Bancorp Rhode Island, Inc. (NASDAQ: BARI), the parent company of Bank Rhode Island, today reported net income of $2.2 million, or $0.17 diluted earnings per share (EPS), after preferred stock dividends and discount accretion, for the quarter ended September 30, 2009, compared to net income of $2.3 million, or $0.50 diluted EPS for the third quarter 2008. For the nine month period ended September 30, 2009, the Company reported net income of $4.4 million, or $0.46 diluted EPS, after preferred stock dividends and discount accretion, compared to net income of $6.9 million, or $1.49 diluted EPS, for the same period in 2008.

During the third quarter, the Company repurchased both the $30.0 million of its preferred stock and the warrant to purchase 192,967 shares of its common stock previously issued to the U.S. Treasury Department. The warrant was repurchased for $1.4 million. The repurchase of the preferred stock resulted in the recognition of $1.3 million of discount accretion associated with its issuance and had a negative impact on the Company’s EPS of $0.28 per share for the quarter ended September 30, 2009.

“I am pleased we have fully concluded our participation in the government’s Capital Purchase Program,” said President & CEO Merrill W. Sherman. “Our well-capitalized stature and healthy balance sheet provided us with flexibility and speaks to our strength as a financial institution.”

At September 30, 2009, the Company’s tier 1 capital ratio was approximately 7.7 percent and its total risk-based capital ratio exceeded 11.5 percent.

Net interest income for the third quarter 2009 was $12.7 million compared to $11.9 million in the third quarter 2008 and $11.6 million in the second quarter 2009. On a year-to-date basis, net interest income was $35.3 million, an increase of $1.7 million or 5.0 percent from 2008.

The net interest margin for the third quarter was 3.38 percent, an increase of 28 basis points from second quarter 2009, and an increase of 4 basis points from the third quarter 2008. For the nine months ended September 30, 2009, the net interest margin was 3.19 percent and flat compared to the same period in 2008.

“Bancorp Rhode Island’s positive third quarter earnings reflect the results of our expanded net interest margin. That expansion is primarily attributed to lower funding costs, as we carefully managed our deposit pricing and replaced higher yielding certificate of deposits with lower cost funds,” Sherman stated.

Noninterest income was $2.2 million for the third quarter 2009, compared to $2.3 million in the third quarter 2008, and $2.2 million in the second quarter 2009. For the third quarter 2009, a loss of $70,000 was charged to earnings for an investment security deemed to be other-than-temporarily impaired.

Noninterest expense was $9.8 million in the third quarter 2009 compared to $9.3 million in the third quarter 2008, and $10.2 million in the second quarter 2009. On a year-to-date basis, noninterest expense was $29.6 million, an increase of $1.2 million or 4.2 percent over the same period in 2008. The expense increases, on a quarter and year-to-date basis, were primarily driven by increases in the FDIC insurance assessments, compensation expense due to expanding our team and expenses related to loan workout and other real estate owned.

The provision for loan and lease losses was $1.9 million for the third quarter 2009, and net charge-offs were $2.3 million. As a comparison, in the third quarter 2008 the provision for loan and lease losses was $1.5 million and net charge-offs were $477,000, while on a linked-quarter basis they were $2.6 million and $1.1 million, respectively. The allowance for loan and lease losses as a percent of total loans and leases was 1.48 percent as of September 30, 2009, slightly down from 1.51 percent as of June 30, 2009, and up from 1.36 percent at December 31, 2008.

Nonperforming assets as of September 30, 2009, totaled $16.9 million, or 1.08 percent of total assets, down from $18.8 million, or 1.19 percent of total assets, at June 30, 2009, and up from $15.2 million, or 1.00 percent of total assets, at year-end 2008.

“Our ongoing resolution efforts, combined with net charge-offs resulted in a reduction in our non-performing assets,” said Sherman. “Given the current economic conditions, we continue to dedicate resources to monitoring the credit risks associated with our portfolio.”

Total assets for the third quarter 2009 ended at $1.57 billion, an increase of approximately $40.9 million from year-end 2008. The increase is primarily due to the growth in the commercial loan portfolio and purchase of mortgage-backed securities which was offset by a decrease in the residential mortgage portfolio.

As of September 30, 2009, the Company’s commercial loan and lease portfolio totaled $724.4 million, an increase of $66.0 million or 10.0 percent from year-end 2008, and up $12.8 million or 1.8 percent from June 30, 2009. Consumer loans were $209.9 million as of September 30, 2009, an increase of $3.2 million or 1.6 percent from year-end 2008, and a slight decrease on a linked-quarter basis. Residential mortgage balances were $182.3 million, a decrease of $30.4 million or 14.3 percent from December 31, 2008, and a decrease of $9.0 million or 4.7 percent from June 30, 2009.

Total deposits were $1.09 billion as of September 30, 2009, up $49.7 million or 4.8 percent from year-end 2008, and up $7.3 million or 0.7 percent from June 30, 2009. The increase was driven primarily by demand deposit and money market accounts.

The Company’s Board of Directors approved a dividend of $0.17 per share. The dividend will be paid on December 9, 2009, to shareholders of record on November 18, 2009.

Company executives will host a conference call Thursday, October 29, at 10 a.m. Eastern Time (ET) to discuss the Company’s third quarter results. Access to the conference call is available by dialing toll free (800) 860-2442, or via webcast in the Investor Relations section of the website at www.bankri.com. International callers can join by dialing 412-858-4600. Please dial in at least 10 minutes prior to the start of the call to ensure a timely connection.

There will be a replay of the call available the same day beginning at approximately 12:00 p.m. ET that can be accessed through 9 a.m. ET on Tuesday, November 3, 2009. The replay dial-in number is (877) 344-7529; when prompted, enter conference ID number 433952. The webcast will be archived in the Investor Relations section of the website at www.bankri.com.

About BancorpRI

Bancorp Rhode Island, Inc. is the parent company of Bank Rhode Island, a full-service, FDIC-insured, state-chartered financial institution. The Bank, headquartered in Providence, Rhode Island, operates 16 branches and more than 60 ATMs throughout Providence, Kent and Washington Counties. As of September 30, 2009, BankRI has $1.6 billion in assets and $1.1 billion in deposits. For more information, visit www.bankri.com.

This release may contain “forward-looking statements” within the meaning of section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements represent the company's present expectations or beliefs concerning future events. The company cautions that such statements are necessarily based on certain assumptions which are subject to risks and uncertainties, including, but not limited to, changes in general economic conditions and changing competition which could cause actual future results to differ materially from those indicated herein. Further information on these risk factors is included in the company's filings with the Securities and Exchange Commission.