Financial Contrast: Farmers & Merchants Bank of Long Beach (OTCMKTS:FMBL) versus Heritage Commerce (NASDAQ:HTBK)

Farmers & Merchants Bank of Long Beach (OTCMKTS:FMBL) and Heritage Commerce (NASDAQ:HTBK) are both small-cap finance companies, but which is the superior business? We will contrast the two businesses based on the strength of their valuation, institutional ownership, analyst recommendations, dividends, profitability, risk and earnings.

Volatility & Risk

Farmers & Merchants Bank of Long Beach has a beta of 0.25, meaning that its stock price is 75% less volatile than the S&P 500. Comparatively, Heritage Commerce has a beta of 0.69, meaning that its stock price is 31% less volatile than the S&P 500.

Insider and Institutional Ownership

7.6% of Farmers & Merchants Bank of Long Beach shares are owned by institutional investors. Comparatively, 75.6% of Heritage Commerce shares are owned by institutional investors. 12.8% of Farmers & Merchants Bank of Long Beach shares are owned by insiders. Comparatively, 2.7% of Heritage Commerce shares are owned by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company is poised for long-term growth.

Analyst Recommendations

This is a summary of current recommendations for Farmers & Merchants Bank of Long Beach and Heritage Commerce, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Farmers & Merchants Bank of Long Beach	0	0	0	0	0.00
Heritage Commerce	0	5	2	0	2.29

Heritage Commerce has a consensus price target of $13.13, indicating a potential downside of 2.42%. Given Heritage Commerce’s stronger consensus rating and higher possible upside, analysts clearly believe Heritage Commerce is more favorable than Farmers & Merchants Bank of Long Beach.

Dividends

Farmers & Merchants Bank of Long Beach pays an annual dividend of $112.00 per share and has a dividend yield of 1.3%. Heritage Commerce pays an annual dividend of $0.52 per share and has a dividend yield of 3.9%. Farmers & Merchants Bank of Long Beach pays out 20.0% of its earnings in the form of a dividend. Heritage Commerce pays out 66.7% 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.

Valuation and Earnings

This table compares Farmers & Merchants Bank of Long Beach and Heritage Commerce”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Farmers & Merchants Bank of Long Beach	$449.19 million	2.28	$68.35 million	$559.38	15.11
Heritage Commerce	$197.46 million	4.20	$47.83 million	$0.78	17.24

Farmers & Merchants Bank of Long Beach has higher revenue and earnings than Heritage Commerce. Farmers & Merchants Bank of Long Beach is trading at a lower price-to-earnings ratio than Heritage Commerce, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares Farmers & Merchants Bank of Long Beach and Heritage Commerce’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Farmers & Merchants Bank of Long Beach	16.08%	5.22%	0.63%
Heritage Commerce	17.77%	8.07%	1.01%

Summary

Heritage Commerce beats Farmers & Merchants Bank of Long Beach on 11 of the 16 factors compared between the two stocks.

About Farmers & Merchants Bank of Long Beach

Farmers & Merchants Bank of Long Beach provides various banking products and services to individuals, professionals, and small to medium-sized businesses in Los Angeles, Orange, and Santa Barbara Counties. It offers checking, savings, Christmas club savings, health savings, market rate savings, and money market accounts; demand and time deposits; certificates of deposit; and individual retirement account. The company also provides personal, home, commercial real estate, real estate and construction, and commercial business loans, as well as lines of credit; financing for residential loans comprising single-family and multifamily loans; and credit and debit cards. In addition, it offers account management, receivables and payables, and risk management services; commercial lending services; and faith-based and healthcare banking services, as well as online and mobile banking services. Farmers & Merchants Bank of Long Beach was founded in 1907 and is headquartered in Long Beach, California.

About Heritage Commerce

Heritage Commerce Corp operates as the bank holding company for Heritage Bank of Commerce that provides various commercial and personal banking services to residents and the business/professional community in California. Its deposit products for business banking and retail markets include interest and non-interest-bearing demand, savings, and money market accounts, as well as certificates of deposit and time deposits. The company’s loan portfolio comprises commercial loans, such as operating secured and unsecured loans advanced for working capital, equipment purchases, and other business purposes; commercial real estate loans; commercial construction loans for rental properties, commercial buildings, and homes; small business administration loans; home equity lines of credit; multifamily loans on residential properties; residential mortgage loans; and consumer loans consisting of loans for financing automobiles, various consumer goods, and other personal purposes. In addition, it offers other banking services, including cashier’s checks, bank by mail, night depositories, safe deposit boxes, direct deposit, automated payroll, electronic funds transfer, online bill pay, homeowner association, remote deposit capture, automated clearing house origination, electronic data interchange, and check imaging services, as well as other customary banking, factoring financing, and electronic banking services. Heritage Commerce Corp was founded in 1994 and is headquartered in San Jose, California.