8-K

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or l5 (d) of the
Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): January 30, 2007

Washington Banking Company

(Exact name of registrant as specified in its charter)

Washington
(State or other jurisdiction of incorporation)

000-24503
(Commission File Number) 91-1725825
(IRS Employer Identification No.)

450 Bayshore Drive
Oak Harbor, WA 98277
(Address of principal executive offices) (Zip Code)

(360) 679-3121
(Registrant’s telephone number, including area code)

No Change
(Former name or former address, if changed since last report)

     Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

TABLE OF CONTENTS

	Item 2.02 Results of Operations and Financial Condition
	Item 7.01 Regulation FD Disclosure
	Item 8.01. Other Events
	Item 9.01. Financial Statements and Exhibits
SIGNATURES
EXHIBIT 99.1
EXHIBIT 99.2

Item 2.02 Results of Operations and Financial Condition

On January 24, 2007, Washington Banking Company announced by press release its earnings for the fourth quarter and year ended December 31, 2006. A copy of the press release is attached hereto as Exhibit 99.1.

Item 7.01 Regulation FD Disclosure

The information in this Form 8-K and the attached Exhibits shall not be deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, except as shall be expressly set forth by specific reference in such filing.

Item 8.01. Other Events

On January 29, 2007, Washington Banking Company announced by press release a cash dividend. A copy of the press release is attached hereto as Exhibit 99.2.

Item 9.01. Financial Statements and Exhibits

Exhibit 99.1 Press Release dated January 24, 2007

Exhibit 99.2 Press Release dated January 29, 2007

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned hereunto duly authorized.

	WASHINGTON BANKING COMPANY
Date: January 30, 2007	By:	/s/ Michal D. Cann
		Michal D. Cann
		President and Chief Executive Officer

EX-99.1

Exhibit 99.1

CONTACT:	Michal D. Cann — President & CEO
	Rick A. Shields — EVP & Chief Financial Officer
	360.679.3121	NEWS RELEASE

WASHINGTON BANKING EARNINGS CONSISTENT WITH 2005 INCLUDING RESTRUCTURING CHARGE

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.

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WBCO — 2006 Results
January 24, 2007
Page 2

“Increasing liability costs continue to outpace gains on asset yields, but it appears that the worst is behind us,” Shields said. “Although some time deposits are still adjusting upwards, the rate changes should be less substantial going forward. As a result, our net interest margin will likely remain under moderate pressure, but it’s not anticipated that we’ll see the kind of compression that we’ve seen in the last couple of quarters.” On a fully tax-equivalent basis, the net interest margin was 5.03% in the fourth quarter, compared to 5.22% in the preceding quarter and 5.60% in the fourth quarter of 2005. For the full year, the 2006 net interest margin was 5.29%, compared to 5.36% in 2005.

The margin compression in 2006 resulted from a 21% increase in interest income, which was largely offset by a 59% increase in interest expense. Net interest income increased 8% to $37.0 million for the year compared to $34.2 million in 2005. Interest income was up 18% in the fourth quarter of 2006, relative to the fourth quarter in 2005, while interest expense increased by 70% comparing the same periods. As a result, net interest income was basically unchanged from the fourth quarter of last year at $9.3 million.

Noninterest income was $7.0 million in 2006, compared to $7.3 million in the previous year. For the fourth quarter of 2006, noninterest income was $1.7 million, versus $1.8 million in the same period the previous year. Decreased gains from the sale of loans, as well as a decline in premiums from the sale of SBA loans and annuities, impacted noninterest income for both the year and the quarter.

Including the $575,000 restructuring charge, noninterest expense grew 9% to $27.5 million in 2006, compared to $25.2 million in the preceding year. In the fourth quarter, noninterest expense was $7.7 million, compared to $6.7 million in final quarter 2005. The staffing and occupancy expenses associated with the fourth Bellingham branch, which opened in October, contributed to the increases, but the restructuring charge had a greater impact on operating expenses and performance measures in both the year and the fourth quarter.

The efficiency ratio increased to 62.1% in 2006 and 69.3% in the fourth quarter of 2006, compared to 60.4% and 60.6%, respectively, a year ago. Excluding the restructuring charge, the efficiency ratio for the year was 60.8%, and 64.1% for the fourth quarter.

EARNINGS CONFERENCE CALL AND WEBCAST

Management will host a conference call today, January 24, at 2:00 p.m. PST (5:00 p.m. EST) to discuss the 2006 results. Investment professionals and all current and prospective shareholders are invited to access the live call by dialing (303) 262-2142, or to listen to the call, either live or archived, from the Investor Relations page of Whidbey Island Bank’s website, www.wibank.com. Shortly after the call concludes, the replay will be archived for two months at (303) 590-3000, using access code 11080799#.

