Heritage Commerce (NASDAQ:HTBK) versus First Hawaiian (NASDAQ:FHB) Critical Contrast

Heritage Commerce (NASDAQ:HTBK) and First Hawaiian (NASDAQ:FHB) are both finance companies, but which is the better stock? We will compare the two businesses based on the strength of their valuation, profitability, dividends, analyst recommendations, risk, earnings and institutional ownership.

Institutional & Insider Ownership

75.6% of Heritage Commerce shares are owned by institutional investors. Comparatively, 97.6% of First Hawaiian shares are owned by institutional investors. 2.7% of Heritage Commerce shares are owned by insiders. Comparatively, 0.6% of First Hawaiian shares are owned by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock will outperform the market over the long term.

Earnings and Valuation

This table compares Heritage Commerce and First Hawaiian”s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Heritage Commerce	$269.09 million	2.91	$47.83 million	$0.78	16.38
First Hawaiian	$1.17 billion	2.92	$230.13 million	$2.05	13.40

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

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Heritage Commerce	17.77%	8.10%	1.02%
First Hawaiian	22.60%	9.68%	1.08%

Dividends

Heritage Commerce pays an annual dividend of $0.52 per share and has a dividend yield of 4.1%. First Hawaiian pays an annual dividend of $1.04 per share and has a dividend yield of 3.8%. Heritage Commerce pays out 66.7% of its earnings in the form of a dividend. First Hawaiian pays out 50.7% 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 Ratings

This is a breakdown of current ratings for Heritage Commerce and First Hawaiian, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Heritage Commerce	0	6	2	0	2.25
First Hawaiian	3	6	0	0	1.67

Heritage Commerce presently has a consensus price target of $12.25, indicating a potential downside of 4.15%. First Hawaiian has a consensus price target of $27.64, indicating a potential upside of 0.59%. Given First Hawaiian’s higher probable upside, analysts plainly believe First Hawaiian is more favorable than Heritage Commerce.

Volatility & Risk

Heritage Commerce has a beta of 0.8, indicating that its stock price is 20% less volatile than the S&P 500. Comparatively, First Hawaiian has a beta of 0.73, indicating that its stock price is 27% less volatile than the S&P 500.

Summary

First Hawaiian beats Heritage Commerce on 10 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 First Hawaiian

First Hawaiian, Inc. operates as a bank holding company for First Hawaiian Bank that provides a range of banking products and services to consumer and commercial customers in the United States. It operates in three segments: Retail Banking, Commercial Banking, and Treasury and Other. The company offers various deposit products, including checking, savings, and time deposit accounts, and other deposit accounts. It also provides residential and commercial mortgage loans, home equity lines of credit and loans, automobile loans and leases, secured and unsecured lines of credit, installment loans, small business loans and leases, and construction lending, as well as commercial lease and auto dealer financing. In addition, the company offers wealth management, personal installment, individual investment and financial planning, insurance protection, trust and estate, private banking, investment management, retirement planning, and merchant processing services, as well as consumer and commercial credit cards. The company was formerly known as BancWest Corporation and changed its name to First Hawaiian, Inc. in April 2016. First Hawaiian, Inc. was founded in 1858 and is headquartered in Honolulu, Hawaii.