BHLB - Is Meridian Bancorp Setting Enough Cash Aside to Cover Potential Loan Losses?
Meridian Bancorp, the parent company of East Boston Savings Bank, has grown like gangbusters over the past five years, from roughly $3.5 billion in total assets in 2015 to more than $6.3 billion at the end of 2019. A lot of the growth has come organically and through new branches, which has enabled the bank to grow its loan book significantly, particularly through commercial loans.
So when the coronavirus pandemic struck the economy, I was surprised to see the bank set aside a smaller quarterly credit provision (the cash banks set aside to cover future expected loan losses) than it did in the first quarter of 2019, when the economy was healthy. After all, many of the bank's main competitors significantly increased their quarterly provisions, and Meridian has a large amount of loans on its book. This strikes me as a red flag and something to watch carefully when evaluating the stock. Here's why.
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