ABOUT WASHINGTON BANKING COMPANY

Washington Banking Company is a bank holding company based in Oak Harbor, Washington, that operates Whidbey Island Bank, a state-chartered full-service commercial bank. Founded in 1961, Whidbey Island Bank provides various deposit, loan and investment services to meet customers’ financial needs. Whidbey Island Bank operates 20 full-service branches located in five counties in Northwestern Washington. In September 2006, Ryan Beck & Co. ranked WBCO #33 on its list of the Top 100 U.S. Banks and Thrifts, based on 5 year total return.

www.wibank.com

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January 24, 2007
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CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)	Quarter Ended		Quarter Ended		Three			Quarter Ended		One
($ in thousands, except per share data)	December 31,		September 30,		Month			December 31,		Year
	2006		2006		Change			2005		Change
Interest Income
Loans	$	14,626	$	14,177		3	%	$	12,192		20	%
Taxable Investment Securities		113		97		16	%		98		15	%
Tax Exempt Securities		71		77		-8	%		73		-3	%
Other		30		84		-64	%		209		-86	%
Total Interest Income		14,840		14,435		3	%		12,572		18	%
Interest Expense
Deposits		5,128		4,614		11	%		2,891		77	%
Other Borrowings		124		45		176	%		95		31	%
Junior Subordinated Debentures		342		351		-3	%		296		16	%
Total Interest Expense		5,594		5,010		12	%		3,282		70	%
Net Interest Income		9,246		9,425		-2	%		9,290		0	%
Provision for Loan Losses		625		750		-17	%		750		-17	%
Net Interest Income after Provision for Loan Losses		8,621		8,675		-1	%		8,540		1	%
Noninterest Income
Service Charges and Fees		815		812		0	%		845		-4	%
Income from the Sale of Loans		210		168		25	%		109		93	%
Other Income		679		745		-9	%		812		-16	%
Total Noninterest Income		1,704		1,725		-1	%		1,766		-4	%
Noninterest Expense
Compensation and Employee Benefits		4,313		4,245		2	%		4,067		6	%
Occupancy and Equipment		940		907		4	%		845		11	%
Office Supplies and Printing		169		149		13	%		157		8	%
Data Processing		139		136		2	%		99		40	%
Restructuring Charge		575		—	NA				—		100	%
Consulting and Professional Fees		298		195		53	%		361		-17	%
Other		1,264		1,123		13	%		1,215		4	%
Total Noninterest Expense		7,698		6,755		14	%		6,744		14	%
Income Before Income Taxes		2,627		3,645		-28	%		3,562		-26	%
Provision for Income Taxes		816		1,003		-19	%		1,165		-30	%
Net Income	$	1,811	$	2,642		-31	%	$	2,397		-24	%
Earnings per Common Share (1)
Net Income per Share, Basic	$	0.20	$	0.29		-31	%	$	0.26		-23	%
Net Income per Share, Diluted	$	0.19	$	0.28		-32	%	$	0.26		-27	%
Average Number of Common Shares Outstanding(1)		9,256,000		9,240,000					9,134,000
Fully Diluted Average Common and Equivalent Shares Outstanding (1)		9,529,000		9,525,000					9,456,000

⁽¹⁾ Prior periods restated for 5-for-4 stock split distributed on September 6, 2006

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CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)	Year Ended				One
($ in thousands, except per share data)	December 31,				Year
	2006		2005		Change
Interest Income
Loans	$	54,498	$	44,615		22	%
Taxable Investment Securities		414		357		16	%
Tax Exempt Securities		310		310		0	%
Other		221		508		-56	%
Total Interest Income		55,443		45,790		21	%
Interest Expense
Deposits		16,557		9,957		66	%
Other Borrowings		547		538		2	%
Junior Subordinated Debentures		1,337		1,071		25	%
Total Interest Expense		18,441		11,566		59	%
Net Interest Income		37,002		34,224		8	%
Provision for Loan Losses		2,675		2,250		19	%
Net Interest Income after Provision for Loan Losses		34,327		31,974		7	%
Noninterest Income
Service Charges and Fees		3,296		3,150		5	%
Income from the Sale of Loans		709		773		-8	%
Other Income		2,987		3,376		-12	%
Total Noninterest Income		6,992		7,299		-4	%
Noninterest Expense
Compensation and Employee Benefits		16,807		15,086		11	%
Occupancy and Equipment		3,596		3,373		7	%
Office Supplies and Printing		640		659		-3	%
Data Processing		479		493		-3	%
Restructuring Charge		575		—		100	%
Consulting and Professional Fees		769		829		-7	%
Other		4,664		4,785		-3	%
Total Noninterest Expense		27,530		25,225		9	%
Income Before Income Taxes		13,789		14,048		-2	%
Provision for Income Taxes		4,298		4,580		-6	%
Net Income	$	9,491	$	9,468		0	%
Earnings per Common Share(1)
Net Income per Share, Basic	$	1.03	$	1.04		-1	%
Net Income per Share, Diluted	$	1.00	$	1.00		0	%
Average Number of Common Shares Outstanding(1)		9,217,000		9,098,000
Fully Diluted Average Common and Equivalent Shares Outstanding(1)		9,490,000		9,428,000

