Critical Comparison: Independent Bank (NASDAQ:IBCP) versus Commercial National Financial (OTCMKTS:CEFC)

Independent Bank (NASDAQ:IBCP) and Commercial National Financial (OTCMKTS:CEFC) are both small-cap finance companies, but which is the superior business? We will contrast the two businesses based on the strength of their earnings, profitability, institutional ownership, valuation, dividends, analyst recommendations and risk.

Institutional and Insider Ownership

79.4% of Independent Bank shares are owned by institutional investors. 5.9% of Independent Bank shares are owned by company insiders. Comparatively, 23.0% of Commercial National Financial shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company is poised for long-term growth.

Earnings & Valuation

This table compares Independent Bank and Commercial National Financial”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Independent Bank	$315.38 million	2.17	$68.54 million	$3.35	9.91
Commercial National Financial	$28.15 million	2.05	$6.61 million	$1.74	8.41

Independent Bank has higher revenue and earnings than Commercial National Financial. Commercial National Financial is trading at a lower price-to-earnings ratio than Independent Bank, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares Independent Bank and Commercial National Financial’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Independent Bank	22.02%	14.15%	1.27%
Commercial National Financial	24.39%	N/A	N/A

Volatility and Risk

Independent Bank has a beta of 0.71, suggesting that its stock price is 29% less volatile than the S&P 500. Comparatively, Commercial National Financial has a beta of 0.4, suggesting that its stock price is 60% less volatile than the S&P 500.

Analyst Recommendations

This is a breakdown of recent ratings for Independent Bank and Commercial National Financial, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Independent Bank	0	2	1	0	2.33
Commercial National Financial	0	0	0	0	0.00

Independent Bank currently has a consensus target price of $37.00, indicating a potential upside of 11.48%. Given Independent Bank’s stronger consensus rating and higher probable upside, analysts plainly believe Independent Bank is more favorable than Commercial National Financial.

Dividends

Independent Bank pays an annual dividend of $1.12 per share and has a dividend yield of 3.4%. Commercial National Financial pays an annual dividend of $0.60 per share and has a dividend yield of 4.1%. Independent Bank pays out 33.4% of its earnings in the form of a dividend. Commercial National Financial pays out 34.5% 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. Independent Bank has increased its dividend for 11 consecutive years.

Summary

Independent Bank beats Commercial National Financial on 14 of the 17 factors compared between the two stocks.

About Independent Bank

Independent Bank Corporation operates as the bank holding company for Independent Bank that provides commercial banking services to individuals and businesses in rural and suburban communities in Michigan. It offers checking and savings accounts, commercial lending, direct and indirect consumer financing, mortgage lending, and safe deposit box services. The company also provides title insurance services and investment services, as well as automatic teller machines, and internet and mobile banking services. In addition, it operates through branches, drive-thru facilities, and loan production offices. Independent Bank Corporation was founded in 1864 and is based in Grand Rapids, Michigan.

About Commercial National Financial

Commercial National Financial Corporation operates as the holding company for Commercial Bank that provides various banking products and services to individuals, agricultural businesses, commercial businesses, and light industries in Michigan. The company accepts various deposit products, including checking and savings accounts, individual retirement accounts, certificates of deposit, and health savings accounts. It also offers personal loan products, such as automobile loans, recreational vehicle loans, personal lines of credit, and unsecured term loans, as well as home equity loans and mortgage loans; and business loans, including secured lines of credit, business equity line of credit, SBA loans, equipment loans, real estate loans, vehicle loans, term loans, USDA loan programs, and capital access loan programs. In addition, the company provides other services comprising business VISA check cards, debit and ATM cards, business statement savings, business certificates of deposit, merchant services, night depository, telephone banking, online banking, e-statements, direct deposit of payroll for employees, child support payments, collection of receivables, and remote deposit capture, as well as treasury services. It provides its services through offices located in Barry, Gratiot, Ingham, Kent, and Montcalm counties in Michigan. The company was founded in 1893 and is headquartered in Ithaca, Michigan.