Reviewing Merchants Bancorp (NASDAQ:MBIN) & First US Bancshares (NASDAQ:FUSB)

First US Bancshares (NASDAQ:FUSB) and Merchants Bancorp (NASDAQ:MBIN) are both small-cap finance companies, but which is the superior stock? We will contrast the two companies based on the strength of their profitability, dividends, valuation, institutional ownership, analyst recommendations, earnings and risk.

Profitability

This table compares First US Bancshares and Merchants Bancorp’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
First US Bancshares	15.10%	9.74%	0.80%
Merchants Bancorp	23.42%	25.38%	1.76%

Insider & Institutional Ownership

18.7% of First US Bancshares shares are owned by institutional investors. Comparatively, 24.6% of Merchants Bancorp shares are owned by institutional investors. 11.2% of First US Bancshares shares are owned by insiders. Comparatively, 39.7% of Merchants Bancorp shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock is poised for long-term growth.

Analyst Ratings

This is a summary of recent ratings for First US Bancshares and Merchants Bancorp, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
First US Bancshares	0	0	0	0	N/A
Merchants Bancorp	0	0	1	1	3.50

Merchants Bancorp has a consensus price target of $46.50, indicating a potential upside of 20.97%. Given Merchants Bancorp’s higher possible upside, analysts clearly believe Merchants Bancorp is more favorable than First US Bancshares.

Dividends

First US Bancshares pays an annual dividend of $0.20 per share and has a dividend yield of 2.1%. Merchants Bancorp pays an annual dividend of $0.36 per share and has a dividend yield of 0.9%. First US Bancshares pays out 15.0% of its earnings in the form of a dividend. Merchants Bancorp pays out 6.4% 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. Merchants Bancorp has raised its dividend for 7 consecutive years.

Earnings & Valuation

This table compares First US Bancshares and Merchants Bancorp’s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
First US Bancshares	$56.19 million	0.99	$8.48 million	$1.33	7.22
Merchants Bancorp	$1.19 billion	1.40	$279.23 million	$5.64	6.82

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

Volatility & Risk

First US Bancshares has a beta of 0.99, indicating that its share price is 1% less volatile than the S&P 500. Comparatively, Merchants Bancorp has a beta of 1.18, indicating that its share price is 18% more volatile than the S&P 500.

Summary

Merchants Bancorp beats First US Bancshares on 15 of the 17 factors compared between the two stocks.

About First US Bancshares

First US Bancshares, Inc. operates as the bank holding company for First US Bank that provides commercial banking products and services. The company offers non-interest-bearing demand deposits, savings accounts, NOW accounts, money market demand accounts, individual retirement accounts, and time deposits. Its loan products include commercial construction, land, and land development loans, including residential housing projects, commercial and industrial development, and for purchase and improvement of raw land for agricultural production; mortgage loans on one-to-four family and multi-family residential properties; real estate loans secured by commercial and industrial properties, office or mixed-use facilities, strip shopping centers, or other commercial properties; commercial and industrial loans and leases; and secured and unsecured personal loans, including automobile loans, loans for household and personal purposes, and other direct consumer installment loans. The company also provides loans secured by collateral in form of personal property items. In addition, it provides letters of credit; and safe deposit box and remote deposit capture services. The company serves small-and medium-sized businesses, property managers, business executives, professionals, and other individuals. The company was formerly known as United Security Bancshares, Inc. and changed its name to First US Bancshares, Inc. in October 2016. First US Bancshares, Inc. was founded in 1952 and is headquartered in Birmingham, Alabama.

About Merchants Bancorp

Merchants Bancorp operates as the diversified bank holding company in the United States. It operates through three segments: Multi-family Mortgage Banking, Mortgage Warehousing, and Banking. The Multi-family Mortgage Banking segment engages in the mortgage banking, which originates and services government sponsored mortgages, including bridge financing products to refinance, acquire, or reposition multi-family housing projects, and construction lending for multi-family and healthcare facilities. This segment also offers customized loan products for need-based skilled nursing facilities, such as independent living, assisted living, and memory care; and tax credit equity syndicator service. The Mortgage Warehousing segment funds agency eligible residential loans, as well as commercial loans to non-depository financial institutions. The Banking segment offers a range of financial products and services to consumers and businesses, which includes retail banking, commercial lending, agricultural lending, retail and correspondent residential mortgage banking, and small business administration lending. Merchants Bancorp was founded in 1990 and is headquartered in Carmel, Indiana.