Horizon Bancorp (NASDAQ:HBNC) and Heritage Commerce (NASDAQ:HTBK) Head-To-Head Analysis

Heritage Commerce (NASDAQ:HTBK) and Horizon Bancorp (NASDAQ:HBNC) are both small-cap finance companies, but which is the better business? We will contrast the two businesses based on the strength of their profitability, valuation, risk, earnings, dividends, analyst recommendations and institutional ownership.

Profitability

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

Net Margins Return on Equity Return on Assets
Heritage Commerce 26.62% 13.01% 1.50%
Horizon Bancorp 24.71% 10.18% 1.19%

Risk and Volatility

Heritage Commerce has a beta of 0.83, suggesting that its share price is 17% less volatile than the S&P 500. Comparatively, Horizon Bancorp has a beta of 0.95, suggesting that its share price is 5% less volatile than the S&P 500.

Analyst Recommendations

This is a summary of current ratings and target prices for Heritage Commerce and Horizon Bancorp, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Heritage Commerce 0 1 1 0 2.50
Horizon Bancorp 0 0 2 0 3.00

Heritage Commerce currently has a consensus target price of $17.50, indicating a potential upside of 46.69%. Horizon Bancorp has a consensus target price of $20.00, indicating a potential upside of 23.76%. Given Heritage Commerce’s higher probable upside, equities research analysts clearly believe Heritage Commerce is more favorable than Horizon Bancorp.

Dividends

Heritage Commerce pays an annual dividend of $0.48 per share and has a dividend yield of 4.0%. Horizon Bancorp pays an annual dividend of $0.48 per share and has a dividend yield of 3.0%. Heritage Commerce pays out 45.3% of its earnings in the form of a dividend. Horizon Bancorp pays out 37.8% 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. Heritage Commerce has raised its dividend for 5 consecutive years and Horizon Bancorp has raised its dividend for 5 consecutive years.

Earnings and Valuation

This table compares Heritage Commerce and Horizon Bancorp’s gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Heritage Commerce $139.42 million 3.72 $35.33 million $1.06 11.25
Horizon Bancorp $200.58 million 3.63 $53.12 million $1.27 12.72

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

Institutional and Insider Ownership

74.6% of Heritage Commerce shares are held by institutional investors. Comparatively, 46.1% of Horizon Bancorp shares are held by institutional investors. 4.2% of Heritage Commerce shares are held by company insiders. Comparatively, 4.0% of Horizon Bancorp shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock is poised for long-term growth.

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. It offers a range of deposit products for business banking and retail markets, including interest and non-interest bearing demand, savings accounts, certificate of deposit, money market accounts, and time deposits. The company also provides various loan products comprising 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; home equity lines of credit; consumer loans consisting of loans for financing automobiles, various consumer goods, and other personal purposes; and small business administration loans. In addition, it offers other banking services, including cashier's checks, bank-by-mail, ATMs, 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. The company provides its banking products and services through 14 full service branch offices in the southern and eastern regions of the general San Francisco Bay Area of California in the counties of Santa Clara, Alameda, Contra Costa, and San Benito. Heritage Commerce Corp was founded in 1997 and is based in San Jose, California.

About Horizon Bancorp

Horizon Bancorp, Inc. operates as the bank holding company for Horizon Bank that provides commercial and retail banking services. The company offers demand and time deposits. Its loan portfolio comprises commercial, residential real estate, mortgage warehouse, and consumer loans. The company also provides corporate and individual trust and agency, investment management, and real estate investment trust services; and sells various insurance products. It operates through a network of 63 full service offices and 3 loan and deposit production offices in Northern and Central regions of Indiana, as well as Southern, Central, and Great Lakes bay regions of Michigan. Horizon Bancorp, Inc. was founded in 1873 and is headquartered in Michigan City, Indiana.

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