Head to Head Review: First United (NASDAQ:FUNC) vs. F & M Bank (OTCMKTS:FMBM)

First United (NASDAQ:FUNC) and F & M Bank (OTCMKTS:FMBM) are both small-cap finance companies, but which is the better investment? We will compare the two businesses based on the strength of their profitability, earnings, institutional ownership, dividends, analyst recommendations, valuation and risk.

Insider and Institutional Ownership

33.3% of First United shares are held by institutional investors. Comparatively, 3.9% of F & M Bank shares are held by institutional investors. 7.9% of First United shares are held by company insiders. Comparatively, 11.6% of F & M Bank shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company is poised for long-term growth.

Analyst Ratings

This is a summary of current recommendations and price targets for First United and F & M Bank, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
First United	0	0	1	0	3.00
F & M Bank	0	0	0	0	0.00

First United currently has a consensus target price of $42.00, indicating a potential upside of 13.70%. Given First United’s stronger consensus rating and higher possible upside, analysts clearly believe First United is more favorable than F & M Bank.

Dividends

First United pays an annual dividend of $0.88 per share and has a dividend yield of 2.4%. F & M Bank pays an annual dividend of $1.04 per share and has a dividend yield of 4.2%. First United pays out 24.1% of its earnings in the form of a dividend. F & M Bank pays out 43.2% 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. First United has raised its dividend for 6 consecutive years.

Profitability

This table compares First United and F & M Bank’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
First United	20.53%	13.05%	1.21%
F & M Bank	10.96%	9.36%	0.64%

Valuation and Earnings

This table compares First United and F & M Bank”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
First United	$111.40 million	2.15	$20.57 million	$3.65	10.12
F & M Bank	$75.25 million	1.16	$7.28 million	$2.41	10.16

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

Risk & Volatility

First United has a beta of 0.7, indicating that its share price is 30% less volatile than the S&P 500. Comparatively, F & M Bank has a beta of 0.24, indicating that its share price is 76% less volatile than the S&P 500.

Summary

First United beats F & M Bank on 14 of the 17 factors compared between the two stocks.

About First United

First United Corporation operates as the bank holding company for First United Bank & Trust that provides various retail and commercial banking services to businesses and individuals. It offers various deposit products, which includes checking, savings, money market deposit, and regular and individual retirement accounts (IRAs), as well as certificates of deposit. The company loan portfolio includes commercial loans secured by real estate, commercial equipment, vehicles, or other assets of the borrower; commercial real estate loans for residential and commercial development, agricultural purpose properties, and service industry buildings, such as restaurants and motels, retail buildings, and general purpose business space; residential mortgage loans; home equity lines of credit; residential real estate construction loans; and indirect and direct auto loans, student loans, and other secured and unsecured lines of credit and term loans. It also offers access to multi-million-dollar certificates of deposit and the Intrafi cash service, including multi-million-dollar savings and demand deposits to municipalities, businesses, and consumers; and treasury management, cash sweep, and various checking services. In addition, the company provides trust services, which includes personal trust, investment agency accounts, charitable trusts, retirement accounts, including IRA roll-overs, 401(k) accounts and defined benefit plans, estate administration, and estate planning; and insurance products, brokerage services, and safe deposit and night depository facilities. First United Corporation was founded in 1900 and is headquartered in Oakland, Maryland.

About F & M Bank

F & M Bank Corp. operates as the bank holding company for Farmers & Merchants Bank that provides financial products and services to consumers and businesses in Virginia. The company offers commercial and individual demand and time deposit accounts, savings accounts, money market accounts, internet and mobile banking services, and drive-in banking services. It also provides construction loans, including residential, and land acquisition and development loans; commercial real estate loans; business loans; consumer loans, such as personal loans, automobile loans, deposit account loans, installment and demand loans, and home equity loans; residential mortgage loans; credit cards; dealer finance; farmland loans; multi-family loans; and commercial and industrial loans. In addition, the company offers brokerage services and commercial and personal insurance products. Further, it originates conventional and government agency sponsored mortgages; and offers title insurance and real estate settlement services. The company was founded in 1908 and is headquartered in Timberville, Virginia.