 for securities deemed to be other-than-temporarily impaired. Impairment losses amounted to $858 thousand in the first quarter of 2008. Also included in noninterest income were net realized gains on securities of $57 thousand in the first quarter of 2009, compared to net realized gains of $813 thousand in the first quarter of 2008.

The loan loss provision charged to earnings amounted to $1.7 million for the three months ended March 31, 2009, compared to $450 thousand for the same period in 2008. The loan loss provision was based on management's assessment of economic and credit conditions as well as growth in the loan portfolio.

No dividend was received from the Federal Home Loan Bank of Boston ("FHLB") in the first quarter of 2009. Dividend income on the Corporation's investment in FHLB stock totaled $445 thousand in the first quarter of 2008.

Net interest income for the first quarter of 2009 increased by 6% from the same quarter in 2008, while the net interest margin for the first quarter of 2009 declined by 20 basis points from the first quarter a year earlier. The decrease in the margin reflected the elimination of the FHLB dividend and margin compression resulting from a lagging effect of downward pricing of deposit rates in response to the Federal Reserve's actions to reduce short-term interest rates.

Revenue from wealth management services, our primary source of noninterest income, is largely dependent on the value of assets under administration. Wealth management revenues for the first quarter of 2009 were down by $1.8 million, or 25%, from the same quarter in 2008, reflecting decline in the financial markets. Wealth management assets under administration declined by $189.7 million, or 6%, in the first quarter of 2009 and totaled $2.958 billion at March 31, 2009. Assets under administration were down by $920.8 million, or 24%, from the March 31, 2008 balance.

Also included in noninterest income were net gains on loan sales and commissions on loans originated for others of $1.0 million for the first quarter of 2009, up by $553 thousand from the first quarter a year earlier. This increase was due to strong residential mortgage refinancing and mortgage sales activity in the first quarter of 2009.

Noninterest expenses for the first three months of 2009 were up by $1.2 million, or 7%, from the same period in 2008. This increase included higher Federal Deposit Insurance Corporation ("FDIC") deposit insurance costs of $395 thousand and a $250 thousand charge associated with the Corporation's 401(k) Plan.

Results of Operations
Segment Reporting
Washington Trust manages its operations through two business segments, Commercial Banking and Wealth Management Services. The Commercial Banking segment includes commercial, commercial real estate, residential and consumer lending activities; mortgage banking, secondary market and loan servicing activities; deposit generation; merchant credit card services; cash management activities; and direct banking activities, which include the operation of ATMs, telephone and internet banking services and customer support and sales. Wealth Management Services includes asset management services provided for individuals and institutions; personal trust services, including services as executor, trustee, administrator, custodian and guardian; corporate trust services, including services as trustee for pension and profit sharing plans; and other financial planning and advisory services. All other activity, such as the investment securities portfolio, wholesale funding activities and administrative units, are not related to the segments and

The Commercial Banking segment reported net income of $4.7 million in first quarter of 2009, down by $261 thousand, or 5%, from the comparable 2008 quarter. Net interest income was up by $1.5 million, or 10%, driven by growth in average loan balances and lower deposit costs. This increase in net interest income was offset by a $1.3 million increase in the loan loss provision and $1.1 million increase in Commercial Banking other noninterest expenses in the first quarter of 2009, as compared to the same quarter in 2008. This increase in other noninterest expenses reflects increases in salaries and benefits and higher FDIC deposit insurance costs.

The Wealth Management Services segment reported net income of $323 thousand in the first quarter of 2009, a decrease of $1.0 million, or 76%, from net income reported for this segment the first quarter of 2008. Noninterest income derived from the Wealth Management Services segment was $5.4 million in first three months of 2009, down by $1.8 million, or 25%, from the same period in 2008. These revenues are dependent to a large extent on the value of assets under administration and are closely tied to the performance of the financial markets. In the first quarter of 2009, noninterest expenses for the Wealth Management Services segment amounted to $4.9 million, down by $193 thousand, or 4%, from same quarter in 2008. This decrease reflects lower incentive-based compensation.

Net Interest Income
Net interest income is the difference between interest earned on loans and securities and interest paid on deposits and other borrowings, and continues to be the primary source of Washington Trust's operating income. Net interest income is affected by the level of interest rates, changes in interest rates and changes in the amount and composition of interest-earnings assets and interest-bearing liabilities. Included in interest income are loan prepayment fees and certain other fees, such as late charges.

Net interest income for the first quarter of 2009 increased $883 thousand, or 6%, from the same quarter a year earlier. Included in net interest income in first quarter of 2008 was dividend income on the Corporation's investment in FHLB stock of $445 thousand. No dividend was received from FHLB in the first quarter of 2009.

The following discussion presents net interest income on a fully taxable equivalent ("FTE") basis by adjusting income and yields on tax-exempt loans and securities to be comparable to taxable loans and securities. For more information see the section entitled "Average Balances / Net Interest Margin - Fully Taxable Equivalent (FTE) Basis" below.

FTE net interest income for the first quarter of 2009 increased 6% from the same period in 2008. The net interest margin (FTE net interest income as a percentage of average interest-earnings assets) for the first quarter of 2009 was 2.39%, down 20 basis points from the same quarter a year earlier. The decline in the net interest margin reflects the elimination of the FHLB dividend income and margin compression resulting from a lagging effect of downward pricing of deposit rates in response to the Federal Reserve's actions to reduce short-term interest rates.

