Reviewing Independent Bank (NASDAQ:IBCP) and Farmers National Banc (NASDAQ:FMNB)

Independent Bank (NASDAQ:IBCP) and Farmers National Banc (NASDAQ:FMNB) are both small-cap finance companies, but which is the better business? We will contrast the two businesses based on the strength of their institutional ownership, risk, analyst recommendations, dividends, valuation, earnings and profitability.

Institutional & Insider Ownership

79.4% of Independent Bank shares are owned by institutional investors. Comparatively, 38.7% of Farmers National Banc shares are owned by institutional investors. 5.7% of Independent Bank shares are owned by company insiders. Comparatively, 4.0% of Farmers National Banc shares are owned by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock will outperform the market over the long term.

Dividends

Independent Bank pays an annual dividend of $1.04 per share and has a dividend yield of 3.3%. Farmers National Banc pays an annual dividend of $0.68 per share and has a dividend yield of 5.1%. Independent Bank pays out 31.9% of its earnings in the form of a dividend. Farmers National Banc pays out 47.2% 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. Independent Bank has increased its dividend for 11 consecutive years.

Earnings & Valuation

This table compares Independent Bank and Farmers National Banc”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Independent Bank	$222.04 million	2.93	$66.79 million	$3.26	9.65
Farmers National Banc	$183.61 million	2.73	$45.95 million	$1.44	9.24

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

Analyst Ratings

This is a summary of current ratings and price targets for Independent Bank and Farmers National Banc, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Independent Bank	0	4	0	0	2.00
Farmers National Banc	0	3	1	0	2.25

Independent Bank presently has a consensus target price of $36.00, suggesting a potential upside of 14.47%. Farmers National Banc has a consensus target price of $14.50, suggesting a potential upside of 9.02%. Given Independent Bank’s higher probable upside, research analysts clearly believe Independent Bank is more favorable than Farmers National Banc.

Profitability

This table compares Independent Bank and Farmers National Banc’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Independent Bank	21.25%	14.76%	1.28%
Farmers National Banc	19.57%	13.82%	1.14%

Volatility & Risk

Independent Bank has a beta of 0.86, meaning that its stock price is 14% less volatile than the S&P 500. Comparatively, Farmers National Banc has a beta of 0.85, meaning that its stock price is 15% less volatile than the S&P 500.

Summary

Independent Bank beats Farmers National Banc on 14 of the 17 factors compared between the two stocks.

About Independent Bank

Independent Bank Corporation operates as the bank holding company for Independent Bank that provides commercial banking services to individuals and businesses in rural and suburban communities in Michigan. It offers checking and savings accounts, commercial lending, direct and indirect consumer financing, mortgage lending, and safe deposit box services. The company also provides title insurance services and investment services, as well as automatic teller machines, and internet and mobile banking services. In addition, it operates through branches, drive-thru facilities, and loan production offices. Independent Bank Corporation was founded in 1864 and is based in Grand Rapids, Michigan.

About Farmers National Banc

Farmers National Banc Corp. operates as a bank holding company for The Farmers National Bank of Canfield engages in the banking, trust, retirement consulting, insurance, and financial management businesses. It offers commercial and retail banking services, including checking, savings, and time deposit accounts; commercial, mortgage and installment, and home equity loans; home equity lines of credit, night depository, safe deposit box, money order, bank check, automated teller machine, Internet banking, travel card, E bond transaction, brokerage, and other services. The company also provides personal and corporate trust services in the areas of estate settlement, trust administration, employee benefit plans, and retirement services; property and casualty insurance products and services; and various insurance products through licensed representatives, as well as invests in municipal securities. The company was founded in 1887 and is headquartered in Canfield, Ohio.