Bank buying back stock; recommended by Wall Street

April 15, 2010
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Meridian Interstate Bankcorp, Inc., owner of the East Boston Savings Bank – which operates a major branch in Everett on Route 16 – has announced that it will be buying back shares that were already distributed.

In addition, the company received a very favorable buy rating from a prominent Wall Street financial analyst.

Sterne Agee said last week it is initiating coverage on Meridian Interstate Bankcorp.

It issued a buy recommendation on the stock and a $13.50 price target.

The stock’s 52-week range was $7.70 -$10.70.

“Our price target represents 81% of estimated fully converted tangible book value at an offering price of 90%. Compared with peers of similar size and profitability Meridian is significantly undervalued … in our view,” wrote the analysts from Sterne Agee.

“Looking ahead, we believe (there will be) double-digit earning asset growth, additional share repurchase activity and potential additional acquisitions.”

Presently, Meridian Interstate Bankcorp has a market capitalization of $238 million. There are 22.6 million shares outstanding.

The company has $1.727 billion in assets with a per share book value of $9.00.

In addition to the Wall Street news, MIB’s chairman and chief executive officer Richard Gavegnano that the bank will be buying back 5% of its outstanding stock or approximately 472,000 shares.

The shares will be repurchased in the open market or private transactions, through block trades and pursuant to the approval from the Securities and Exchange Commission.

“Buying back shares indicates that we have the cash to make those purchases,” said Gavegnano. “We feel the current market value of our stock represents a great buy for the bank . It is selling at a lower price than the book value. This is what Sterne Agee has noticed and this may be why Sterne Agee has put out a buy recommendation on our stock.”

Gavegnano said the bank has come out of the banking crisis with flying colors.

“We feel very positive about our growth and potential. We’re performing very well in our loans and growth of deposits and customer base. We took no TARP money from the government. We’re busy lending – our lending pipeline is very strong. We’re taking advantage of current market conditions which are completely in favor of community banks,” said Gavegnano.