Analyzing Banc of California (NYSE:BANC) and Heritage Commerce (NASDAQ:HTBK)

Heritage Commerce (NASDAQ:HTBK) and Banc of California (NYSE:BANC) are both finance companies, but which is the superior business? We will contrast the two companies based on the strength of their valuation, earnings, profitability, dividends, analyst recommendations, risk and institutional ownership.

Dividends

Heritage Commerce pays an annual dividend of $0.52 per share and has a dividend yield of 3.9%. Banc of California pays an annual dividend of $0.48 per share and has a dividend yield of 2.7%. Heritage Commerce pays out 66.7% of its earnings in the form of a dividend. Banc of California pays out -141.2% 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.

Earnings & Valuation

This table compares Heritage Commerce and Banc of California”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Heritage Commerce	$197.46 million	4.20	$47.83 million	$0.78	17.24
Banc of California	$1.82 billion	1.57	$228.97 million	($0.34)	-52.87

Banc of California has higher revenue and earnings than Heritage Commerce. Banc of California is trading at a lower price-to-earnings ratio than Heritage Commerce, indicating that it is currently the more affordable of the two stocks.

Analyst Ratings

This is a breakdown of current recommendations for Heritage Commerce and Banc of California, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Heritage Commerce	0	5	1	0	2.17
Banc of California	0	3	7	0	2.70

Heritage Commerce currently has a consensus target price of $14.25, indicating a potential upside of 5.95%. Banc of California has a consensus target price of $22.38, indicating a potential upside of 24.48%. Given Banc of California’s stronger consensus rating and higher probable upside, analysts clearly believe Banc of California is more favorable than Heritage Commerce.

Institutional and Insider Ownership

75.6% of Heritage Commerce shares are owned by institutional investors. Comparatively, 86.9% of Banc of California shares are owned by institutional investors. 2.7% of Heritage Commerce shares are owned by company insiders. Comparatively, 2.8% of Banc of California shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock is poised for long-term growth.

Volatility and Risk

Heritage Commerce has a beta of 0.69, suggesting that its share price is 31% less volatile than the S&P 500. Comparatively, Banc of California has a beta of 0.74, suggesting that its share price is 26% less volatile than the S&P 500.

Profitability

This table compares Heritage Commerce and Banc of California’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Heritage Commerce	17.77%	8.07%	1.01%
Banc of California	-0.58%	8.51%	0.72%

Summary

Banc of California beats Heritage Commerce on 10 of the 16 factors compared between the two stocks.

About Heritage Commerce

Heritage Commerce Corp. is a bank holding company that provides commercial banking services through its subsidiary, Heritage Bank of Commerce. The bank serves businesses, professionals, nonprofit organizations and individuals, with a focus on businesses in the San Francisco Bay Area and Silicon Valley. Its offerings include business checking and savings accounts, commercial real estate and business loans, lines of credit, and treasury management and cash-management services. The bank also provides consumer deposit accounts and other traditional banking services.

About Banc of California

Banc of California, Inc. is a bank holding company headquartered in Los Angeles. Through its banking subsidiary, Banc of California, N.A., it provides commercial banking services to businesses, professionals and individuals, with a focus on customers in California. The company offers business and consumer deposit accounts, commercial and real estate lending, and treasury management services. Its lending activities include financing for commercial real estate and businesses, along with specialized financing solutions.