Financial Analysis: Farmers & Merchants Bancorp (OTCMKTS:FMCB) & Southside Bancshares (NYSE:SBSI)

Insider & Institutional Ownership

5.6% of Farmers & Merchants Bancorp shares are held by institutional investors. Comparatively, 55.7% of Southside Bancshares shares are held by institutional investors. 8.0% of Farmers & Merchants Bancorp shares are held by company insiders. Comparatively, 6.0% of Southside Bancshares shares are held by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock is poised for long-term growth.

Valuation & Earnings

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

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Farmers & Merchants Bancorp	$292.68 million	2.56	$88.46 million	$126.87	8.21
Southside Bancshares	$456.07 million	1.90	$88.49 million	$2.82	10.24

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

Profitability

This table compares Farmers & Merchants Bancorp and Southside Bancshares’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Farmers & Merchants Bancorp	30.61%	15.19%	1.64%
Southside Bancshares	19.07%	10.59%	1.02%

Dividends

Farmers & Merchants Bancorp pays an annual dividend of $18.60 per share and has a dividend yield of 1.8%. Southside Bancshares pays an annual dividend of $1.44 per share and has a dividend yield of 5.0%. Farmers & Merchants Bancorp pays out 14.7% of its earnings in the form of a dividend. Southside Bancshares pays out 51.1% 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. Southside Bancshares has increased its dividend for 30 consecutive years. Southside Bancshares is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Risk and Volatility

Farmers & Merchants Bancorp has a beta of 0.24, meaning that its stock price is 76% less volatile than the S&P 500. Comparatively, Southside Bancshares has a beta of 0.68, meaning that its stock price is 32% less volatile than the S&P 500.

About Farmers & Merchants Bancorp

Farmers & Merchants Bancorp operates as the bank holding company for Farmers & Merchants Bank of Central California that provides various banking services to businesses and individuals. The company accepts various deposit products, including checking, savings, money market, time certificates of deposit, and individual retirement accounts. It also offers range of lending products comprising commercial and residential real estate, real estate construction, agribusiness, and consumer loans, as well as equipment leases and credit card services; commercial products, including term loans, lines of credit and other working capital financing, and letters of credit; and financing products, such as automobile financing, home improvement, and home equity lines of credit. In addition, the company provides various specialized services consisting of credit card programs for merchants, lockbox and other collection services, account reconciliation, investment sweep, online account access, and electronic funds transfers through domestic and international wire and automated clearinghouse; online banking services; and investment products, such as mutual funds and annuities. The company was founded in 1916 and is headquartered in Lodi, California.

About Southside Bancshares

Southside Bancshares, Inc. operates as the bank holding company for Southside Bank that provides a range of financial services to individuals, businesses, municipal entities, and nonprofit organizations. Its deposit products include savings, money market, and interest and noninterest bearing checking accounts, as well as certificates of deposit. The company’s loan portfolio comprises consumer loans that include 1-4 family residential loans, home equity loans, home improvement loans, automobile loans, and other consumer related loans; commercial loans, such as short-term working capital loans for inventory and accounts receivable, short and medium-term loans for equipment or other business capital expansion, commercial real estate loans, and municipal loans; and construction loans for 1-4 family residential and commercial real estate. It also offers wealth management and trust services consisting of investment management, administration, revocable and testamentary trusts, and custodian services for individuals, partnerships, and corporations; safe deposit services; and brokerage services. As of December 31, 2021, the company operated through 56 banking facilities and 73 ATMs/ITMs. Southside Bancshares, Inc. was founded in 1960 and is headquartered in Tyler, Texas.