⁽¹⁾ Prior periods restated for 5-for-4 stock split distributed on September 6, 2006

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CONSOLIDATED BALANCE SHEETS (unaudited)							Three						One
($ in thousands except per share data)	December 31,			September 30,			Month			December 31,			Year
	2006			2006			Change			2005			Change
Assets
Cash and Due from Banks	$	18,984		$	20,062			-5	%	$	19,949			-5	%
Interest-Bearing Deposits with Banks		761			789			-4	%		983			-23	%
Fed Funds Sold		—			—			0	%		21,095			-100	%
Total Cash and Cash Equivalents		19,745			20,851			-5	%		42,027			-53	%
Investment Securities Available for Sale		16,790			17,514			-4	%		19,077			-12	%
FHLB Stock		1,984			1,984			0	%		1,984			0	%
Loans Held for Sale		2,458			1,940			27	%		2,829			-13	%
Loans Receivable		719,580			713,638			1	%		630,258			14	%
Less: Allowance for Loan Losses		(10,048	)		(9,985	)		1	%		(8,810	)		14	%
Loans, Net		709,532			703,653			1	%		621,448			14	%
Premises and Equipment, Net		23,372			22,024			6	%		20,514			14	%
Bank Owned Life Insurance		10,930			10,831			1	%		10,558			4	%
Other Real Estate Owned		363			363			0	%		—			100	%
Other Assets		9,371			9,917			-6	%		7,539			24	%
Total Assets	$	794,545		$	789,077			1	%	$	725,976			9	%
Liabilities and Shareholders’ Equity
Deposits:
Noninterest-Bearing Demand	$	96,858		$	97,277			0	%	$	105,365			-8	%
NOW Accounts		152,087			157,820			-4	%		143,042			6	%
Money Market		101,856			95,531			7	%		86,595			18	%
Savings		50,036			53,700			-7	%		57,577			-13	%
Time Deposits		302,930			296,392			2	%		244,910			24	%
Total Deposits		703,767			700,720			0	%		637,489			10	%
FHLB Overnight Borrowings		3,075			3,000			2	%		—			100	%
Other Borrowed Funds		—			—			0	%		10,000			-100	%
Junior Subordinated Debentures		15,007			15,007			0	%		15,007			0	%
Other Liabilities		6,303			5,915			7	%		5,631			12	%
Total Liabilities		728,152			724,642			0	%		668,127			9	%
Shareholders’ Equity:
Common Stock (no par value)
Authorized 13,679,757 Shares:
Issued and Outstanding 9,388,600 at 12/31/06, 9,285,439 at 9/30/06 and 9,227,763 at 12/31/05(1)		33,016			32,432			2	%		32,106			3	%
Retained Earnings		33,422			32,075			4	%		25,789			30	%
Other Comprehensive Income		(45	)		(72	)		-38	%		(46	)		-2	%
Total Shareholders’ Equity		66,393			64,435			3	%		57,849			15	%
Total Liabilities and Shareholders’ Equity	$	794,545		$	789,077			1	%	$	725,976			9	%

⁽¹⁾ Prior periods restated for 5-for-4 stock split distributed on September 6, 2006

