Financial Analysis: Summit State Bank (NASDAQ:SSBI) & Hanmi Financial (NASDAQ:HAFC)

Hanmi Financial (NASDAQ:HAFC) and Summit State Bank (NASDAQ:SSBI) are both small-cap finance companies, but which is the better investment? We will compare the two companies based on the strength of their institutional ownership, profitability, valuation, analyst recommendations, dividends, earnings and risk.

Insider and Institutional Ownership

88.7% of Hanmi Financial shares are owned by institutional investors. 1.9% of Hanmi Financial shares are owned 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 Recommendations

This is a breakdown of recent recommendations and price targets for Hanmi Financial and Summit State Bank, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Hanmi Financial	0	3	2	0	2.40
Summit State Bank	1	0	0	0	1.00

Hanmi Financial presently has a consensus price target of $31.33, suggesting a potential upside of 23.65%. Given Hanmi Financial’s stronger consensus rating and higher probable upside, equities analysts plainly believe Hanmi Financial is more favorable than Summit State Bank.

Valuation and Earnings

This table compares Hanmi Financial and Summit State Bank”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Hanmi Financial	$270.17 million	2.80	$76.09 million	$2.51	10.10
Summit State Bank	$35.97 million	2.50	$6.80 million	$1.01	13.12

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

Dividends

Hanmi Financial pays an annual dividend of $1.12 per share and has a dividend yield of 4.4%. Summit State Bank pays an annual dividend of $0.16 per share and has a dividend yield of 1.2%. Hanmi Financial pays out 44.6% of its earnings in the form of a dividend. Summit State Bank pays out 15.8% 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. Hanmi Financial has raised its dividend for 1 consecutive years. Hanmi Financial is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Profitability

This table compares Hanmi Financial and Summit State Bank’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Hanmi Financial	17.10%	9.85%	0.97%
Summit State Bank	11.55%	N/A	N/A

Risk & Volatility

Hanmi Financial has a beta of 0.74, meaning that its stock price is 26% less volatile than the S&P 500. Comparatively, Summit State Bank has a beta of 0.19, meaning that its stock price is 81% less volatile than the S&P 500.

Summary

Hanmi Financial beats Summit State Bank on 15 of the 17 factors compared between the two stocks.

About Hanmi Financial

Hanmi Financial Corporation operates as the holding company for Hanmi Bank that provides business banking products and services in the United States. It offers various deposit products, including noninterest-bearing checking accounts, savings accounts, negotiable order of withdrawal accounts, money market accounts, and certificates of deposit. The company also provides real estate loans, such as commercial property, construction, and residential property loans; and commercial and industrial loans, such as commercial term loans and commercial lines of credit; and international finance and trade services and products, such as letters of credit, and import and export financing. In addition, it offers small business administration loans for business purposes, which comprise owner-occupied commercial real estate, business acquisitions, start-ups, franchise financing, working capital, improvements and renovations, inventory and equipment, and debt-refinancing, as well as equipment lease financing. The company was founded in 1982 and is headquartered in Los Angeles, California.

About Summit State Bank

Summit State Bank engages in providing an array of financial services to small and medium-sized businesses, their owners and employees, entrepreneurs, high net worth families, foundations, estates, and individual consumers. It specializes in business services, personal accounts, nonprofit programs, and mobile banking ranging from lending, checking, merchant, eBanking, automated teller machines, equity loans, and others. The company was founded on December 20, 1982 and is headquartered in Santa Rosa, CA.