Average interest-earning assets for the three months ended March 31, 2009 increased $370.3 million from the same period a year earlier. This increase was largely due to growth in the loan portfolio. Total average loans for the three months ended March 31, 2009 increased $260.2 million from the same period in 2008 primarily due to growth in the commercial loan category. The yield on total loans for the first quarter of 2009 decreased 101 basis points from the comparable 2008 period, reflecting declines in short-term interest rates. Total average securities for the three months ended March 31, 2009 increased $110.1 million from the same period last year due largely to purchases of mortgage-backed securities issued by U.S. government agencies and government-sponsored enterprises during a period of substantial spread widening for these and many other classes of investment securities. The FTE rate of return on securities for the first quarter of 2009 decreased 85 basis points from the same quarter in 2008. The decrease in the total yield on securities was largely attributable to the elimination of dividend income on the Corporation's investment in FHLB stock.

For the three months ended March 31, 2009, average interest-bearing liabilities increased $309.3 million from the amount reported for the same period in 2008 primarily due to growth in deposits and increases in FHLB advances. The average balance of FHLB advances for the three months ended March 31, 2009 increased $97.1 million, while the average rate paid on FHLB advances decreased 56 basis points from the same period a year earlier. The average balance of time deposits for the first quarter of 2009 increased $159.5 million, while the average rate paid on time deposits decreased 108 basis points from the same quarter in 2008. Time deposits include out-of-market brokered

Average Balances / Net Interest Margin - Fully Taxable Equivalent (FTE) Basis The following tables present average balance and interest rate information. Tax-exempt income is converted to a fully taxable equivalent ("FTE") basis using the statutory federal income tax rate adjusted for applicable state income taxes net of the related federal tax benefit. For dividends on corporate stocks, the 70% federal dividends received deduction is also used in the calculation of tax equivalency. Unrealized gains (losses) on available for sale securities are excluded from the average balance and yield calculations. Nonaccrual and renegotiated loans, as well as interest earned on these loans (to the extent recognized in the Consolidated Statements of Income) are included in amounts presented for loans.

Three months ended
March 31,                                    2009                                        2008
                              Average                       Yield/        Average                       Yield/
(Dollars in thousands)        Balance        Interest        Rate         Balance        Interest        Rate
Assets:
Commercial and other
loans                       $   897,458     $   12,111         5.47 %   $   707,073     $   12,221         6.95 %
Residential real estate
loans                           645,959          8,712         5.47 %       601,564          8,297         5.55 %
Consumer loans                  318,234          3,367         4.29 %       292,800          4,497         6.18 %
Total loans                   1,861,651         24,190         5.27 %     1,601,437         25,015         6.28 %
Cash, federal funds sold
and other short-term
investments                      27,228             17         0.26 %        20,985            140         2.69 %
Taxable debt securities         771,240          8,449         4.45 %       668,701          8,416         5.06 %
Nontaxable debt
securities                       80,677          1,166         5.86 %        81,025          1,143         5.68 %
Corporate stocks and FHLB
stock                            48,520            105         0.83 %        46,860            687         5.89 %
Total securities                927,665          9,737         4.26 %       817,571         10,386         5.11 %
Total interest-earning
assets                        2,789,316         33,927         4.93 %     2,419,008         35,401         5.89 %
Non interest-earning
assets                          174,669                                     168,709
Total assets                $ 2,963,985                                 $ 2,587,717
Liabilities and
Shareholders' Equity:
NOW accounts                $   170,031     $       75         0.18 %   $   162,509     $       78         0.19 %
Money market accounts           365,070          1,398         1.55 %       327,877          2,552         3.13 %
Savings accounts                178,144            177         0.40 %       174,733            432         1.00 %
Time deposits                   971,275          7,897         3.30 %       811,767          8,837         4.38 %
FHLB advances                   769,179          7,227         3.81 %       672,116          7,299         4.37 %
Junior subordinated
debentures                       32,991            479         5.89 %        22,681            338         5.99 %
Other                            23,517            245         4.22 %        29,247            314         4.32 %
Total interest-bearing
liabilities                   2,510,207         17,498         2.83 %     2,200,930         19,850         3.63 %
Demand deposits                 172,420                                     165,934
Other liabilities                43,836                                      30,534
Shareholders' equity            237,522                                     190,319
Total liabilities and
shareholders' equity        $ 2,963,985                                 $ 2,587,717
Net interest income (FTE)                   $   16,429                                  $   15,551
Interest rate spread                                           2.10 %                                      2.26 %
Net interest margin                                            2.39 %                                      2.59 %

Interest income amounts presented in the preceding table include the following adjustments for taxable equivalency:

(Dollars in thousands)

Three months ended March 31,    2009      2008
Commercial and other loans     $  51     $  45
Nontaxable debt securities       386       363
Corporate stocks                  33        67
Total                          $ 470     $ 475

The following table presents certain information on a FTE basis regarding changes in our interest income and interest expense for the period indicated. The net change attributable to both volume and rate has been allocated proportionately.

                                                              Three months ended
                                                            March 31, 2009 vs. 2008
                                                          Increase (decrease) due to
(Dollars in thousands)                                 Volume         Rate       Net Chg
Interest on interest-earning assets:
Residential real estate loans                         $     605     $   (190 )   $    415
Commercial and other loans                                2,894       (3,004 )       (110 )
Consumer loans                                              365       (1,495 )     (1,130 )
Cash, federal funds sold and short-term investments          32         (155 )       (123 )
Taxable debt securities                                   1,194       (1,161 )         33
Nontaxable debt securities                                   (5 )         28           23
. . .