F & M Bank (OTCMKTS:FMBM) and Orrstown Financial Services (NASDAQ:ORRF) Head-To-Head Review

F & M Bank (OTCMKTS:FMBM) and Orrstown Financial Services (NASDAQ:ORRF) are both small-cap finance companies, but which is the better stock? We will contrast the two businesses based on the strength of their profitability, valuation, risk, dividends, analyst recommendations, institutional ownership and earnings.

Insider and Institutional Ownership

3.8% of F & M Bank shares are held by institutional investors. Comparatively, 44.3% of Orrstown Financial Services shares are held by institutional investors. 10.6% of F & M Bank shares are held by insiders. Comparatively, 4.3% of Orrstown Financial Services shares are held by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company is poised for long-term growth.

Risk and Volatility

F & M Bank has a beta of 0.3, indicating that its share price is 70% less volatile than the S&P 500. Comparatively, Orrstown Financial Services has a beta of 0.7, indicating that its share price is 30% less volatile than the S&P 500.

Analyst Recommendations

This is a breakdown of current ratings and target prices for F & M Bank and Orrstown Financial Services, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
F & M Bank	0	0	0	0	0.00
Orrstown Financial Services	0	2	3	0	2.60

Orrstown Financial Services has a consensus target price of $41.67, suggesting a potential upside of 2.00%. Given Orrstown Financial Services’ stronger consensus rating and higher probable upside, analysts plainly believe Orrstown Financial Services is more favorable than F & M Bank.

Profitability

This table compares F & M Bank and Orrstown Financial Services’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
F & M Bank	14.96%	11.77%	0.88%
Orrstown Financial Services	23.58%	14.75%	1.55%

Dividends

F & M Bank pays an annual dividend of $1.04 per share and has a dividend yield of 2.8%. Orrstown Financial Services pays an annual dividend of $1.20 per share and has a dividend yield of 2.9%. F & M Bank pays out 30.8% of its earnings in the form of a dividend. Orrstown Financial Services pays out 27.5% 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. Orrstown Financial Services has raised its dividend for 10 consecutive years. Orrstown Financial Services is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Valuation and Earnings

This table compares F & M Bank and Orrstown Financial Services”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
F & M Bank	$78.92 million	1.69	$11.23 million	$3.38	10.98
Orrstown Financial Services	$356.05 million	2.25	$80.86 million	$4.37	9.35

Orrstown Financial Services has higher revenue and earnings than F & M Bank. Orrstown Financial Services is trading at a lower price-to-earnings ratio than F & M Bank, indicating that it is currently the more affordable of the two stocks.

Summary

Orrstown Financial Services beats F & M Bank on 15 of the 17 factors compared between the two stocks.

About F & M Bank

F & M Bank Corp. operates as the bank holding company for Farmers & Merchants Bank that provides financial products and services to consumers and businesses in Virginia. The company offers commercial and individual demand and time deposit accounts, savings accounts, money market accounts, internet and mobile banking services, and drive-in banking services. It also provides construction loans, including residential, and land acquisition and development loans; commercial real estate loans; business loans; consumer loans, such as personal loans, automobile loans, deposit account loans, installment and demand loans, and home equity loans; residential mortgage loans; credit cards; dealer finance; farmland loans; multi-family loans; and commercial and industrial loans. In addition, the company offers brokerage services and commercial and personal insurance products. Further, it originates conventional and government agency sponsored mortgages; and offers title insurance and real estate settlement services. The company was founded in 1908 and is headquartered in Timberville, Virginia.

About Orrstown Financial Services

Orrstown Financial Services, Inc. operates as the financial holding company for Orrstown Bank that provides commercial banking and financial advisory services to retail, commercial, non-profit, and government clients in the United States. It accepts various deposits, including checking, savings, time, demand, and money market deposits, as well as certificates of deposit. The company also offers commercial loans, such as commercial real estate, equipment, construction, working capital, and other commercial purpose loans, as well as industrial loans; consumer loans, such as home equity and other consumer loans, as well as home equity lines of credit; residential mortgage loans; acquisition and development loans; municipal loans; and installment and other loans. In addition, it provides renders services as trustee, executor, administrator, guardian, managing agent, custodian, and investment advisor, as well as other fiduciary services under the Orrstown Financial Advisors name; and retail brokerage services through a third-party broker/dealer arrangement. Further, the company offers fiduciary, investment advisory, insurance, and brokerage services. Orrstown Financial Services, Inc. was founded in 1919 and is headquartered in Shippensburg, Pennsylvania.