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ASSET QUALITY (unaudited)	Quarter Ended			Quarter Ended			Quarter Ended			Year Ended
($ in thousands, except per share data)	December 31,			September 30,			December 31,			December 31,
	2006			2006			2005			2006			2005
Allowance for Loan Losses Activity:
Balance at Beginning of Period	$	9,985		$	9,606		$	8,593		$	8,810		$	7,903
Indirect Loans:
Charge-offs		(185	)		(161	)		(389	)		(747	)		(1,153	)
Recoveries		106			90			68			415			316
Indirect Net Charge-offs		(79	)		(71	)		(321	)		(332	)		(837	)
Other Loans:
Charge-offs		(542	)		(352	)		(406	)		(1,640	)		(1,063	)
Recoveries		59			52			194			535			557
Other Net Charge-offs		(483	)		(300	)		(212	)		(1,105	)		(506	)
Total Net Charge-offs		(562	)		(371	)		(533	)		(1,437	)		(1,343	)
Provision for loan losses		625			750			750			2,675			2,250
Balance at End of Period	$	10,048		$	9,985		$	8,810		$	10,048		$	8,810
Net Charge-offs to Average Loans:
Indirect Loans Net Charge-Offs, to Avg Indirect Loans, Annualized(1)		0.31	%		0.29	%		1.40	%		0.34	%		0.88	%
Other Loans Net Charge-Offs, to Avg Other Loans, Annualized(1)		0.31	%		0.20	%		0.16	%		0.19	%		0.10	%
Net Charge-offs to Average Total Loans(1)		0.31	%		0.21	%		0.34	%		0.21	%		0.22	%

	December 31,			September 30,			December 31,
	2006			2006			2005
Nonperforming Assets
Nonperforming Loans(2)	$	3,638		$	3,758		$	2,159
Other Real Estate Owned		363			363			—
Total Nonperforming Assets	$	4,001		$	4,121		$	2,159
Nonperforming Loans to Loans(1)		0.51	%		0.53	%		0.34	%
Nonperforming Assets to Assets		0.50	%		0.52	%		0.30	%
Allowance for Loan Losses to Nonperforming Loans		276.19	%		265.70	%		408.06	%
Allowance for Loan Losses to Nonperforming Assets		251.13	%		242.30	%		408.06	%
Allowance for Loan Losses to Loans		1.40	%		1.40	%		1.40	%
Loan Composition
Commercial	$	82,990		$	82,192		$	79,341
Real Estate Mortgages
One-to-Four Family Residential		54,509			52,552			45,278
Commercial		249,109			241,802			218,260
Real Estate Construction
One-to-Four Family Residential		96,107			105,547			79,016
Commercial		46,329			46,426			34,645
Consumer
Indirect		104,794			100,933			90,290
Direct		83,741			82,401			82,425
Deferred Fees		2,001			1,785			1,003
Total Loans	$	719,580		$	713,638		$	630,258

(1)	Excludes Loans Held for Sale.
(2)	Nonperforming loans includes nonaccrual loans plus accruing loans 90 or more days past due.

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January 24, 2007
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FINANCIAL STATISTICS (unaudited)	Quarter Ended			Quarter Ended			Quarter Ended			Year Ended
($ in thousands, except per share data)	December 31,			September 30,			December 31,			December 31,
	2006			2006			2005			2006			2005
Revenues(1) (2)	$	11,115		$	11,206		$	11,120		$	44,352		$	41,782
Averages
Total Assets	$	794,908		$	775,020		$	710,596		$	756,777		$	693,060
Loans and Loans Held for Sale		722,089			697,972			622,434			682,939			608,998
Interest Earning Assets		742,344			722,486			663,183			706,393			643,228
Deposits		699,090			687,595			624,154			662,933			605,232
Shareholders’ Equity	$	65,133		$	62,790		$	56,246		$	61,800		$	52,985
Financial Ratios
Return on Average Assets, Annualized		0.90	%		1.35	%		1.34	%		1.25	%		1.37	%
Return on Average Equity, Annualized		11.03	%		16.69	%		16.91	%		15.36	%		17.87	%
Average Equity to Average Assets		8.19	%		8.10	%		7.92	%		8.17	%		7.65	%
Efficiency Ratio(2)		69.25	%		60.28	%		60.64	%		62.07	%		60.37	%
Yield on Earning Assets(2)		8.02	%		7.96	%		7.56	%		7.90	%		7.16	%
Cost of Interest Bearing Liabilities		3.56	%		3.30	%		2.39	%		3.13	%		2.14	%
Net Interest Spread		4.46	%		4.67	%		5.17	%		4.77	%		5.02	%
Net Interest Margin(2)		5.03	%		5.22	%		5.60	%		5.29	%		5.36	%

	December 31,		September 30,		December 31,
	2006		2006		2005
Period End
Book Value Per Share(3)	$	7.07	$	6.94	$	6.27

(1)	Revenues is the fully tax-equivalent net interest income before provision for loan losses plus noninterest income.
(2)	Fully tax-equivalent is a non-GAAP performance measurement that management believes provides investors with a more accurate picture of the net interest margin, revenues and efficiency ratio for comparative purposes. The calculation involves grossing up interest income on tax-exempt loans and investments by an amount that makes it comparable to taxable income.
(3)	Prior periods adjusted for the 5-for-4 stock split distributed on September 6, 2006.

