Good morning and welcome to Washington Trust Bancorp Inc.’s Q2 2012 Conference Call. My name is Keith. I will be your operator today [Operator Instructions] And now I’d like to turn the conference over to Elizabeth B. Eckel, Senior Vice President, Marketing and Investor Relations. Ms. Eckel?

Thank you, Keith. Good morning. This is the second quarter 2012 earnings conference call for Washington Trust Bancorp Inc., NASDAQ Global Market Select, symbol: WASH. Please note this morning’s conference call is being recorded and webcast live. A webcast replay of today’s conference call will be available shortly after the conclusion of today’s call through the corporation’s website, www.washtrust.com, in our Investor Relations section under the subhead Presentations. However, the information we provide during today’s call is accurate only as of this date and you should not rely on today’s statements after the conclusion of the call. Hosting this morning’s discussion is Joseph J. MarcAurele, Chairman, President and Chief Executive Officer; and David V. Devault, Senior Executive Vice President, Secretary and Chief Financial Officer. Now, I’m pleased to introduce Washington Trust’s Chairman, President and CEO, Joseph J. MarcAurele.

Good morning. I’d like to welcome everyone to today’s conference call. Yesterday, we released our earnings for the second quarter. This morning I’ll discuss the highlights of the quarter and David will provide an in-depth financial review. At the conclusion of the call, we’ll answer questions about our mid-year performance and our outlook for the remainder of 2012. I’m pleased to report that we once again posted record earnings. Net income for the second quarter was $8.7 million or $0.53 per share, up $0.07 or 15% from the second quarter a year ago. Profitability ratio has also improved during the quarter. Return on average equity was 11.98%, compared to 10.83% for the second quarter last year. Return on avenger assets was 1.16%, compared to 1.04% for the second quarter in 2011. Capital ratio has also increased and remained well above minimum regulatory requirements and our asset quality measures all improved. All business lines performed well, so it was a good quarter all the way around. Our results are strong given the continued economic challenges we face. As we’ve mentioned before, Rhode Island's recovery continues to lag, both the Northeast and the nation. And while there have been a few bright spots in the local economy, Rhode Island still has a way to go. The good news is Washington Trust is a well-diversified financial institution with core business lines that operate beyond our traditional Rhode Island borders, and our second quarter numbers reflect the success of recent expansion into neighboring states. The mortgage area is a prime example. In the second quarter, mortgage origination activity continued at a strong pace and contributed key revenues through loan sale gains. We had particularly good production from our Massachusetts and Connecticut offices, where home values and sales have certainly picked up. And while the…

Thank you, Joe. Good morning, everyone. Thank you for joining us on our call today. I’ll review our second quarter 2012 operating results and financial position as described in our press release yesterday afternoon. As Joe mentioned, net income for the corporation was $8.7 million with diluted earnings per share of $0.53 for the second quarter of 2012. These were both record levels, and these results compare to $8.4 million or $0.51 per diluted share for the previous quarter and $7.6 million or $0.46 per diluted share in the second quarter last year. There were a number of good reasons for these favorable profitability results, including the net interest margin, loan growth, mortgage banking and asset quality, to name a few. Key performance ratios in the latest quarter were also very respectable with the return on average equity of 11.98% and a return on average assets of 1.16%. These compared to the second quarter of 2011 with 10.83% return on equity and 1.04% return on assets. So there has been very good progress and profitability improvement over this period. There were several transactions in the quarter that resulted in an after tax charge of about $0.017 on diluted earnings per share that would round to $0.02 as reported. These included a gain of $348,000 on the sale of bank property, a charge of $131,000 recognized in connection with a lease buy out associated with the planned branch closing and some balance sheet positioning transactions, which are expected to result in net interest income enhancement of about $292,000 in the second half of this year, with some continuing benefit in future years as well. These include a small sale of some lower yield and holdings in the mortgage backed securities portfolio that resulted in a net realized gain of $217,000, a…

Thank you, David. In summary, our results for the second quarter were very solid, particularly given the economy. We do continue to feel very good about our market position, here in Rhode Island in particular, but also in Massachusetts and Connecticut, where we also do business. We hope to keep the momentum going through the year-end, but as usual, we remain somewhat cautious given the sluggishness in the economy. In the meantime, we will continue to -- on our way to our strategic plan to grow our core business lines and certainly to expand our market reach. We thank you for your time this morning and now David and I would be happy to answer any questions.

[Operator Instructions] And the first question comes from Damon Delmont from KB&W.

