Financial Survey: Northeast Indiana Bancorp (OTCMKTS:NIDB) versus Farmers & Merchants Bancorp (NASDAQ:FMAO)

Northeast Indiana Bancorp (OTCMKTS:NIDB) and Farmers & Merchants Bancorp (NASDAQ:FMAO) are both small-cap finance companies, but which is the better stock? We will contrast the two businesses based on the strength of their earnings, profitability, risk, analyst recommendations, valuation, institutional ownership and dividends.

Institutional & Insider Ownership

24.0% of Farmers & Merchants Bancorp shares are held by institutional investors. 19.8% of Northeast Indiana Bancorp shares are held by company insiders. Comparatively, 7.8% of Farmers & Merchants Bancorp shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock will outperform the market over the long term.

Analyst Ratings

This is a summary of current ratings for Northeast Indiana Bancorp and Farmers & Merchants Bancorp, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Northeast Indiana Bancorp	0	0	0	0	N/A
Farmers & Merchants Bancorp	0	2	0	0	2.00

Farmers & Merchants Bancorp has a consensus price target of $24.00, indicating a potential downside of 7.98%. Given Farmers & Merchants Bancorp’s higher possible upside, analysts clearly believe Farmers & Merchants Bancorp is more favorable than Northeast Indiana Bancorp.

Valuation and Earnings

This table compares Northeast Indiana Bancorp and Farmers & Merchants Bancorp”s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Northeast Indiana Bancorp	$27.36 million	1.51	$4.26 million	$2.05	8.34
Farmers & Merchants Bancorp	$93.69 million	3.81	$22.79 million	$1.59	16.40

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

Volatility and Risk

Northeast Indiana Bancorp has a beta of 0.4, meaning that its share price is 60% less volatile than the S&P 500. Comparatively, Farmers & Merchants Bancorp has a beta of 0.63, meaning that its share price is 37% less volatile than the S&P 500.

Dividends

Northeast Indiana Bancorp pays an annual dividend of $0.68 per share and has a dividend yield of 4.0%. Farmers & Merchants Bancorp pays an annual dividend of $0.88 per share and has a dividend yield of 3.4%. Northeast Indiana Bancorp pays out 33.2% of its earnings in the form of a dividend. Farmers & Merchants Bancorp pays out 55.3% 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. Farmers & Merchants Bancorp has increased its dividend for 15 consecutive years. Northeast Indiana Bancorp is clearly the better dividend stock, given its higher yield and lower payout ratio.

Profitability

This table compares Northeast Indiana Bancorp and Farmers & Merchants Bancorp’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Northeast Indiana Bancorp	14.16%	N/A	N/A
Farmers & Merchants Bancorp	12.59%	6.79%	0.65%

Summary

Farmers & Merchants Bancorp beats Northeast Indiana Bancorp on 10 of the 15 factors compared between the two stocks.

About Northeast Indiana Bancorp

Northeast Indiana Bancorp, Inc. operates as the bank holding company for First Federal Savings Bank that provides various banking and financial advisory services. The company offers checking accounts, savings accounts, retirement accounts, health savings accounts, and direct deposits, as well as certificates of deposit. It also provides mortgage, refinance, new construction, and home equity loans; auto, recreational vehicle, and unsecured loans; and revolving lines of credit, term loans, real estate loans, letter of credit, and small business administration loans, as well as debit and credit cards. In addition, the company offers merchant, online banking, and cash management services. It operates through full-service locations in Huntington, Warsaw, and Fort Wayne, Indiana. The company was founded in 1912 and is headquartered in Huntington, Indiana.

About Farmers & Merchants Bancorp

Farmers & Merchants Bancorp, Inc. operates as the bank holding company for The Farmers & Merchants State Bank that provides commercial banking services to individuals and small businesses in Northwest Ohio and Northeast Indiana. The company offers checking, savings, and time deposit accounts; certificates of deposit; and custodial services for individual retirement and health savings accounts. It also provides commercial, agricultural, and residential mortgage, as well as consumer lending products; loans for farmland, farm equipment, and livestock; operating loans for seeds, fertilizers, and feeds; home improvement loans; and loans for autos, trucks, recreational vehicles, and motorcycles. In addition, the company offers commercial real estate loans, such as lines of credit and machinery purchase loans. Further, it provides automated teller machine or interactive teller machine services; and online and mobile banking, bill-pay, on-line statement opportunities, and remote deposit capture or electronic deposit processing. Additionally, the company offers electronic transaction origination, such as wire and automated clearing house file transmittal services. Farmers & Merchants Bancorp, Inc. was founded in 1897 and is headquartered in Archbold, Ohio.