This news release may contain forward-looking statements that are subject to risks and uncertainties. These forward-looking statements describe management’s expectations regarding future events and developments such as future operating results, growth in loans and deposits, credit quality and loan losses, and continued success of the Company’s business plan. Readers should not place undue reliance on forward-looking statements, which reflect management’s views only as of the date hereof. The words “anticipate,” “expect,” “will,” “believe,” and words of similar meaning are intended, in part, to help identify forward-looking statements. Future events are difficult to predict, and the expectations described above are subject to risk and uncertainty that may cause actual results to differ materially. In addition to discussions about risks and uncertainties set forth from time to time in the Company’s filings with the Securities and Exchange Commission, factors that may cause actual results to differ materially from those contemplated in these forward-looking statements include, among others: (1) local and national general and economic condition; (2) changes in interest rates and their impact on net interest margin; (3) competition among financial institutions; (4) legislation or regulatory requirements; and (5) the ability to realize the efficiencies expected from investment in personnel and infrastructure. Washington Banking Company does not undertake to update forward-looking statements to reflect circumstances or events that occur after the date the forward-looking statements were made. Any such statements are made in reliance on the safe harbor protections provided under the Securities Exchange Act of 1934, as amended.

Note: Transmitted on Business Wire at 3:30 a.m. PST, January 24, 2007.

EX-99.2

Exhibit 99.2

CONTACT:	Michal D. Cann — President & CEO
	Rick A. Shields — EVP & Chief Financial Officer
	360.679.3121	NEWS RELEASE

WASHINGTON BANKING COMPANY DECLARES QUARTERLY CASH DIVIDEND

OAK HARBOR, WA — January 29, 2007 — Washington Banking Company (NASDAQ: WBCO), the holding company for Whidbey Island Bank, announced today that its Board of Directors has declared a cash dividend of $0.05 per common share. The dividend will be paid February 27, to shareholders of record on February 12, 2007. Shareholders also received a five-for-four common stock split in September 2006, and per share data has been adjusted to reflect the split. Washington Banking has paid a quarterly cash dividend since its 1998 initial public offering.

Last week, Washington Banking announced 2006 results. Net income for the year was unchanged from 2005 at $9.5 million, or $1.00 per diluted share, despite a $575,000 restructuring charge in the fourth quarter.

ABOUT WASHINGTON BANKING COMPANY

Washington Banking Company is a bank holding company based in Oak Harbor, Washington, that operates Whidbey Island Bank, a state-chartered full-service commercial bank. Founded in 1961, Whidbey Island Bank provides various deposit, loan and investment services to meet customers’ financial needs. Whidbey Island Bank operates 20 full-service branches located in five counties in Northwestern Washington. In September, Ryan Beck & Co. ranked WBCO #33 on its list of the Top 100 U.S. Banks and Thrifts, based on 5 year total return.

This news release may contain forward-looking statements that are subject to risks and uncertainties. These forward-looking statements describe management’s expectations regarding future events and developments such as future operating results, growth in loans and deposits, credit quality and loan losses, and continued success of the Company’s business plan. Readers should not place undue reliance on forward-looking statements, which reflect management’s views only as of the date hereof. The words “anticipate,” “expect,” “will,” “believe,” and words of similar meaning are intended, in part, to help identify forward-looking statements. Future events are difficult to predict, and the expectations described above are subject to risk and uncertainty that may cause actual results to differ materially. In addition to discussions about risks and uncertainties set forth from time to time in the Company’s filings with the Securities and Exchange Commission, factors that may cause actual results to differ materially from those contemplated in these forward-looking statements include, among others: (1) local and national general and economic condition; (2) changes in interest rates and their impact on net interest margin; (3) competition among financial institutions; (4) legislation or regulatory requirements; and (5) the ability to realize the efficiencies expected from investment in personnel and infrastructure. Washington Banking Company does not undertake to update forward-looking statements to reflect circumstances or events that occur after the date the forward-looking statements were made. Any such statements are made in reliance on the safe harbor protections provided under the Securities Exchange Act of 1934, as amended.

www.wibank.com

Note: Transmitted on Business Wire at 3:30 a.m., PST on January 29, 2007.