Colony Bankcorp (NYSE:CBAN) versus Security Federal (OTCMKTS:SFDL) Critical Review

Security Federal (OTCMKTS:SFDL) and Colony Bankcorp (NYSE:CBAN) are both small-cap finance companies, but which is the better business? We will compare the two companies based on the strength of their profitability, valuation, dividends, earnings, analyst recommendations, institutional ownership and risk.

Analyst Recommendations

This is a breakdown of current recommendations for Security Federal and Colony Bankcorp, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Security Federal	0	0	0	0	0.00
Colony Bankcorp	0	0	3	1	3.25

Colony Bankcorp has a consensus price target of $23.00, suggesting a potential upside of 15.93%. Given Colony Bankcorp’s stronger consensus rating and higher probable upside, analysts clearly believe Colony Bankcorp is more favorable than Security Federal.

Valuation & Earnings

This table compares Security Federal and Colony Bankcorp”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Security Federal	$90.14 million	1.23	$13.67 million	$4.00	8.94
Colony Bankcorp	$190.23 million	2.21	$28.25 million	$1.60	12.40

Colony Bankcorp has higher revenue and earnings than Security Federal. Security Federal is trading at a lower price-to-earnings ratio than Colony Bankcorp, indicating that it is currently the more affordable of the two stocks.

Insider and Institutional Ownership

50.4% of Colony Bankcorp shares are owned by institutional investors. 36.4% of Security Federal shares are owned by company insiders. Comparatively, 6.6% of Colony Bankcorp shares are owned by company 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.

Dividends

Security Federal pays an annual dividend of $0.64 per share and has a dividend yield of 1.8%. Colony Bankcorp pays an annual dividend of $0.48 per share and has a dividend yield of 2.4%. Security Federal pays out 16.0% of its earnings in the form of a dividend. Colony Bankcorp pays out 30.0% 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. Colony Bankcorp has increased its dividend for 7 consecutive years. Colony Bankcorp is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Volatility & Risk

Security Federal has a beta of 0.42, indicating that its stock price is 58% less volatile than the S&P 500. Comparatively, Colony Bankcorp has a beta of 0.56, indicating that its stock price is 44% less volatile than the S&P 500.

Profitability

This table compares Security Federal and Colony Bankcorp’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Security Federal	15.72%	12.60%	0.88%
Colony Bankcorp	14.83%	10.68%	1.04%

Summary

Colony Bankcorp beats Security Federal on 13 of the 18 factors compared between the two stocks.

About Security Federal

Security Federal Corporation operates as the bank holding company for Security Federal Bank that provides various banking products and services. It offers various deposit products, such as savings and checking accounts, money market accounts, fixed interest rate certificates with varying maturities, and individual retirement accounts. The company provides real estate loans comprising commercial real estate loans secured by non-residential commercial properties, churches, hotels, residential developments, and multi-family dwellings; one-to-four family residential real estate loans; and construction loans and loans for the acquisition, development, and construction of residential subdivisions and commercial projects. In addition, it offers commercial and agricultural business loans secured by business equipment, furniture and fixtures, inventory, and receivables, or unsecured; and consumer loans including home improvements, residential lots, mortgage, automobiles, boats, mobile homes, recreational vehicles, and education. The company offers trust, financial planning, and financial management services; and insurance agency services, such as auto, business, and home insurance. Additionally, it invests in various types of liquid assets, including U.S. Treasury obligations and securities of various federal agencies, certificates of deposit at insured institutions, mutual funds, bankers' acceptances, and federal funds, as well as commercial paper and corporate debt securities. It through branch offices in Aiken, Lexington, Richland and Saluda counties in South Carolina and Columbia; and Richmond counties in Georgia. Security Federal Corporation was founded in 1922 and is headquartered in Aiken, South Carolina.

About Colony Bankcorp

Colony Bankcorp, Inc. operates as the bank holding company for Colony Bank that provides various banking products and services to commercial and consumer customers. The company offers various deposit products, including demand, savings, and time deposits. It also provides loans to small and medium-sized businesses; residential and commercial construction, and land development loans; commercial real estate loans; commercial loans; agri-business and production loans; residential mortgage loans; home equity loans; and consumer loans. In addition, the company offers internet banking services, electronic bill payment services, safe deposit box rentals, telephone banking, credit and debit card services, and remote depository products, as well as access to a network of ATMs. As of January 20, 2022, it operated 39 locations throughout Georgia. The company was founded in 1975 and is headquartered in Fitzgerald, Georgia.