Farmers & Merchants Bank of Long Beach (OTCMKTS:FMBL) & VersaBank (NASDAQ:VBNK) Critical Comparison

Farmers & Merchants Bank of Long Beach (OTCMKTS:FMBL) and VersaBank (NASDAQ:VBNK) are both small-cap finance companies, but which is the better investment? We will contrast the two businesses based on the strength of their valuation, earnings, dividends, profitability, risk, institutional ownership and analyst recommendations.

Institutional and Insider Ownership

7.6% of Farmers & Merchants Bank of Long Beach shares are owned by institutional investors. Comparatively, 56.9% of VersaBank shares are owned by institutional investors. 12.8% of Farmers & Merchants Bank of Long Beach shares are owned by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock is poised for long-term growth.

Dividends

Farmers & Merchants Bank of Long Beach pays an annual dividend of $112.00 per share and has a dividend yield of 2.3%. VersaBank pays an annual dividend of $0.07 per share and has a dividend yield of 0.7%. Farmers & Merchants Bank of Long Beach pays out 23.1% of its earnings in the form of a dividend. VersaBank pays out 5.3% 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.

Profitability

This table compares Farmers & Merchants Bank of Long Beach and VersaBank’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Farmers & Merchants Bank of Long Beach	13.71%	4.57%	0.50%
VersaBank	17.02%	12.26%	1.11%

Earnings & Valuation

This table compares Farmers & Merchants Bank of Long Beach and VersaBank’s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Farmers & Merchants Bank of Long Beach	$431.97 million	1.34	$70.01 million	$485.58	9.89
VersaBank	$176.45 million	1.57	$31.26 million	$1.32	8.10

Farmers & Merchants Bank of Long Beach has higher revenue and earnings than VersaBank. VersaBank is trading at a lower price-to-earnings ratio than Farmers & Merchants Bank of Long Beach, indicating that it is currently the more affordable of the two stocks.

Risk & Volatility

Farmers & Merchants Bank of Long Beach has a beta of 0.42, suggesting that its share price is 58% less volatile than the S&P 500. Comparatively, VersaBank has a beta of 0.77, suggesting that its share price is 23% less volatile than the S&P 500.

Analyst Ratings

This is a breakdown of current ratings and price targets for Farmers & Merchants Bank of Long Beach and VersaBank, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Farmers & Merchants Bank of Long Beach	0	0	0	0	N/A
VersaBank	0	0	1	0	3.00

VersaBank has a consensus target price of $10.00, indicating a potential downside of 6.45%. Given VersaBank’s higher probable upside, analysts clearly believe VersaBank is more favorable than Farmers & Merchants Bank of Long Beach.

Summary

VersaBank beats Farmers & Merchants Bank of Long Beach on 9 of the 15 factors compared between the two stocks.

About Farmers & Merchants Bank of Long Beach

Farmers & Merchants Bank of Long Beach provides various banking products and services to individuals, professionals, and small to medium-sized businesses in Los Angeles, Orange, and Santa Barbara Counties. It offers checking, savings, Christmas club savings, health savings, market rate savings, and money market accounts; demand and time deposits; certificates of deposit; and individual retirement account. The company also provides personal, home, commercial real estate, real estate and construction, and commercial business loans, as well as lines of credit; financing for residential loans comprising single-family and multifamily loans; and credit and debit cards. In addition, it offers account management, receivables and payables, and risk management services; commercial lending services; and faith-based and healthcare banking services, as well as online and mobile banking services. Farmers & Merchants Bank of Long Beach was founded in 1907 and is headquartered in Long Beach, California.

About VersaBank

VersaBank provides various banking products and services in Canada and the United States. It offers deposit products, such as web-based chequing accounts, guaranteed investment certificates, registered retirement savings plans, and tax-free savings accounts, as well as deposit insurance products. The company also provides lending services, including point of sale financing that covers purchasing loan and lease receivables from finance companies operating in various industries; commercial banking services comprising commercial real estate, public sector/infrastructure financing, and condominium financing; and residential mortgages. In addition, it offers cybersecurity services. The company was formerly known as Pacific & Western Bank of Canada and changed its name to VersaBank in May 2016. VersaBank was incorporated in 1979 and is headquartered in London, Canada.