American Bank (OTCMKTS:AMBK) and Farmers & Merchants Bancorp (NASDAQ:FMAO) Critical Comparison

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

Analyst Ratings

This is a summary of recent ratings and recommmendations for American Bank and Farmers & Merchants Bancorp, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
American Bank	0	0	0	0	0.00
Farmers & Merchants Bancorp	0	1	0	0	2.00

Farmers & Merchants Bancorp has a consensus target price of $26.00, suggesting a potential upside of 0.85%. Given Farmers & Merchants Bancorp’s stronger consensus rating and higher probable upside, analysts clearly believe Farmers & Merchants Bancorp is more favorable than American Bank.

Profitability

This table compares American Bank and Farmers & Merchants Bancorp’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
American Bank	18.46%	N/A	N/A
Farmers & Merchants Bancorp	15.15%	8.23%	0.82%

Dividends

American Bank pays an annual dividend of $0.56 per share and has a dividend yield of 3.8%. Farmers & Merchants Bancorp pays an annual dividend of $0.88 per share and has a dividend yield of 3.4%. American Bank pays out 37.8% of its earnings in the form of a dividend. Farmers & Merchants Bancorp pays out 43.6% 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. Farmers & Merchants Bancorp has increased its dividend for 19 consecutive years. American Bank is clearly the better dividend stock, given its higher yield and lower payout ratio.

Valuation & Earnings

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

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
American Bank	$49.06 million	1.99	$9.02 million	$1.48	10.08
Farmers & Merchants Bancorp	$179.19 million	1.97	$25.94 million	$2.02	12.76

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

Insider and Institutional Ownership

24.0% of Farmers & Merchants Bancorp shares are held by institutional investors. 7.3% of Farmers & Merchants Bancorp shares are held by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company is poised for long-term growth.

Volatility and Risk

American Bank has a beta of -0.01, meaning that its share price is 101% less volatile than the S&P 500. Comparatively, Farmers & Merchants Bancorp has a beta of 0.86, meaning that its share price is 14% less volatile than the S&P 500.

Summary

Farmers & Merchants Bancorp beats American Bank on 12 of the 16 factors compared between the two stocks.

About American Bank

American Bank Incorporated operates as the bank holding company for American Bank that provides various banking products and services to consumer, business, institutional, and governmental customers. It accepts a range of interest-bearing checking and money market accounts, savings accounts, certificates of deposit, and individual retirement accounts. The company also offers commercial, industrial, and other loans; commercial mortgage loans; commercial construction loans; residential mortgage loans; and consumer loans, including personal term loans, personal credit lines, automobile loans, home equity loans, and home equity lines of credit and loans. In addition, it provides online or mobile banking, automated teller machine, safe deposit box rental, and wire transfer services, as well as sells checks and checkbooks, and purchases investment securities. The company operates an office located in Allentown, Pennsylvania; and a loan production office in Blue Bell, Pennsylvania. The company was founded in 1997 and is based in Allentown, Pennsylvania.

About Farmers & Merchants Bancorp

Farmers & Merchants Bancorp, Inc. is a bank holding company, which engages in the provision of commercial banking, retail banking, and financial services. It includes commercial, agricultural, and residential mortgages as well as consumer and credit card lending activities. The firm also offers checking account services, and savings and time deposit services. The company was founded in 1985 and is headquartered in Archbold, OH.