Analyzing Farmers National Banc (NASDAQ:FMNB) and Independent Bank (NASDAQ:IBCP)

Farmers National Banc (NASDAQ:FMNB) and Independent Bank (NASDAQ:IBCP) are both small-cap finance companies, but which is the superior investment? We will contrast the two companies based on the strength of their dividends, analyst recommendations, valuation, profitability, institutional ownership, risk and earnings.

Dividends

Farmers National Banc pays an annual dividend of $0.68 per share and has a dividend yield of 5.1%. Independent Bank pays an annual dividend of $1.04 per share and has a dividend yield of 3.3%. Farmers National Banc pays out 47.2% of its earnings in the form of a dividend. Independent Bank pays out 31.9% 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. Independent Bank has raised its dividend for 11 consecutive years.

Profitability

This table compares Farmers National Banc and Independent Bank’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Farmers National Banc	19.57%	13.82%	1.14%
Independent Bank	21.25%	14.76%	1.28%

Insider and Institutional Ownership

38.7% of Farmers National Banc shares are owned by institutional investors. Comparatively, 79.4% of Independent Bank shares are owned by institutional investors. 4.0% of Farmers National Banc shares are owned by company insiders. Comparatively, 5.7% of Independent Bank shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock is poised for long-term growth.

Valuation and Earnings

This table compares Farmers National Banc and Independent Bank”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Farmers National Banc	$183.61 million	2.73	$45.95 million	$1.44	9.24
Independent Bank	$222.04 million	2.93	$66.79 million	$3.26	9.65

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

Volatility & Risk

Farmers National Banc has a beta of 0.85, suggesting that its share price is 15% less volatile than the S&P 500. Comparatively, Independent Bank has a beta of 0.86, suggesting that its share price is 14% less volatile than the S&P 500.

Analyst Recommendations

This is a breakdown of current ratings for Farmers National Banc and Independent Bank, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Farmers National Banc	0	3	1	0	2.25
Independent Bank	0	4	0	0	2.00

Farmers National Banc presently has a consensus target price of $14.50, indicating a potential upside of 9.02%. Independent Bank has a consensus target price of $36.00, indicating a potential upside of 14.47%. Given Independent Bank’s higher probable upside, analysts clearly believe Independent Bank is more favorable than Farmers National Banc.

Summary

Independent Bank beats Farmers National Banc on 14 of the 17 factors compared between the two stocks.

About Farmers National Banc

Farmers National Banc Corp. operates as a bank holding company for The Farmers National Bank of Canfield engages in the banking, trust, retirement consulting, insurance, and financial management businesses. It offers commercial and retail banking services, including checking, savings, and time deposit accounts; commercial, mortgage and installment, and home equity loans; home equity lines of credit, night depository, safe deposit box, money order, bank check, automated teller machine, Internet banking, travel card, E bond transaction, brokerage, and other services. The company also provides personal and corporate trust services in the areas of estate settlement, trust administration, employee benefit plans, and retirement services; property and casualty insurance products and services; and various insurance products through licensed representatives, as well as invests in municipal securities. The company was founded in 1887 and is headquartered in Canfield, Ohio.

About Independent Bank

Independent Bank Corporation operates as the bank holding company for Independent Bank that provides commercial banking services to individuals and businesses in rural and suburban communities in Michigan. It offers checking and savings accounts, commercial lending, direct and indirect consumer financing, mortgage lending, and safe deposit box services. The company also provides title insurance services and investment services, as well as automatic teller machines, and internet and mobile banking services. In addition, it operates through branches, drive-thru facilities, and loan production offices. Independent Bank Corporation was founded in 1864 and is based in Grand Rapids, Michigan.