Financial Analysis: Meridian (NASDAQ:MRBK) and Northeast Community Bancorp (NASDAQ:NECB)

Northeast Community Bancorp (NASDAQ:NECB) and Meridian (NASDAQ:MRBK) are both small-cap finance companies, but which is the superior investment? We will compare the two businesses based on the strength of their profitability, valuation, risk, earnings, analyst recommendations, dividends and institutional ownership.

Analyst Ratings

This is a breakdown of current recommendations and price targets for Northeast Community Bancorp and Meridian, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Northeast Community Bancorp	0	2	1	1	2.75
Meridian	1	0	3	0	2.50

Northeast Community Bancorp currently has a consensus target price of $29.50, indicating a potential upside of 10.20%. Meridian has a consensus target price of $22.00, indicating a potential upside of 14.17%. Given Meridian’s higher possible upside, analysts clearly believe Meridian is more favorable than Northeast Community Bancorp.

Insider & Institutional Ownership

53.2% of Northeast Community Bancorp shares are held by institutional investors. Comparatively, 58.6% of Meridian shares are held by institutional investors. 7.1% of Northeast Community Bancorp shares are held by company insiders. Comparatively, 14.1% of Meridian shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company is poised for long-term growth.

Volatility and Risk

Northeast Community Bancorp has a beta of 0.36, meaning that its share price is 64% less volatile than the S&P 500. Comparatively, Meridian has a beta of 0.64, meaning that its share price is 36% less volatile than the S&P 500.

Profitability

This table compares Northeast Community Bancorp and Meridian’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Northeast Community Bancorp	27.67%	12.00%	2.05%
Meridian	11.89%	12.29%	0.95%

Dividends

Northeast Community Bancorp pays an annual dividend of $1.00 per share and has a dividend yield of 3.7%. Meridian pays an annual dividend of $0.56 per share and has a dividend yield of 2.9%. Northeast Community Bancorp pays out 32.1% of its earnings in the form of a dividend. Meridian pays out 27.2% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Northeast Community Bancorp has raised its dividend for 2 consecutive years. Northeast Community Bancorp is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Earnings and Valuation

This table compares Northeast Community Bancorp and Meridian”s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Northeast Community Bancorp	$103.62 million	3.56	$44.41 million	$3.12	8.58
Meridian	$205.49 million	1.12	$21.84 million	$2.06	9.35

Northeast Community Bancorp has higher earnings, but lower revenue than Meridian. Northeast Community Bancorp is trading at a lower price-to-earnings ratio than Meridian, indicating that it is currently the more affordable of the two stocks.

About Northeast Community Bancorp

Northeast Community Bancorp, Inc. operates as the holding company for NorthEast Community Bank that provides financial services for individuals and businesses. It accepts various deposit instruments, including checking accounts, money market accounts, regular savings accounts, and non-interest bearing demand accounts, as well as certificates of deposits. The company also offers construction, commercial and industrial, multifamily and mixed-use real estate, non-residential real estate loans, and consumer loans. In addition, it invests in various types of liquid assets, including U.S. Treasury obligations, municipal securities, deposits at the Federal Home Loan Bank of New York, and certificates of deposit of federally insured institutions, as well as securities of various federal agencies, and of state and municipal governments. Further, the company offers financial planning and investment advisory services; and life insurance products and fixed-rate annuities. It operates full-service branches located in Bronx, New York, Orange, Rockland, and Sullivan Counties in New York and Essex, Middlesex, and Norfolk Counties in Massachusetts; and loan production offices located in White Plains, New York, and New City counties in New York and Danvers, Massachusetts. Northeast Community Bancorp, Inc. was founded in 1934 and is headquartered in White Plains, New York.

About Meridian

Meridian Corporation operates as the holding company for Meridian Bank that provides commercial banking products and services in Pennsylvania, New Jersey, Delaware, Florida, and Maryland. The company offers various deposit products, such as demand non-interest bearing, demand interest bearing, savings accounts, money market accounts, and time deposits. It also provides commercial and industrial loans comprising business lines of credit, term loans, small business lending, lease financing, shared national credits, and other financing; commercial real estate, and land development and construction loans for residential and commercial projects; and consumer and home equity lending, private banking, merchant, and title and land settlement services. In addition, the company operates and originates mortgage loans for 1-4 family dwellings; and offers real estate holding, investment advisory, and equipment leasing services, as well as financial planning and wealth management services. Meridian Corporation was incorporated in 2004 and is headquartered in Malvern, Pennsylvania.