Contrasting Heritage Commerce (NASDAQ:HTBK) and M&T Bank (NYSE:MTB)

Heritage Commerce (NASDAQ:HTBK) and M&T Bank (NYSE:MTB) are both finance companies, but which is the superior business? We will contrast the two companies based on the strength of their earnings, analyst recommendations, risk, valuation, institutional ownership, profitability and dividends.

Profitability

This table compares Heritage Commerce and M&T Bank’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Heritage Commerce	17.77%	8.07%	1.01%
M&T Bank	22.63%	11.86%	1.40%

Valuation & Earnings

This table compares Heritage Commerce and M&T Bank”s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Heritage Commerce	$197.46 million	4.20	$47.83 million	$0.78	17.24
M&T Bank	$13.23 billion	2.43	$2.85 billion	$19.16	11.61

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

Dividends

Heritage Commerce pays an annual dividend of $0.52 per share and has a dividend yield of 3.9%. M&T Bank pays an annual dividend of $6.00 per share and has a dividend yield of 2.7%. Heritage Commerce pays out 66.7% of its earnings in the form of a dividend. M&T Bank pays out 31.3% 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.

Analyst Recommendations

This is a summary of recent ratings for Heritage Commerce and M&T Bank, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Heritage Commerce	0	5	2	0	2.29
M&T Bank	1	14	8	0	2.30

Heritage Commerce presently has a consensus price target of $13.12, indicating a potential downside of 2.42%. M&T Bank has a consensus price target of $247.12, indicating a potential upside of 11.09%. Given M&T Bank’s stronger consensus rating and higher probable upside, analysts clearly believe M&T Bank is more favorable than Heritage Commerce.

Institutional and Insider Ownership

75.6% of Heritage Commerce shares are owned by institutional investors. Comparatively, 84.7% of M&T Bank shares are owned by institutional investors. 2.7% of Heritage Commerce shares are owned by insiders. Comparatively, 0.4% of M&T Bank shares are owned by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock will outperform the market over the long term.

Risk & Volatility

Heritage Commerce has a beta of 0.69, indicating that its share price is 31% less volatile than the S&P 500. Comparatively, M&T Bank has a beta of 0.61, indicating that its share price is 39% less volatile than the S&P 500.

Summary

M&T Bank beats Heritage Commerce on 11 of the 16 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 M&T Bank

M&T Bank Corp. operates as a bank holding company, which engages in the provision of retail and commercial banking, trust, wealth management, and investment services. It operates through the following segments: Commercial Bank, Retail Bank, Institutional Services and Wealth Management, and All Other. The Commercial Bank segment offers a wide range of credit products and banking services to middle-market and large commercial customers, mainly within the markets served by the company. The Retail Bank segment refers to the services to consumers and small businesses through the company’s branch network and several other delivery channels such as telephone banking, internet banking, and ATMs. The Institutional Services and Wealth Management segment relates to helping high net worth individuals, institutions, and families grow, preserve, and transfer wealth. The All Other segment reflects other activities of the company that are not directly attributable to the reported segments. The company was founded on August 30, 1856 and is headquartered in Buffalo, NY.