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Bridge Beats Bigger Banks: Under the Radar

Stocks in this article: BDGE C BAC

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BRIDGEHAMPTON, N.Y. ( TheStreet) -- If the financial crisis has taught investors anything, it's that proximity between debtors and creditors is important in lending. With that in mind, here's a regional bank stock to consider.

Bridge Bancorp (BDGE) of Bridgehampton, N.Y., increased earnings every quarter last year while larger rivals such as Citigroup (C) and Bank of America (BAC) wrote down the value of bad assets and posted losses.

Despite a 10% dip in second-quarter profit, Bridge's operating performance was strong. Revenue jumped 15% to $13 million, net interest income advanced 22% to $8.9 million and its net interest margin hovered at 4.8%. Annualized loan growth hit 12%, a sign the bank is actively lending despite the recession. The company recently opened its 15th branch.

A debt-to-equity ratio of 0.4 indicates modest leverage. The company holds $16 million of cash reserves on its balance sheet and had a tier-1 capital ratio of 10.7% as of June 30, meaning it has adequate reserves. We rate Bridge Bancorp "buy" and give it a financial strength score of 7.4 out of 10.

During the latest quarter, provisions for loan losses quadrupled to $1.4 million, a sign that defaults might be on the horizon. Total loan loss reserves also increased 51% to $5 million. However, the added capital is more a sign of caution than an omen of losses, especially if you consider the company's past performance.

Bridge Bancorp shares have surged 54% this year, outpacing major U.S. indices. The stock trades at a price-to-earnings ratio of 19, a premium to the market, and offers a dividend yield of 3.3%. Management began paying dividends in 2008, when other financial institutions were cutting theirs.

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