Contrasting MainStreet Bank (NASDAQ:MNSB) and Southern Michigan Bancorp (OTCMKTS:SOMC)

MainStreet Bank (NASDAQ:MNSB) and Southern Michigan Bancorp (OTCMKTS:SOMC) are both small-cap finance companies, but which is the superior business? We will compare the two companies based on the strength of their profitability, dividends, earnings, risk, analyst recommendations, valuation and institutional ownership.

Institutional & Insider Ownership

52.3% of MainStreet Bank shares are owned by institutional investors. 10.2% of MainStreet Bank shares are owned by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock will outperform the market over the long term.

Profitability

This table compares MainStreet Bank and Southern Michigan Bancorp’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
MainStreet Bank	12.94%	9.13%	0.80%
Southern Michigan Bancorp	13.00%	10.60%	0.76%

Dividends

MainStreet Bank pays an annual dividend of $0.40 per share and has a dividend yield of 1.8%. Southern Michigan Bancorp pays an annual dividend of $0.68 per share and has a dividend yield of 2.4%. MainStreet Bank pays out 20.1% of its earnings in the form of a dividend. Southern Michigan Bancorp pays out 25.4% 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.

Analyst Ratings

This is a summary of current recommendations and price targets for MainStreet Bank and Southern Michigan Bancorp, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
MainStreet Bank	0	2	0	0	2.00
Southern Michigan Bancorp	0	0	0	0	0.00

Earnings & Valuation

This table compares MainStreet Bank and Southern Michigan Bancorp”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
MainStreet Bank	$135.62 million	1.18	$15.61 million	$1.99	11.28
Southern Michigan Bancorp	$93.18 million	1.42	$12.22 million	$2.68	10.63

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

Risk and Volatility

MainStreet Bank has a beta of 0.56, meaning that its stock price is 44% less volatile than the S&P 500. Comparatively, Southern Michigan Bancorp has a beta of 0.19, meaning that its stock price is 81% less volatile than the S&P 500.

Summary

MainStreet Bank beats Southern Michigan Bancorp on 9 of the 14 factors compared between the two stocks.

About MainStreet Bank

MainStreet Bancshares, Inc. operates as the bank holding company for MainStreet Bank that provides various banking products and services for individuals, small to medium-sized businesses, and professional service organizations. The company offers demand, NOW, money market, savings, and sweep accounts, as well as certificates of deposit; business and consumer checking, interest-bearing checking, business account analysis, and other depository services; and cash management, wire transfer, check imaging, bill pay, remote deposit capture, and courier services. It also provides commercial loans, include government contract receivables, plant and equipment, general working capital, contract administration, and acquisition loans; commercial real estate, real estate construction, and residential real estate loans; and consumer loans comprising term loans and overdraft protection, as well as debit and credit cards. In addition, the company offers deposit insurance solutions; remote deposit of checks; and internet bill payment, online cash management, and online and mobile banking services. It operates in Herndon, Fairfax, McLean, Leesburg, Clarendon, and Washington D.C., as well as automated teller machines. The company was incorporated in 2003 and is headquartered in Fairfax, Virginia.

About Southern Michigan Bancorp

Southern Michigan Bancorp, Inc. operates as the bank holding company for Southern Michigan Bank & Trust that provides a range of commercial banking services to individuals, businesses, institutions, and governmental agencies primarily in the southwest Michigan communities. Its deposit products include interest and non-interest checking, savings, and various types of money market accounts; time, savings, and demand deposits; and certificates of deposit and IRAs. The company also provides home mortgages and equity loans, home equity lines of credit, VA and FHA home loans, USDA rural development loans, and auto/personal loans; business loans, such as lines of credit, term loans, commercial real estate loans, commercial and industrial loans, agriculture loans, letters of credit, small business administration loans, and capital access loans; industrial, construction, real estate, and inventory loans; and consumer lending products comprising direct and indirect loans to purchasers of residential real property and consumer goods. In addition, it offers trust and investment services that include investment management, trustee, IRA rollovers and retirement plan, institutional and personal custody, estate settlement, wealth management, estate and wealth transfer planning assistance, charitable gift planning assistance, and cash management custody services; and safe deposit box and automated teller machine services. Further, the company provides bill pay, e-statements, ACH, wire transfer, remote deposit capture, and insurance services, as well as ATM, debit, credit, and gift cards. The company was founded in 1871 and is based in Coldwater, Michigan.