Exhibit 99.1
         
(WASHINGTON BANKING COMPANY LOGO)   (THE CEREGHINO GROUP LOGO)
         
CONTACT:
  Michal D. Cann — President & CEO
Rick A. Shields — EVP & Chief Financial Officer
360.679.3121
  NEWS RELEASE
Washington Banking Fourth Quarter 2007 Earnings Increase to $1.9 million, or $0.19 per Diluted Share
Asset Quality Remains Healthy with Nonperforming Assets at 0.49% of Total Assets
OAK HARBOR, WA — January 23, 2008 — Washington Banking Company (NASDAQ: WBCO), the holding company for Whidbey Island Bank, today reported that solid loan and deposit growth and strong asset quality contributed to profitability in the fourth quarter of 2007. Expenses associated with the previously announced merger agreement with Frontier Financial reduced profits by $513,000 pre-tax, or $0.04 per share after tax, for both the fourth quarter and full year. For the quarter ended December 31, 2007, net income was $1.9 million, or $0.19 per diluted share, compared to $1.8 million, or $0.19 per diluted share, in the fourth quarter a year ago. In 2007, net income was $9.4 million, or $0.99 per diluted share, approaching last year’s level of $9.5 million, or $1.00 per share.
“Strong loan and deposit growth helped offset margin compression and merger related costs to deliver a profitable year,” stated Michal Cann, President and CEO. “We continue to work towards the closing of our merger with Frontier Financial. In the meantime, we continue to operate as a profitable, independent bank for the benefit of our customers, employees and shareholders.”
Fourth quarter 2007 financial highlights, compared to the like period last year, include:
    Revenues increased 3% to $11.4 million.
 
    Total loans increased 12% to $806 million.
 
    Total deposits grew 8% to $758 million, with noninterest-bearing deposits up 5% and money market balances up 31%.
 
    Book value per share grew 10% to $7.78.
 
    Nonperforming Assets (NPA) to total assets was just 0.49% compared to 0.50% last year.
At December 31, 2007, total assets increased 11% to $882 million compared to $795 million a year ago. Total loans grew 12% to $806 million from $720 million at December 31, 2006. Business, or C&I, loans grew 23%, commercial real estate loans increased 19%, and residential construction loans grew 6% while commercial construction shrank 4% over the past twelve months. “In addition to strong commercial loan activity we are generating good growth in consumer lending, both direct and indirect,” said Cann.
“Asset quality remained strong during the quarter, with nonperforming assets up slightly from last year and higher than at the end of September,” stated Rick Shields, Executive Vice President and CFO. “There are less than a dozen loans in the nonperforming category, and we believe we are well secured on these loans.” Nonperforming assets totaled $4.3 million, or 0.49% of total assets at December 31, 2007, compared to $2.7 million, or 0.31% of total assets at September 30, 2007, and $4.0 million, or 0.50% of total assets a year ago. The allowance for loan losses increased to $11.1 million, or 395% of nonperforming loans and 1.38% of total loans as of December 31, 2007, as compared to $10.0 million, or 276% of nonperforming loans and 1.40% of total loans a year ago. Net charge-offs decreased to $429,000, or 0.21% of average loans in the fourth quarter and $1.9 million, or 0.25% of average loans for the full year in 2007.
“We continue to fund our loan growth with good deposit growth, supplemented with low cost funds from the Federal Home Loan Bank,” Shields said. “Deposits grew 8% over the past year, with noninterest-bearing deposits up 5% and money market balances growing 31%. In light of the sharp cuts by the Federal Reserve in the second half of 2007, our net interest margin for the fourth quarter was down 23 basis points from the third quarter and off 28 basis points from the fourth quarter a year ago.” On a fully tax-equivalent basis, the net interest margin was 4.71% in the fourth quarter of 2007, compared to 4.94% in the preceding quarter and 4.99% in the fourth quarter of 2006. For the full year, the net interest margin was 4.89% compared to 5.25% in 2006.
In the fourth quarter, the yield on earning assets was 7.92%, down 24 basis points on a sequential-quarter basis and 10 basis points from the fourth quarter of 2006. The cost of interest-bearing liabilities was 3.77% in the quarter, down 3 basis points sequentially and up 21 basis points relative to the fourth quarter of last year. Year to date, the yield on earning assets increased 21 basis points to 8.07% and the cost of interest-bearing liabilities increased 62 basis points to 3.75%.
Interest income increased 8% in the fourth quarter and 13% year to date, compared to the respective year-ago periods. Higher cost of funds, however, offset these increases, with interest expense up 17% over the fourth quarter of 2006, and 35% in 2007. Loan growth helped generate a 3% increase in net interest income, which totaled $9.5 million, up from $9.2 million in the fourth quarter of 2006. In 2007, net interest income was up 2% to $37.6 million, from $36.7 million in 2006.
In the 2007 fourth quarter, noninterest income increased 2% to $1.8 million from $1.7 million a year ago, reflecting increased income from Bank Owned Life Insurance. Noninterest income in 2007 increased 3% to $7.5 million from $7.3 million in 2006. Reflecting the costs associated with the merger, noninterest expense grew to $7.9 million in the fourth quarter of 2007 compared to $6.8 million in the prior quarter and $7.7 million in the fourth quarter a year ago. In 2007, operating expense increased 3% to $28.5 million from $27.5
(more)

 


The following information was filed by Washington Banking Co (WBCO) on Friday, January 25, 2008 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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