Critical Analysis: Bay Commercial Bank (NASDAQ:BCML) and Five Star Bancorp (NASDAQ:FSBC)

Bay Commercial Bank (NASDAQ:BCML) and Five Star Bancorp (NASDAQ:FSBC) are both small-cap finance companies, but which is the superior investment? We will compare the two businesses based on the strength of their profitability, risk, institutional ownership, dividends, analyst recommendations, valuation and earnings.

Insider and Institutional Ownership

66.2% of Bay Commercial Bank shares are held by institutional investors. Comparatively, 46.9% of Five Star Bancorp shares are held by institutional investors. 7.2% of Bay Commercial Bank shares are held by insiders. Comparatively, 25.6% of Five Star Bancorp shares are held by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company will outperform the market over the long term.

Volatility and Risk

Bay Commercial Bank has a beta of 0.58, suggesting that its share price is 42% less volatile than the S&P 500. Comparatively, Five Star Bancorp has a beta of 0.52, suggesting that its share price is 48% less volatile than the S&P 500.

Dividends

Bay Commercial Bank pays an annual dividend of $1.00 per share and has a dividend yield of 3.4%. Five Star Bancorp pays an annual dividend of $0.80 per share and has a dividend yield of 2.4%. Bay Commercial Bank pays out 45.9% of its earnings in the form of a dividend. Five Star Bancorp pays out 32.7% 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. Bay Commercial Bank has increased its dividend for 3 consecutive years. Bay Commercial Bank is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Profitability

This table compares Bay Commercial Bank and Five Star Bancorp’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Bay Commercial Bank	17.36%	7.41%	0.93%
Five Star Bancorp	22.14%	12.89%	1.25%

Analyst Ratings

This is a breakdown of current recommendations and price targets for Bay Commercial Bank and Five Star Bancorp, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Bay Commercial Bank	0	1	1	0	2.50
Five Star Bancorp	0	1	4	0	2.80

Bay Commercial Bank currently has a consensus target price of $31.50, indicating a potential upside of 6.31%. Five Star Bancorp has a consensus target price of $35.00, indicating a potential upside of 6.64%. Given Five Star Bancorp’s stronger consensus rating and higher probable upside, analysts plainly believe Five Star Bancorp is more favorable than Bay Commercial Bank.

Earnings & Valuation

This table compares Bay Commercial Bank and Five Star Bancorp”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Bay Commercial Bank	$138.09 million	2.34	$23.61 million	$2.18	13.59
Five Star Bancorp	$213.40 million	3.29	$45.67 million	$2.45	13.40

Five Star Bancorp has higher revenue and earnings than Bay Commercial Bank. Five Star Bancorp is trading at a lower price-to-earnings ratio than Bay Commercial Bank, indicating that it is currently the more affordable of the two stocks.

Summary

Five Star Bancorp beats Bay Commercial Bank on 12 of the 17 factors compared between the two stocks.

About Bay Commercial Bank

BayCom Corp operates as the bank holding company for United Business Bank that provides various financial services to small and mid-sized businesses, service professionals, and individuals. The company provides demand, savings, money market, and time deposit accounts. It offers commercial and multifamily real estate loans, including owner-occupied and investor real estate loans; commercial and industrial loans, such as equipment loans and working capital lines of credit; small business administration loans; construction and land loans; agriculture-related loans; and consumer loans comprising installment loans, unsecured and secured personal lines of credit, and overdraft protection. In addition, the company provides online and mobile banking, automated teller machine, remote deposit capture, night depository, courier, direct deposit, treasury management, wire transfer, automated clearing house, debit cards, cashier's and travelers checks, letters of credit, lockbox, positive pay, reverse positive pay, and account reconciliation services, as well as zero balance accounts and sweep accounts, including loan sweep. It operates through a network of full-service banking branches in Northern and Southern California; Las Vegas, Nevada; Denver, Colorado; Custer, Delta, and Grand counties, Colorado; and Seattle, Washington and Central New Mexico. The company was formerly known as Bay Commercial Bank and changed its name to BayCom Corp in January 2017. BayCom Corp was incorporated in 2004 and is headquartered in Walnut Creek, California.

About Five Star Bancorp

Five Star Bancorp operates as the bank holding company for Five Star Bank that provides a range of banking products and services to small and medium-sized businesses, professionals, and individuals in Northern California. It accepts various deposits, such as money market accounts, noninterest-bearing and interest checking accounts, savings accounts, term certificate accounts, and time deposits. The company also offers loan products, including commercial and residential real estate loans; commercial loans; commercial land loans; farmland loans; commercial and residential construction loans; and consumer and other loans, as well as operating lines of credit. In addition, it provides debit cards; and remote deposit capture, online and mobile banking, and direct deposit services. Five Star Bancorp was founded in 1999 and is headquartered in Rancho Cordova, California.