DA Davidson Initiates Bridge Bancorp At Neutral On Near-Term Headwinds

A slowdown in loan growth could be a near-term headwind for Bridge Bancorp, Inc. BDGE and likely downward revisions in estimates may exert pressure on the stock, according to DA Davidson.

The Analyst

DA Davidson’s David Bishop initiated coverage of Bridge Bancorp with a Neutral rating and a price target of $33.

The Thesis

Bridge Bancorp has a strong deposit base, which supports stable core margins, with low cost of funds and high contribution of fee revenues, Bishop said.

For Bridge Bancorp, the proportion of non-IB (investment bank) deposits to total deposits was at around 36% at the end of the second quarter, versus an average of merely 16% for its peers, the analyst noted.

He explained that this high proportion translated into a lower cost of deposits for Bridge Bancorp, allowing the company to maintain its Net Interest Margin above that of its peers.

Bishop added, however, that the quarter-to-date trends indicate pressure on Bridge Bancorp’s Net Interest Margin during the back half of 2019.

For Bridge Bancorp, the proportion of fee income to total revenues was at 13% in the second quarter, versus an average of merely 9% for its peers, the analyst further noted.

The company’s loan yields would likely decline, given that the current market rates are moving down, Bishop said. He also expects loan growth to slow in the near term “as growth is incrementally less profitable than prior originations and market conditions remain competitive.”

Price Action

Shares of Bridge Bancorp were down 1.09% at $28.94 at the time of publishing on Thursday.

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