Shares of Washington Trust Bancorp Inc. in Westerly, R.I., fell Tuesday, even though strong loan growth helped the company's second-quarter earnings climb 12.5% from a year earlier, to $6.1 million.
Frank Schiraldi, an analyst at Sandler O'Neill & Partners LP, said in an interview that investors might be wary of a decline in Washington Trust's capital, though it remains well capitalized.
The $2.7 billion-asset company said late Monday that its loans increased 14.5% from a year earlier, to $1.7 billion. Commercial loans in particular rose 28%, to $172 million.
Washington Trust called credit quality "manageable." Nonperforming assets more than doubled from a year earlier, to $6.2 million, or 0.23% of total assets, and the loan-loss provision rose fourfold, to $1.4 million.
Mr. Schiraldi said that earnings of 45 cents a share (a penny above the average analyst estimate, according to Thomson Reuters) reflects strong fundamentals and sound asset quality. The one negative, he said, was that tangible equity fell 50 basis points from a quarter earlier, to 4.7% of total assets, because of strong loan growth and unrealized fair-value adjustments to the securities portfolio.
By late Tuesday, Washington Trust's stock had dropped 6.5% from Monday's close, to $21.35. Mr. Schiraldi said that the capital drop could be the reason. "Capital is something that investors are concerned with right now."
