Touchstone Bankshares (OTCMKTS:TSBA) & Heritage Commerce (NASDAQ:HTBK) Financial Analysis

Touchstone Bankshares (OTCMKTS:TSBA) and Heritage Commerce (NASDAQ:HTBK) are both small-cap finance companies, but which is the superior stock? We will contrast the two companies based on the strength of their analyst recommendations, risk, earnings, profitability, dividends, valuation and institutional ownership.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Touchstone Bankshares	N/A	N/A	N/A
Heritage Commerce	22.84%	8.40%	1.05%

Dividends

Touchstone Bankshares pays an annual dividend of $0.32 per share and has a dividend yield of 2.7%. Heritage Commerce pays an annual dividend of $0.52 per share and has a dividend yield of 6.2%. Touchstone Bankshares pays out 49.2% of its earnings in the form of a dividend. Heritage Commerce pays out 56.5% 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.

Earnings & Valuation

This table compares Touchstone Bankshares and Heritage Commerce’s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Touchstone Bankshares	N/A	N/A	$1.61 million	$0.65	18.52
Heritage Commerce	$243.30 million	2.12	$64.44 million	$0.92	9.17

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

Risk and Volatility

Touchstone Bankshares has a beta of 0.57, indicating that its stock price is 43% less volatile than the S&P 500. Comparatively, Heritage Commerce has a beta of 0.91, indicating that its stock price is 9% less volatile than the S&P 500.

Institutional and Insider Ownership

0.4% of Touchstone Bankshares shares are held by institutional investors. Comparatively, 75.6% of Heritage Commerce shares are held by institutional investors. 10.4% of Touchstone Bankshares shares are held by insiders. Comparatively, 4.0% of Heritage Commerce shares are held by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company will outperform the market over the long term.

Analyst Ratings

This is a summary of current recommendations for Touchstone Bankshares and Heritage Commerce, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Touchstone Bankshares	0	0	0	0	N/A
Heritage Commerce	0	1	3	0	2.75

Heritage Commerce has a consensus target price of $10.50, suggesting a potential upside of 24.41%. Given Heritage Commerce’s higher possible upside, analysts plainly believe Heritage Commerce is more favorable than Touchstone Bankshares.

Summary

Heritage Commerce beats Touchstone Bankshares on 11 of the 14 factors compared between the two stocks.

About Touchstone Bankshares

Touchstone Bankshares, Inc. operates as the bank holding company for Touchstone Bank that provides various community banking products and services in the United States. The company offers personal and business savings and checking accounts. It also provides home mortgage, professional mortgage, home equity, auto, and personal term loans; personal lines of credit; and business loans comprising commercial real estate, operating capital, business term, and construction loans, as well as business lines of credit. In addition, the company offers credit and debit cards; and digital banking, treasury, wealth management, and financial planning services. It has branches in northern North Carolina and south-central Virginia. The company was founded in 1906 and is headquartered in Prince George, Virginia.

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.