Critical Comparison: Bay Commercial Bank (NASDAQ:BCML) & Meridian (NASDAQ:MRBK)

Bay Commercial Bank (NASDAQ:BCML) and Meridian (NASDAQ:MRBK) are both small-cap finance companies, but which is the superior business? We will contrast the two companies based on the strength of their earnings, profitability, valuation, institutional ownership, analyst recommendations, risk and dividends.

Insider and Institutional Ownership

66.2% of Bay Commercial Bank shares are held by institutional investors. Comparatively, 58.6% of Meridian shares are held by institutional investors. 2.9% of Bay Commercial Bank shares are held by company insiders. Comparatively, 14.1% of Meridian shares are held by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock will outperform the market over the long term.

Risk and Volatility

Bay Commercial Bank has a beta of 0.32, indicating that its share price is 68% less volatile than the S&P 500. Comparatively, Meridian has a beta of 0.65, indicating that its share price is 35% less volatile than the S&P 500.

Analyst Recommendations

This is a summary of current recommendations and price targets for Bay Commercial Bank and Meridian, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Bay Commercial Bank	0	4	0	1	2.40
Meridian	1	0	3	0	2.50

Bay Commercial Bank currently has a consensus price target of $34.00, indicating a potential upside of 10.50%. Meridian has a consensus price target of $22.00, indicating a potential upside of 17.65%. Given Meridian’s stronger consensus rating and higher probable upside, analysts clearly believe Meridian is more favorable than Bay Commercial Bank.

Profitability

This table compares Bay Commercial Bank and Meridian’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Bay Commercial Bank	6.53%	7.54%	0.98%
Meridian	11.46%	11.37%	0.89%

Dividends

Bay Commercial Bank pays an annual dividend of $1.20 per share and has a dividend yield of 3.9%. Meridian pays an annual dividend of $0.56 per share and has a dividend yield of 3.0%. Bay Commercial Bank pays out 142.9% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Meridian pays out 27.2% of its earnings in the form of a dividend. Bay Commercial Bank has raised its dividend for 3 consecutive years. Bay Commercial Bank is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Earnings & Valuation

This table compares Bay Commercial Bank and Meridian”s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Bay Commercial Bank	$141.48 million	2.37	$23.93 million	$0.84	36.63
Meridian	$205.49 million	1.09	$21.84 million	$2.06	9.08

Bay Commercial Bank has higher earnings, but lower revenue than Meridian. Meridian is trading at a lower price-to-earnings ratio than Bay Commercial Bank, indicating that it is currently the more affordable of the two stocks.

Summary

Meridian beats Bay Commercial Bank on 10 of the 18 factors compared between the two stocks.

About Bay Commercial Bank

BayCom Corp operates as the bank holding company for United Business Bank that provides various financial services to small and mid-sized businesses, service professionals, and individuals. The company provides demand, savings, money market, and time deposit accounts. It offers commercial and multifamily real estate loans, including owner-occupied and investor real estate loans; commercial and industrial loans, such as equipment loans and working capital lines of credit; small business administration loans; construction and land loans; agriculture-related loans; and consumer loans comprising installment loans, unsecured and secured personal lines of credit, and overdraft protection. In addition, the company provides online and mobile banking, automated teller machine, remote deposit capture, night depository, courier, direct deposit, treasury management, wire transfer, automated clearing house, debit cards, cashier's and travelers checks, letters of credit, lockbox, positive pay, reverse positive pay, and account reconciliation services, as well as zero balance accounts and sweep accounts, including loan sweep. It operates through a network of full-service banking branches in Northern and Southern California; Las Vegas, Nevada; Denver, Colorado; Custer, Delta, and Grand counties, Colorado; and Seattle, Washington and Central New Mexico. The company was formerly known as Bay Commercial Bank and changed its name to BayCom Corp in January 2017. BayCom Corp was incorporated in 2004 and is headquartered in Walnut Creek, California.

About Meridian

Meridian Corporation operates as the holding company for Meridian Bank that provides commercial banking products and services in Pennsylvania, New Jersey, Delaware, Florida, and Maryland. The company offers various deposit products, such as demand non-interest bearing, demand interest bearing, savings accounts, money market accounts, and time deposits. It also provides commercial and industrial loans comprising business lines of credit, term loans, small business lending, lease financing, shared national credits, and other financing; commercial real estate, and land development and construction loans for residential and commercial projects; and consumer and home equity lending, private banking, merchant, and title and land settlement services. In addition, the company operates and originates mortgage loans for 1-4 family dwellings; and offers real estate holding, investment advisory, and equipment leasing services, as well as financial planning and wealth management services. Meridian Corporation was incorporated in 2004 and is headquartered in Malvern, Pennsylvania.