Head to Head Contrast: Midland States Bancorp (NASDAQ:MSBI) and Farmers & Merchants Bancorp (NASDAQ:FMAO)

Midland States Bancorp (NASDAQ:MSBI) 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 earnings, profitability, risk, analyst recommendations, dividends, valuation and institutional ownership.

Dividends

Midland States Bancorp pays an annual dividend of $1.28 per share and has a dividend yield of 8.1%. Farmers & Merchants Bancorp pays an annual dividend of $0.91 per share and has a dividend yield of 3.8%. Midland States Bancorp pays out -166.2% of its earnings in the form of a dividend. Farmers & Merchants Bancorp pays out 42.1% 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. Midland States Bancorp has increased its dividend for 1 consecutive years and Farmers & Merchants Bancorp has increased its dividend for 19 consecutive years. Midland States Bancorp is clearly the better dividend stock, given its higher yield and lower payout ratio.

Analyst Ratings

This is a breakdown of current ratings and target prices for Midland States Bancorp and Farmers & Merchants Bancorp, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Midland States Bancorp	1	4	0	0	1.80
Farmers & Merchants Bancorp	0	2	0	0	2.00

Midland States Bancorp currently has a consensus price target of $20.75, suggesting a potential upside of 31.08%. Given Midland States Bancorp’s higher possible upside, equities research analysts clearly believe Midland States Bancorp is more favorable than Farmers & Merchants Bancorp.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Midland States Bancorp	-1.50%	-1.30%	-0.10%
Farmers & Merchants Bancorp	16.04%	8.66%	0.88%

Institutional and Insider Ownership

60.9% of Midland States Bancorp shares are held by institutional investors. Comparatively, 24.0% of Farmers & Merchants Bancorp shares are held by institutional investors. 5.3% of Midland States Bancorp shares are held by insiders. Comparatively, 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 stock is poised for long-term growth.

Risk & Volatility

Midland States Bancorp has a beta of 0.72, suggesting that its stock price is 28% less volatile than the S&P 500. Comparatively, Farmers & Merchants Bancorp has a beta of 0.88, suggesting that its stock price is 12% less volatile than the S&P 500.

Valuation & Earnings

This table compares Midland States Bancorp 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
Midland States Bancorp	$489.48 million	0.70	$38.04 million	($0.77)	-20.56
Farmers & Merchants Bancorp	$179.19 million	1.81	$25.94 million	$2.16	10.96

Midland States Bancorp has higher revenue and earnings than Farmers & Merchants Bancorp. Midland States Bancorp 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.

Summary

Farmers & Merchants Bancorp beats Midland States Bancorp on 10 of the 16 factors compared between the two stocks.

About Midland States Bancorp

Midland States Bancorp, Inc. operates as a financial holding company for Midland States Bank that provides various banking products and services to individuals, businesses, municipalities, and other entities. It operates through Banking, Wealth Management, and Other segments. The company provides a range of financial products and services to consumers and businesses, including commercial loans to finance agricultural equipment and production; and commercial real estate loans for owner occupied offices, warehouses and production facilities, office buildings, hotels, mixed-use residential and commercial facilities, retail centers, multifamily properties, and assisted living facilities. In addition, it offers construction and land development loans, such as real estate investment properties and residential developments, and lesser extent loans; and residential real estate loans, which includes first and second mortgage loans, and home equity lines of credit consisting of loans secured by first or second mortgages on primarily owner occupied primary residences. The company also provides consumer installment loans for the purchase of cars, boats and other recreational vehicles, as well as for the purchase of major appliances and other home improvement projects; and commercial equipment leasing programs for manufacturing, construction, transportation, and healthcare industries. Further, it offers merchant services; deposit products, including checking, time, savings, money market, and certificates of deposit, as well as sweep accounts; letters of credit; and trust and wealth management services, such as financial and estate planning, trustee and custodial, investment management, tax, insurance, and business planning, corporate retirement plan consulting and administration, and retail brokerage services. The company was founded in 1881 and is headquartered in Effingham, Illinois.

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.