Analyzing MainStreet Bank (NASDAQ:MNSB) & Hawthorn Bancshares (NASDAQ:HWBK)

MainStreet Bank (NASDAQ:MNSB) and Hawthorn Bancshares (NASDAQ:HWBK) are both small-cap finance companies, but which is the better business? We will compare the two companies based on the strength of their dividends, profitability, valuation, institutional ownership, risk, earnings and analyst recommendations.

Earnings and Valuation

This table compares MainStreet Bank and Hawthorn Bancshares”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
MainStreet Bank	$137.87 million	1.08	-$9.98 million	($1.46)	-13.23
Hawthorn Bancshares	$75.43 million	2.71	$18.26 million	$2.97	9.98

Hawthorn Bancshares has lower revenue, but higher earnings than MainStreet Bank. MainStreet Bank is trading at a lower price-to-earnings ratio than Hawthorn Bancshares, indicating that it is currently the more affordable of the two stocks.

Insider & Institutional Ownership

52.3% of MainStreet Bank shares are held by institutional investors. Comparatively, 30.7% of Hawthorn Bancshares shares are held by institutional investors. 9.3% of MainStreet Bank shares are held by insiders. Comparatively, 22.7% of Hawthorn Bancshares shares are held by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company will outperform the market over the long term.

Profitability

This table compares MainStreet Bank and Hawthorn Bancshares’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
MainStreet Bank	-6.34%	3.72%	0.32%
Hawthorn Bancshares	18.88%	13.63%	1.12%

Analyst Recommendations

This is a summary of recent ratings and recommmendations for MainStreet Bank and Hawthorn Bancshares, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
MainStreet Bank	1	1	0	0	1.50
Hawthorn Bancshares	0	0	1	0	3.00

Dividends

MainStreet Bank pays an annual dividend of $0.40 per share and has a dividend yield of 2.1%. Hawthorn Bancshares pays an annual dividend of $0.80 per share and has a dividend yield of 2.7%. MainStreet Bank pays out -27.4% of its earnings in the form of a dividend. Hawthorn Bancshares pays out 26.9% 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. Hawthorn Bancshares has raised its dividend for 5 consecutive years. Hawthorn Bancshares is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Volatility and Risk

MainStreet Bank has a beta of 0.58, indicating that its stock price is 42% less volatile than the S&P 500. Comparatively, Hawthorn Bancshares has a beta of 0.61, indicating that its stock price is 39% less volatile than the S&P 500.

Summary

Hawthorn Bancshares beats MainStreet Bank on 13 of the 16 factors compared between the two stocks.

About MainStreet Bank

MainStreet Bancshares, Inc. operates as the bank holding company for MainStreet Bank that provides various banking products and services for individuals, small to medium-sized businesses, and professional service organizations. The company offers demand, NOW, money market, savings, and sweep accounts, as well as certificates of deposit; business and consumer checking, interest-bearing checking, business account analysis, and other depository services; and cash management, wire transfer, check imaging, bill pay, remote deposit capture, and courier services. It also provides commercial loans, include government contract receivables, plant and equipment, general working capital, contract administration, and acquisition loans; commercial real estate, real estate construction, and residential real estate loans; and consumer loans comprising term loans and overdraft protection, as well as debit and credit cards. In addition, the company offers deposit insurance solutions; remote deposit of checks; and internet bill payment, online cash management, and online and mobile banking services. It operates in Herndon, Fairfax, McLean, Leesburg, Clarendon, and Washington D.C., as well as automated teller machines. The company was incorporated in 2003 and is headquartered in Fairfax, Virginia.

About Hawthorn Bancshares

Hawthorn Bancshares, Inc. operates as the bank holding company for Hawthorn Bank that provides various banking services in the United States. It accepts checking, savings, money market, individual retirement, and other time deposit accounts, as well as certificates of deposit. The company also offers commercial and industrial, single payment personal, installment, commercial and residential real estate, and consumer loans, as well as equipment, operating, and small business administration loans; and debit and credit cards. In addition, it provides trust services that include estate planning, investment, and asset management services; and cash management, safety deposit box, brokerage, and Internet banking services. Hawthorn Bancshares, Inc. was founded in 1865 and is headquartered in Jefferson City, Missouri.