Critical Analysis: Mechanics Bancorp (NASDAQ:MCHB) versus Isabella Bank (NASDAQ:ISBA)

Isabella Bank (NASDAQ:ISBA) and Mechanics Bancorp (NASDAQ:MCHB) are both financial services companies, but which is the better business? We will compare the two businesses based on the strength of their profitability, risk, dividends, institutional ownership, analyst recommendations, earnings and valuation.

Earnings and Valuation

This table compares Isabella Bank and Mechanics Bancorp”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Isabella Bank	$104.55 million	3.41	$13.89 million	$2.46	19.76
Mechanics Bancorp	$358.19 million	9.37	-$144.34 million	($6.76)	-2.24

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

Volatility & Risk

Isabella Bank has a beta of 0.09, meaning that its stock price is 91% less volatile than the S&P 500. Comparatively, Mechanics Bancorp has a beta of 1.55, meaning that its stock price is 55% more volatile than the S&P 500.

Profitability

This table compares Isabella Bank and Mechanics Bancorp’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Isabella Bank	16.65%	8.01%	0.81%
Mechanics Bancorp	-14.49%	4.74%	0.41%

Analyst Recommendations

This is a breakdown of current ratings and target prices for Isabella Bank and Mechanics Bancorp, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Isabella Bank	0	2	1	0	2.33
Mechanics Bancorp	0	2	0	0	2.00

Isabella Bank currently has a consensus target price of $38.50, indicating a potential downside of 20.81%. Mechanics Bancorp has a consensus target price of $14.50, indicating a potential downside of 4.42%. Given Mechanics Bancorp’s higher possible upside, analysts clearly believe Mechanics Bancorp is more favorable than Isabella Bank.

Dividends

Isabella Bank pays an annual dividend of $1.12 per share and has a dividend yield of 2.3%. Mechanics Bancorp pays an annual dividend of $0.84 per share and has a dividend yield of 5.5%. Isabella Bank pays out 45.5% of its earnings in the form of a dividend. Mechanics Bancorp pays out -12.4% 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. Mechanics Bancorp is clearly the better dividend stock, given its higher yield and lower payout ratio.

Institutional and Insider Ownership

74.7% of Mechanics Bancorp shares are owned by institutional investors. 9.7% of Isabella Bank shares are owned by insiders. Comparatively, 4.6% of Mechanics Bancorp shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock is poised for long-term growth.

Summary

Isabella Bank beats Mechanics Bancorp on 9 of the 16 factors compared between the two stocks.

About Isabella Bank

Isabella Bank Corporation operates as the bank holding company for Isabella Bank that provides various banking products and services to businesses, institutions, and individuals and their families. Its deposit products include checking accounts, savings accounts, certificates of deposit, direct deposits, and money market accounts. The company’s loan portfolio comprises commercial, agricultural, and residential real estate loans, as well as consumer loans, including secured and unsecured personal loans. It also offers cash management, mobile and internet banking, electronic bill pay, automated teller machines, trust and investment, estate planning, and safe deposit box rental services; and group life, health, accident, disability, and other insurance products, as well as other employee benefit programs. As of December 31, 2021, the company operated 30 banking offices in Clare, Gratiot, Isabella, Mecosta, Midland, Montcalm, and Saginaw counties. Isabella Bank Corporation was founded in 1903 and is headquartered in Mount Pleasant, Michigan.

About Mechanics Bancorp

HomeStreet, Inc. operates as the bank holding company for HomeStreet Bank that provides commercial, mortgage, and consumer/retail banking services primarily in the Western United States. The company offers personal and business checking, savings accounts, interest-bearing negotiable order of withdrawal accounts, money market accounts, and time certificates of deposit; credit cards; insurance; and treasury management products and services. Its loan products include commercial business and agriculture loans, single family residential mortgages, consumer loans, commercial loans secured by residential and commercial real estate, and construction loans for residential and commercial real estate development, as well as consumer installment loans and permanent loans on commercial real estate and single-family residences. In addition, the company offers its products and services through bank branches, loan production offices, and ATMs, as well as through online, mobile, and telephone banking. As of December 31, 2021, it operated 60 full-service bank branches located in Washington state, Northern and Southern California, the Portland, Oregon, and Hawaii; and five primary stand-alone commercial lending centers in Central Washington, Oregon, Southern California, Idaho, and Utah. HomeStreet, Inc. serves small and medium sized businesses, real estate investors, professional firms, and individuals. The company was formerly known as Continental Mortgage and Loan Company. HomeStreet, Inc. was incorporated in 1921 and is headquartered in Seattle, Washington.