Exhibit 99.1
  Michal D. Cann — President & CEO    
  Rick A. Shields — EVP & Chief Financial Officer    
  360.679.3121    NEWS RELEASE
OAK HARBOR, WA — January 24, 2007 — Washington Banking Company (NASDAQ: WBCO), the holding company for Whidbey Island Bank, today reported 2006 net income was unchanged from the previous year, despite a $575,000 restructuring charge (equivalent to $374,000 net of tax) taken in the fourth quarter. In 2006 and 2005, net income was $9.5 million or $1.00 per diluted share. In the quarter ended December 31, 2006, net income was $1.8 million, or $0.19 per diluted share, compared to $2.4 million, or $0.26 per diluted share in the fourth quarter of 2005. Excluding the non-recurring charge, 2006 net income was $9.9 million, or $1.04 per diluted share, and for the fourth quarter was $2.2 million, or $0.23 per diluted share.
“We had an exceptional year in 2005 and knew that we’d face some challenges in 2006,” stated Michal Cann, President and CEO. “We took some difficult but necessary steps in the fourth quarter to reduce our go-forward operating expenses by roughly $1 million a year. Although 2006 earnings per share were negatively impacted by four cents, we are now better positioned to meet our long-term targets, which we’ve identified as a return on equity in excess of 18%, an efficiency ratio in the mid-50s, and double-digit earnings growth.”
2006 FINANCIAL HIGHLIGHTS (Compared to 2005)
    Total loans increased 14% to $719.6 million.
    Total deposits grew 10% to $703.8 million.
    Return on average equity was 15.36%; or 15.96% excluding the one-time charge.
    Return on average assets was 1.25%; or 1.30% excluding the one-time charge.
    Net interest margin dipped just 7 basis points to 5.29%.
“Some of the challenges from 2006 have carried over into this year,” Cann said. “The flat yield curve is still putting pressure on our net interest margin, and although economic expansion continues, it appears to be returning to a normalized level after an extraordinary run. That said, we remain moderately optimistic about 2007.”
At year-end 2006, total loans were $719.6 million, up 14% from $630.3 million at the end of December 2005. Total assets were up 9% to $794.5 million, compared to $726.0 million at year-end 2005.
“Total loans grew by $89.3 million over the course of the year, but only by $5.9 million in the fourth quarter,” stated Rick Shields, Executive Vice President and CFO. “Continued job and population growth are fueling residential and commercial construction, although a seasonal slowdown in the fourth quarter is generally expected. While loan demand may ease a bit in 2007, we still see positive economic trends in our markets and credit quality remains strong.”
At year-end, nonperforming loans (NPLs) were $3.6 million, or 0.51% of total loans, compared to $3.8 million, or 0.53% of total loans at the end of the third quarter, and $2.2 million, or 0.34% of loans at the end of 2005. Net loan losses for 2006 were $1.44 million, or 0.21% of total loans, compared to $1.34 million, or 0.21% of total loans for 2005. The loan loss provision was $625,000 in the quarter and totaled $2.7 million for the year. As a result, the reserve for loan losses grew to $10.0 million at year-end, representing 1.40% of total loans and approaching three times coverage of nonperforming loans.
“We generated double-digit growth in both loans and deposits,” Cann said. “We have a proven track record for attracting high-quality borrowers, but funding those loans with low-cost deposits remains a challenge. All banks in our market are chasing the same deposit dollars. With the yields on money market accounts and time deposits continuing to escalate, customers are shifting cash out of their checking accounts.”
At the end of December 2006, total deposits were $703.8 million, up just slightly on a sequential-quarter basis and up 10% from $637.5 million at the end of 2005. Transaction accounts increased by 2% over the year, reflecting continued growth in money market accounts at the expense of checking and savings. Conversely, time deposits increased by 24% in 2006, to $302.9 million at year-end.
In the fourth quarter, the yield on earning assets was 8.02%, up 6 basis points on a sequential-quarter basis and 46 basis points from the fourth quarter of 2005. The cost of interest-bearing liabilities was 3.56% in the quarter, up 26 basis points sequentially and 117 basis points relative to the fourth quarter of last year. In 2006, the yield on earning assets was 7.90%, a 74 basis point improvement over the previous year. The cost of interest-bearing liabilities was 3.13%, an increase of 99 basis points over the 2005 level.


The following information was filed by Washington Banking Co (WBCO) on Wednesday, January 31, 2007 as an 8K 2.02 statement, which is an earnings press release pertaining to results of operations and financial condition. It may be helpful to assess the quality of management by comparing the information in the press release to the information in the accompanying 10-K Annual Report statement of earnings and operation as management may choose to highlight particular information in the press release.

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