Farmers & Merchants Bancorp (OTCMKTS:FMCB) and American Business Bank (OTCMKTS:AMBZ) Critical Review

Institutional and Insider Ownership

5.6% of Farmers & Merchants Bancorp shares are held by institutional investors. Comparatively, 9.9% of American Business Bank shares are held by institutional investors. 8.5% of Farmers & Merchants Bancorp shares are held by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company will outperform the market over the long term.

Dividends

Farmers & Merchants Bancorp pays an annual dividend of $18.60 per share and has a dividend yield of 1.8%. American Business Bank pays an annual dividend of $1.00 per share and has a dividend yield of 1.9%. Farmers & Merchants Bancorp pays out 14.7% of its earnings in the form of a dividend. American Business Bank pays out 19.3% 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.

Risk and Volatility

Farmers & Merchants Bancorp has a beta of 0.24, meaning that its share price is 76% less volatile than the S&P 500. Comparatively, American Business Bank has a beta of 0.48, meaning that its share price is 52% less volatile than the S&P 500.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Farmers & Merchants Bancorp	30.61%	15.03%	1.64%
American Business Bank	25.23%	N/A	N/A

Valuation & Earnings

This table compares Farmers & Merchants Bancorp and American Business Bank”s 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
American Business Bank	$183.26 million	2.58	$43.28 million	$5.18	10.22

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

Summary

Farmers & Merchants Bancorp beats American Business Bank on 8 of the 13 factors compared between the two stocks.

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 American Business Bank

American Business Bank, a California-chartered bank, provides banking products and services to small and medium-sized firms, non-profits, business executives, and professionals in Southern California. The company offers credit and depository; treasury management; asset-based lending; SBA lending; international banking comprising money transfers, import and export commercial letters of credit, standby letters of credit, documentary and clean collections, and foreign currency exchange services; and consulting and referral services. It operates regional loan production offices located in North Orange County, Orange County, South Bay, San Fernando Valley, Riverside County, Inland Empire, and Long Beach. American Business Bank was incorporated in 1998 and is headquartered in Los Angeles, California.