1st Source (NASDAQ:SRCE) and F & M Bank (OTCMKTS:FMBM) Critical Survey

1st Source (NASDAQ:SRCE) and F & M Bank (OTCMKTS:FMBM) are both small-cap finance companies, but which is the better business? We will contrast the two businesses based on the strength of their risk, profitability, analyst recommendations, institutional ownership, earnings, valuation and dividends.

Valuation and Earnings

This table compares 1st Source and F & M Bank”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
1st Source	$380.68 million	3.73	$124.93 million	$5.25	11.04
F & M Bank	$66.48 million	1.06	$2.77 million	$1.57	12.74

1st Source has higher revenue and earnings than F & M Bank. 1st Source is trading at a lower price-to-earnings ratio than F & M Bank, indicating that it is currently the more affordable of the two stocks.

Dividends

1st Source pays an annual dividend of $1.44 per share and has a dividend yield of 2.5%. F & M Bank pays an annual dividend of $1.04 per share and has a dividend yield of 5.2%. 1st Source pays out 27.4% of its earnings in the form of a dividend. F & M Bank pays out 66.2% 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. 1st Source has increased its dividend for 37 consecutive years.

Profitability

This table compares 1st Source and F & M Bank’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
1st Source	23.01%	11.68%	1.48%
F & M Bank	7.48%	6.69%	0.42%

Analyst Ratings

This is a summary of current ratings and recommmendations for 1st Source and F & M Bank, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
1st Source	0	2	0	0	2.00
F & M Bank	0	0	0	0	0.00

1st Source presently has a consensus price target of $64.75, suggesting a potential upside of 11.71%. Given 1st Source’s stronger consensus rating and higher probable upside, equities analysts clearly believe 1st Source is more favorable than F & M Bank.

Institutional and Insider Ownership

74.4% of 1st Source shares are owned by institutional investors. Comparatively, 3.8% of F & M Bank shares are owned by institutional investors. 19.3% of 1st Source shares are owned by company insiders. Comparatively, 10.7% of F & M Bank shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company will outperform the market over the long term.

Volatility & Risk

1st Source has a beta of 0.82, suggesting that its share price is 18% less volatile than the S&P 500. Comparatively, F & M Bank has a beta of 0.37, suggesting that its share price is 63% less volatile than the S&P 500.

Summary

1st Source beats F & M Bank on 14 of the 16 factors compared between the two stocks.

About 1st Source

1st Source Corporation operates as the bank holding company for 1st Source Bank that provides commercial and consumer banking services, trust and wealth advisory services, and insurance products to individual and business clients. Its consumer banking services include checking and savings accounts; certificates of deposit; individual retirement accounts; online and mobile banking products; consumer loans, real estate mortgage loans, and home equity lines of credit; and financial planning, financial literacy, and other consultative services, as well as debit and credit cards. The company also offers commercial, small business, agricultural, and real estate loans for general corporate purposes, including financing for industrial and commercial properties, equipment, inventories, accounts receivables, and renewable energy and acquisition financing; and commercial leasing, treasury management, and retirement planning services. In addition, it provides trust, investment, agency, and custodial services comprising administration of estates and personal trusts, as well as management of investment accounts for individuals, employee benefit plans, and charitable foundations. Further, the company offers equipment loan and lease products for construction equipment, new and pre-owned aircraft, auto and light trucks, and medium and heavy duty trucks; and finances construction equipment, aircrafts, medium and heavy duty trucks, step vans, vocational work trucks, motor coaches, shuttle buses, funeral cars, automobiles, and other equipment. Additionally, it provides corporate and personal property, casualty, and individual and group health and life insurance products and services. 1st Source Corporation was founded in 1863 and is headquartered in South Bend, Indiana.

About F & M Bank

F & M Bank Corp. operates as the bank holding company for Farmers & Merchants Bank that provides financial products and services to consumers and businesses in Virginia. The company offers commercial and individual demand and time deposit accounts, savings accounts, money market accounts, internet and mobile banking services, and drive-in banking services. It also provides construction loans, including residential, and land acquisition and development loans; commercial real estate loans; business loans; consumer loans, such as personal loans, automobile loans, deposit account loans, installment and demand loans, and home equity loans; residential mortgage loans; credit cards; dealer finance; farmland loans; multi-family loans; and commercial and industrial loans. In addition, the company offers brokerage services and commercial and personal insurance products. Further, it originates conventional and government agency sponsored mortgages; and offers title insurance and real estate settlement services. The company was founded in 1908 and is headquartered in Timberville, Virginia.