Bank of Marin Bancorp (NASDAQ: BMRC) and Heritage Commerce Corp (NASDAQ:HTBK) are both small-cap finance companies, but which is the better investment? We will contrast the two businesses based on the strength of their profitability, risk, earnings, valuation, analyst recommendations, dividends and institutional ownership.

Dividends

Bank of Marin Bancorp pays an annual dividend of $1.16 per share and has a dividend yield of 1.7%. Heritage Commerce Corp pays an annual dividend of $0.40 per share and has a dividend yield of 2.7%. Bank of Marin Bancorp pays out 31.8% of its earnings in the form of a dividend. Heritage Commerce Corp pays out 54.8% 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 & Earnings

This table compares Bank of Marin Bancorp and Heritage Commerce Corp’s revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Bank of Marin Bancorp $83.92 million 5.12 $22.30 million $3.65 19.26
Heritage Commerce Corp $104.01 million 5.35 $27.83 million $0.73 20.00

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

Analyst Recommendations

This is a summary of current recommendations and price targets for Bank of Marin Bancorp and Heritage Commerce Corp, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Bank of Marin Bancorp 0 4 0 0 2.00
Heritage Commerce Corp 0 1 1 0 2.50

Bank of Marin Bancorp currently has a consensus target price of $69.50, suggesting a potential downside of 1.14%. Heritage Commerce Corp has a consensus target price of $15.50, suggesting a potential upside of 6.16%. Given Heritage Commerce Corp’s stronger consensus rating and higher possible upside, analysts plainly believe Heritage Commerce Corp is more favorable than Bank of Marin Bancorp.

Risk and Volatility

Bank of Marin Bancorp has a beta of 0.88, suggesting that its share price is 12% less volatile than the S&P 500. Comparatively, Heritage Commerce Corp has a beta of 0.51, suggesting that its share price is 49% less volatile than the S&P 500.

Insider & Institutional Ownership

42.4% of Bank of Marin Bancorp shares are held by institutional investors. Comparatively, 69.5% of Heritage Commerce Corp shares are held by institutional investors. 5.2% of Bank of Marin Bancorp shares are held by company insiders. Comparatively, 5.7% of Heritage Commerce Corp shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock will outperform the market over the long term.

Profitability

This table compares Bank of Marin Bancorp and Heritage Commerce Corp’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Bank of Marin Bancorp 26.72% 9.55% 1.09%
Heritage Commerce Corp 25.75% 10.61% 1.07%

Summary

Heritage Commerce Corp beats Bank of Marin Bancorp on 11 of the 16 factors compared between the two stocks.

Bank of Marin Bancorp Company Profile

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.

Heritage Commerce Corp Company Profile

Heritage Commerce Corp is a bank holding company. The Company, through its subsidiary Heritage Bank of Commerce (the Bank), provides a range of banking services. The Bank is a California state-chartered multi-community independent bank that offers a range of commercial banking services to small and medium-sized businesses and their owners, managers and employees. As of December 31, 2016, the Company operated through 11 service branch offices located in the southern and eastern regions of the general San Francisco Bay Area of California in the counties of Santa Clara, Alameda, Contra Costa and San Benito. The Company’s subsidiary, CSNK Working Capital Finance Corp., doing business as Bay View Funding, provides business-essential working capital factoring financing to various industries across the United States. As of December 31, 2016, the Bank operated automated teller machines (ATMs) at five different locations.

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