Head to Head Review: F & M Bank (OTCMKTS:FMBM) & Merchants Bancorp (NASDAQ:MBIN)

Merchants Bancorp (NASDAQ:MBIN) and F & M Bank (OTCMKTS:FMBM) are both small-cap finance companies, but which is the superior business? We will compare the two companies based on the strength of their profitability, valuation, institutional ownership, dividends, analyst recommendations, risk and earnings.

Risk & Volatility

Merchants Bancorp has a beta of 1.12, suggesting that its stock price is 12% more volatile than the S&P 500. Comparatively, F & M Bank has a beta of 0.4, suggesting that its stock price is 60% less volatile than the S&P 500.

Dividends

Merchants Bancorp pays an annual dividend of $0.36 per share and has a dividend yield of 0.9%. F & M Bank pays an annual dividend of $1.04 per share and has a dividend yield of 4.9%. Merchants Bancorp pays out 6.0% of its earnings in the form of a dividend. F & M Bank pays out 66.2% 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 Merchants Bancorp and F & M Bank’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Merchants Bancorp	21.33%	22.36%	1.69%
F & M Bank	7.48%	6.69%	0.42%

Valuation and Earnings

This table compares Merchants Bancorp and F & M Bank”s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Merchants Bancorp	$1.19 billion	1.52	$279.23 million	$6.04	6.54
F & M Bank	$66.48 million	1.12	$2.77 million	$1.57	13.50

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

Institutional and Insider Ownership

24.6% of Merchants Bancorp shares are owned by institutional investors. Comparatively, 3.9% of F & M Bank shares are owned by institutional investors. 39.7% of Merchants Bancorp shares are owned by insiders. Comparatively, 10.7% of F & M Bank shares are owned by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock will outperform the market over the long term.

Analyst Recommendations

This is a summary of current ratings and target prices for Merchants Bancorp and F & M Bank, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Merchants Bancorp	0	1	2	0	2.67
F & M Bank	0	0	0	0	0.00

Merchants Bancorp presently has a consensus target price of $52.33, suggesting a potential upside of 32.46%. Given Merchants Bancorp’s stronger consensus rating and higher probable upside, equities research analysts clearly believe Merchants Bancorp is more favorable than F & M Bank.

Summary

Merchants Bancorp beats F & M Bank on 14 of the 16 factors compared between the two stocks.

About Merchants Bancorp

Merchants Bancorp operates as the diversified bank holding company in the United States. It operates through three segments: Multi-family Mortgage Banking, Mortgage Warehousing, and Banking. The Multi-family Mortgage Banking segment engages in the mortgage banking, which originates and services government sponsored mortgages, including bridge financing products to refinance, acquire, or reposition multi-family housing projects, and construction lending for multi-family and healthcare facilities. This segment also offers customized loan products for need-based skilled nursing facilities, such as independent living, assisted living, and memory care; and tax credit equity syndicator service. The Mortgage Warehousing segment funds agency eligible residential loans, as well as commercial loans to non-depository financial institutions. The Banking segment offers a range of financial products and services to consumers and businesses, which includes retail banking, commercial lending, agricultural lending, retail and correspondent residential mortgage banking, and small business administration lending. Merchants Bancorp was founded in 1990 and is headquartered in Carmel, Indiana.

About F & M Bank

F & M Bank Corp. operates as the bank holding company for Farmers & Merchants Bank that provides financial products and services to consumers and businesses in Virginia. The company offers commercial and individual demand and time deposit accounts, savings accounts, money market accounts, internet and mobile banking services, and drive-in banking services. It also provides construction loans, including residential, and land acquisition and development loans; commercial real estate loans; business loans; consumer loans, such as personal loans, automobile loans, deposit account loans, installment and demand loans, and home equity loans; residential mortgage loans; credit cards; dealer finance; farmland loans; multi-family loans; and commercial and industrial loans. In addition, the company offers brokerage services and commercial and personal insurance products. Further, it originates conventional and government agency sponsored mortgages; and offers title insurance and real estate settlement services. The company was founded in 1908 and is headquartered in Timberville, Virginia.