Reviewing Heritage Commerce (NASDAQ:HTBK) and Coastal Financial (NASDAQ:CCB)

Heritage Commerce (NASDAQ:HTBK) and Coastal Financial (NASDAQ:CCB) are both small-cap finance companies, but which is the superior business? We will compare the two businesses based on the strength of their analyst recommendations, risk, earnings, institutional ownership, valuation, dividends and profitability.

Volatility & Risk

Heritage Commerce has a beta of 0.89, indicating that its share price is 11% less volatile than the S&P 500. Comparatively, Coastal Financial has a beta of 1.06, indicating that its share price is 6% more volatile than the S&P 500.

Institutional and Insider Ownership

75.6% of Heritage Commerce shares are owned by institutional investors. Comparatively, 59.2% of Coastal Financial shares are owned by institutional investors. 2.7% of Heritage Commerce shares are owned by insiders. Comparatively, 14.1% of Coastal Financial shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock will outperform the market over the long term.

Profitability

This table compares Heritage Commerce and Coastal Financial’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Heritage Commerce	16.31%	7.20%	0.90%
Coastal Financial	7.14%	10.45%	1.09%

Earnings & Valuation

This table compares Heritage Commerce and Coastal Financial”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Heritage Commerce	$189.76 million	3.42	$40.53 million	$0.70	15.11
Coastal Financial	$703.32 million	2.25	$45.22 million	$3.16	33.18

Coastal Financial has higher revenue and earnings than Heritage Commerce. Heritage Commerce is trading at a lower price-to-earnings ratio than Coastal Financial, indicating that it is currently the more affordable of the two stocks.

Analyst Ratings

This is a summary of current ratings for Heritage Commerce and Coastal Financial, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Heritage Commerce	0	1	4	1	3.00
Coastal Financial	0	1	5	1	3.00

Heritage Commerce currently has a consensus price target of $11.50, indicating a potential upside of 8.70%. Coastal Financial has a consensus price target of $116.20, indicating a potential upside of 10.82%. Given Coastal Financial’s higher probable upside, analysts clearly believe Coastal Financial is more favorable than Heritage Commerce.

Summary

Coastal Financial beats Heritage Commerce on 10 of the 13 factors compared between the two stocks.

About Heritage Commerce

Heritage Commerce Corp operates as the bank holding company for Heritage Bank of Commerce that provides various commercial and personal banking services to residents and the business/professional community in California. Its deposit products for business banking and retail markets include interest and non-interest-bearing demand, savings, and money market accounts, as well as certificates of deposit and time deposits. The company’s loan portfolio comprises commercial loans, such as operating secured and unsecured loans advanced for working capital, equipment purchases, and other business purposes; commercial real estate loans; commercial construction loans for rental properties, commercial buildings, and homes; small business administration loans; home equity lines of credit; multifamily loans on residential properties; residential mortgage loans; and consumer loans consisting of loans for financing automobiles, various consumer goods, and other personal purposes. In addition, it offers other banking services, including cashier’s checks, bank by mail, night depositories, safe deposit boxes, direct deposit, automated payroll, electronic funds transfer, online bill pay, homeowner association, remote deposit capture, automated clearing house origination, electronic data interchange, and check imaging services, as well as other customary banking, factoring financing, and electronic banking services. Heritage Commerce Corp was founded in 1994 and is headquartered in San Jose, California.

About Coastal Financial

Coastal Financial Corporation operates as the bank holding company for Coastal Community Bank that provides various banking products and services to small and medium-sized businesses, professionals, and individuals in the Puget Sound region in Washington. It accepts a range of deposit products, including demand and savings accounts, time deposits, and money market accounts. The company also offers commercial and industrial loans, such as term loans, commercial lines of credit, capital call lines working capital loans, equipment financing, borrowing base loans, small business administration loans, and other loan products; owner and non-owner-occupied real estate loans, and multi-family residential loans; construction, land, and land development loans; residential real estate loans; and consumer and other loans, including automobile, boat and recreational vehicle, and secured term loans, as well as personal lines of credit, including overdraft protection. In addition, it provides remote deposit capture, online and mobile banking, and direct and reciprocal deposit services; and debit cards. Further, the company offers business accounts and cash management services, including business checking and savings accounts, and treasury services, as well as Banking as a Service (BaaS), a platform that allows broker dealers and digital financial service providers to offer their customers banking services. Coastal Financial Corporation was founded in 1997 and is headquartered in Everett, Washington.