Independent Bank (INDB) vs. Heritage Commerce (HTBK) Financial Analysis

Independent Bank (NASDAQ: INDB) and Heritage Commerce (NASDAQ:HTBK) are both small-cap finance companies, but which is the superior stock? We will compare the two businesses based on the strength of their dividends, valuation, institutional ownership, analyst recommendations, profitability, risk and earnings.

Insider & Institutional Ownership

79.8% of Independent Bank shares are held by institutional investors. Comparatively, 70.0% of Heritage Commerce shares are held by institutional investors. 2.7% of Independent Bank shares are held by insiders. Comparatively, 5.7% of Heritage Commerce shares are held by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company is poised for long-term growth.

Dividends

Independent Bank pays an annual dividend of $1.28 per share and has a dividend yield of 1.7%. Heritage Commerce pays an annual dividend of $0.40 per share and has a dividend yield of 2.4%. Independent Bank pays out 40.3% of its earnings in the form of a dividend. Heritage Commerce pays out 51.9% 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.

Risk and Volatility

Independent Bank has a beta of 0.97, suggesting that its share price is 3% less volatile than the S&P 500. Comparatively, Heritage Commerce has a beta of 0.51, suggesting that its share price is 49% less volatile than the S&P 500.

Analyst Recommendations

This is a breakdown of current recommendations and price targets for Independent Bank and Heritage Commerce, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Independent Bank 0 3 1 0 2.25
Heritage Commerce 0 1 1 0 2.50

Independent Bank currently has a consensus price target of $70.67, suggesting a potential downside of 3.92%. Heritage Commerce has a consensus price target of $16.50, suggesting a potential downside of 0.42%. Given Heritage Commerce’s stronger consensus rating and higher possible upside, analysts plainly believe Heritage Commerce is more favorable than Independent Bank.

Profitability

This table compares Independent Bank and Heritage Commerce’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Independent Bank 24.21% 10.10% 1.16%
Heritage Commerce 26.40% 11.15% 1.10%

Valuation & Earnings

This table compares Independent Bank and Heritage Commerce’s gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Independent Bank $360.19 million 5.60 $76.64 million $3.18 23.13
Heritage Commerce $106.06 million 5.97 $27.38 million $0.77 21.52

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

Summary

Independent Bank beats Heritage Commerce on 8 of the 15 factors compared between the two stocks.

Independent Bank Company Profile

Independent Bank Corp. is a bank holding company. The Company operates through its subsidiary, Rockland Trust Company (the Bank). The Bank is a community-oriented commercial bank. Its community banking business provides a range of banking services, including lending activities, acceptance of demand, savings, and time deposits, and investment management. As of December 31, 2016, the bank had operated 80 full service and three limited service retail branches, 11 commercial banking centers, five investment management offices and one mortgage lending center, all of which located in Eastern Massachusetts. The Bank classifies loans as commercial loans, consumer real estate loans, or other consumer loans. Commercial loans consist of commercial and industrial loans, commercial real estate loans, commercial construction loans, and small business loans. The Bank offers a range of demand deposits, interest checking, money market accounts, savings accounts and time certificates of deposit.

Heritage Commerce 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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