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Investors punished Washington Trust Bancorp after the Westerly, Rhode Island-based company disclosed that it moved two office loans to nonaccrual status.<\/p>\n
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Shares in the $6.5 billion-asset Washington Trust slid 17% Tuesday to finish at $30.00.<\/p>\n
The company did not disclose the size of the two loans. One of the nonaccrual borrowers is facing the loss of a tenant, while the second loan matured without it being paid off, according to Washington Trust Chief Risk Officer William Wray.<\/p>\n
Though Washington Trust’s overall nonperforming assets ratio remained a manageable 0.81% of total loans, the sell-off of the company’s shares reflects investors’ That sector came under pressure following the COVID-19 pandemic due to increased levels of remote and hybrid work. Over the last few quarters, banks have faced fewer questions about the office sector, following a period when Wall Street’s concerns led banks to make a flood of disclosures about the composition of their office loan portfolios.<\/p>\n At Washington Trust, the added nonperforming loans pushed total nonperforming assets to $40.4 million on March 31, up from $12.9 million at year-end 2025.\u00a0<\/p>\n Wray said Washington Trust has a track record of resolving credit-quality issues without losses. He didn’t rule out such an outcome in this instance.\u00a0\u00a0<\/p>\n “We think they’re both solid properties with solid sponsors, and we expect that we will continue to drive resolution,” Wray told analysts.\u00a0<\/p>\n Washington Trust’s stock rebounded modestly Wednesday, with shares closing up a little less than 1%. One analyst who covers the bank, Laurie Hunsicker at Seaport Research Partners, characterized investors’ sell-off on Tuesday as “overdone.”<\/p>\n Washington Trust “has been working through the office book,” Hunsicker wrote Wednesday in a research note. “Excluding office, Washington Trust has an exceptional track record of conservative underwriting” and doesn’t have exposure to nondepository financial institution lending.<\/p>\n But Damon DelMonte, an analyst who covers Washington Trust for Keefe Bruyette & Woods, believes investors’ skepticism may linger until the bank remedies its credit-quality issues.\u00a0<\/p>\n “Washington Trust has become a show-me stock,” DelMonte wrote in a research note. “Valuation figures could be range-bound until greater clarity emerges on the bank’s ability to deliver positive operating results.”<\/p>\n On Monday, Washington Trust reported total loans of $5 billion on March 31, down 1.6% year over year. But commercial-and-industrial loans increased 6.2% from the March 31, 2025, level to $568.2 million.<\/p>\n CEO Ned Handy indicated the C&I growth trend has legs. He said a lending team Washington Trust lured away from Boston-based Beacon Financial in January has hit the ground running.<\/p>\n The institutional banking team, led by veteran Boston lender Gerald Algere, focuses on independent schools, colleges and universities, as well as health care and human services providers.\u00a0<\/p>\n Washington Trust’s first-quarter profit totaled $12.6 million, up 3.5% from the same period in 2025.<\/p>\n Washington Trust wasn’t the only bank to take a hit in connection with office loans during the first quarter.<\/p>\n Shares in the $41.7 billion-asset Bank OZK closed down 2% Wednesday after the Little Rock, Arkansas-based company disclosed that it moved a pair of CRE loans \u2014 including one office credit \u2014 to nonaccrual status.<\/p>\n Bank OZK also reported three commercial real estate charge-offs, including another office credit. Bank OZK’s nonperforming loan ratio closed the quarter at 0.90% of total loans \u2014 up from 0.20% a year earlier, but down from 1.06% at the end of 2025.<\/p>\n Bank OZK’s first-quarter net income of $159.3 million declined 5% from a year ago, hurt by elevated levels of prepayments in the company’s signature Real Estate Specialties Group. That group still originates more than half of the company’s loans, despite ongoing efforts to Like Washington Trust, Bank OZK reported significant year-over-year commercial loan growth. Indeed, its commercial-and-institutional loan portfolio totaled $6.2 billion on March 31, up from $3 billion a year earlier.<\/p>\n While investors’ near-term focus will likely stay fixed on near-term credit quality, Piper Sandler analyst Stephen Scouten suggested the success of Bank OZK’s diversification program was probably the bigger first-quarter takeaway.<\/p>\n “We think this remains a story with less downside risk fundamentally than there is speculatively,” Scouten wrote Wednesday in a research note.<\/p>\n<\/div>\nSimilar woes at Bank OZK<\/h2>\n