Bank of Marin Bancorp (NASDAQ: BMRC) and Summit Financial Group (NASDAQ:SMMF) are both small-cap finance companies, but which is the superior investment? We will contrast the two businesses based on the strength of their risk, analyst recommendations, profitabiliy, institutional ownership, valuation, earnings and dividends.

Insider and Institutional Ownership

41.8% of Bank of Marin Bancorp shares are owned by institutional investors. Comparatively, 16.1% of Summit Financial Group shares are owned by institutional investors. 4.9% of Bank of Marin Bancorp shares are owned by insiders. Comparatively, 22.8% of Summit Financial Group shares are owned by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock is poised for long-term growth.

Volatility and Risk

Bank of Marin Bancorp has a beta of 0.88, meaning that its stock price is 12% less volatile than the S&P 500. Comparatively, Summit Financial Group has a beta of 1.02, meaning that its stock price is 2% more volatile than the S&P 500.

Analyst Recommendations

This is a breakdown of recent ratings and price targets for Bank of Marin Bancorp and Summit Financial Group, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Bank of Marin Bancorp 0 3 0 0 2.00
Summit Financial Group 0 1 1 0 2.50

Bank of Marin Bancorp presently has a consensus target price of $69.00, indicating a potential upside of 10.31%. Summit Financial Group has a consensus target price of $24.50, indicating a potential upside of 14.75%. Given Summit Financial Group’s stronger consensus rating and higher possible upside, analysts clearly believe Summit Financial Group is more favorable than Bank of Marin Bancorp.

Profitability

This table compares Bank of Marin Bancorp and Summit Financial Group’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Bank of Marin Bancorp 26.43% 9.54% 1.09%
Summit Financial Group 14.90% 11.49% 1.04%

Dividends

Bank of Marin Bancorp pays an annual dividend of $1.08 per share and has a dividend yield of 1.7%. Summit Financial Group pays an annual dividend of $0.44 per share and has a dividend yield of 2.1%. Bank of Marin Bancorp pays out 30.0% of its earnings in the form of a dividend. Summit Financial Group pays out 40.4% 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 and Valuation

This table compares Bank of Marin Bancorp and Summit Financial Group’s gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Bank of Marin Bancorp $83.11 million 4.58 $21.93 million $3.60 17.38
Summit Financial Group $61.73 million 4.30 $13.54 million $1.09 19.59

Bank of Marin Bancorp has higher revenue and earnings than Summit Financial Group. Bank of Marin Bancorp is trading at a lower price-to-earnings ratio than Summit Financial Group, indicating that it is currently the more affordable of the two stocks.

Summary

Bank of Marin Bancorp beats Summit Financial Group on 9 of the 16 factors compared between the two stocks.

About Bank of Marin Bancorp

Bank of Marin Bancorp (Bancorp) is the holding company for Bank of Marin (the Bank). The Company’s business banking focus is on small to medium-sized businesses, professionals and not-for-profit organizations. As of December 31, 2016, the Company operated through 20 offices in Marin, Sonoma, San Francisco, Napa and Alameda counties. It makes international banking services available to its customers indirectly through other financial institutions, with whom it has correspondent banking relationships. The Company offers a range of commercial and retail deposit and lending programs. Its lending categories include commercial real estate loans, commercial and industrial loans, construction financing, consumer loans and home equity lines of credit. The Company offers a range of personal and business checking and savings accounts, and time deposit alternatives.

About Summit Financial Group

Summit Financial Group, Inc. (Summit) is a financial holding company. The Company provides community banking services primarily in the Eastern Panhandle and South Central regions of West Virginia and the Shenandoah Valley, and Northern region of Virginia. The Company provides these services through its community bank subsidiary, Summit Community Bank (Summit Community or the Bank). The Company operates through two segments: community banking, and insurance & financial services. The community banking segment consists of its full service banks, which offer customers traditional banking products and services through various delivery channels. The insurance & financial services segment includes three insurance agency offices that sell insurance products. The Company also operates Summit Insurance Services, LLC in Moorefield, West Virginia and Leesburg, Virginia, which provides insurance brokerage services to individuals and businesses.

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