My first question is regarding the growth in commercial real estate. Could you talk a little bit about the types of projects or properties that you are adding to the portfolio, and kind of from a geographic perspective, where you are seeing the most demand.

These are in Southern New England. Primarily, there are a variety of different types of properties, including some housing, well, apartment type projects, some retail, substantial retail properties as well as hotels.

These are primary credit tenant anchored type properties. There is a mix of office, and again, the mix of tenants is quite good and the loan to values and the underwriting parameters we feel are solid, with borrowers that we certainly know.

Okay, and can you talk a little bit about the competitive environment with regard to pricing right now?

I would say, overall, this remains a competitive environment. The way we are competing, I think, is that we are very consistent in regard to the type of deals that we do. We deliver with relative speed and efficiency to our customers. All that being said, there continues to be a significant price competition for assets that are considered to be of good quality.

Okay great. And then with regards to the mortgage banking data, I believe you had said there was about a 4% increase over the last quarter. What was the actually dollar amount of the originations this quarter?

$178 million.

And do you have the gain on sale of those?

$3 million.

Okay, great. And then my last question, with regards to your remaining --

Damon, excuse me. I just want to clarify. Some of that goes to portfolios. So the $3 million is not on the $178 million.

Okay, so can you break out how much goes to the portfolio and how much is sold?

Sales were about $119 million.

Okay. All right, that’s helpful. And then my last question just deals with the outstanding FHLB advances that you have. I think it’s around $524 million and I think the cost on those is somewhere on the 3.25 range. Any additional opportunity to maybe restructure or refinance those like you did quarter with some others.

Well, I would have said no 6 months ago, but then rates continued to decline. So it’s always possible, but there are certainly diminishing opportunities for that in the near term.

And the next question comes from Frank Schiraldi from Sandler O'Neill.

Just a couple of questions. I wondered first, Dave, if you could talk a little bit about your, the margin expectations going forward. You got a little bit of a benefit from the restructuring and seems that funding cost might be sort of be hitting bottom. What are your thoughts there?

There are still some future benefits to come from reducing times deposit and wholesale funding costs, but to a lesser extent than we’ve seen, certainly in recent quarters. Offsetting that is the fact that at today’s rates, assets that are coming on to the balance sheet are not as high a yield as we had seen in the past. So our goal for the near term is going to be margin preservation, and we would be happy with that.

Okay, and I wondered, do you have the numbers on CD balances maturing in coming quarters or in the coming quarter and pricing on that?

Not summarized that way. We can put that in our 10-Q this quarter.

Okay great. And then just on the provisioning, it looks like you had a recovery in the quarter of about, I think $500,000. Is a better way to look at the provisioning going forward more normalized provisioning up around the $1 million level, do you think, on a quarterly basis?

We don’t think so in the near term, and by that I would mean the next couple of quarters. We think asset quality is such that we can do with a lower provision than $1 million per quarter. If we have to increase it, we believe that would be because of growth and not due to anything that we can see regarding asset quality inherent in the portfolio right now. We’ve seen significant progress in improving commercial loan asset quality. Residential continues to be -- it's certainly very, very, very manageable and very low by industry standards, but there seems to be a longer tail with workouts of residential, which have a lower loss experience even when they -- if they do become non-performing.

Okay, great. So I mean, in that case, is the current provisioning, the provision we saw in this quarter, that might be a little bit better expectation or run rate in the short term, without nailing down a number?

We think somewhere in that range, probably not lower than that, is fair for the next couple of quarters.

Okay, and then just finally a question for Joe, just a 30,000 foot view in terms of M&A. Just wondering if you got the sense that you are hearing a little more chatter in and around the footprint and if there is potential to, in your mind, to do something in and around the footprint.

Well, Frank, I think that our comments on M&A have been very consistent. Clearly we consider a lot of things. We again, though, would like to emphasize that we would look for things that would be geographically close to us and would be something that we could put our brand on and benefit from the synergies that our company could bring to anything we would combine with.

[Operator Instructions] Okay, as there are no more questions at this present time, I’d like to turn the call back over to management for any closing remarks.

Well, this is Joe. I really appreciate everyone’s time. Thank you very much. We feel good about the quarter. We certainly hope to continue this type of momentum, and we look forward to speaking to you all again at the end of next quarter.

Thank you. That concludes today’s teleconference. You may now disconnect your phone lines. Thank you for participating.

Thanks a lot.

And have a nice day.