Live Oak Bancshares (NYSE:LOB) and Hanmi Financial (NASDAQ:HAFC) Critical Contrast

Live Oak Bancshares (NYSE:LOB) and Hanmi Financial (NASDAQ:HAFC) are both small-cap finance companies, but which is the better stock? We will compare the two companies based on the strength of their dividends, institutional ownership, earnings, profitability, analyst recommendations, risk and valuation.

Insider & Institutional Ownership

64.0% of Live Oak Bancshares shares are held by institutional investors. Comparatively, 88.7% of Hanmi Financial shares are held by institutional investors. 22.4% of Live Oak Bancshares shares are held by company insiders. Comparatively, 2.1% of Hanmi Financial shares are held by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock will outperform the market over the long term.

Volatility and Risk

Live Oak Bancshares has a beta of 1.94, suggesting that its share price is 94% more volatile than the S&P 500. Comparatively, Hanmi Financial has a beta of 0.75, suggesting that its share price is 25% less volatile than the S&P 500.

Analyst Ratings

This is a breakdown of current ratings and recommmendations for Live Oak Bancshares and Hanmi Financial, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Live Oak Bancshares	0	4	2	0	2.33
Hanmi Financial	0	4	2	0	2.33

Live Oak Bancshares presently has a consensus price target of $42.50, suggesting a potential upside of 20.66%. Hanmi Financial has a consensus price target of $33.00, suggesting a potential upside of 2.64%. Given Live Oak Bancshares’ higher possible upside, analysts clearly believe Live Oak Bancshares is more favorable than Hanmi Financial.

Earnings & Valuation

This table compares Live Oak Bancshares and Hanmi Financial”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Live Oak Bancshares	$1.04 billion	1.57	$105.87 million	$2.84	12.40
Hanmi Financial	$444.90 million	2.14	$76.09 million	$2.97	10.82

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

Profitability

This table compares Live Oak Bancshares and Hanmi Financial’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Live Oak Bancshares	12.22%	11.56%	0.89%
Hanmi Financial	19.82%	11.20%	1.13%

Dividends

Live Oak Bancshares pays an annual dividend of $0.12 per share and has a dividend yield of 0.3%. Hanmi Financial pays an annual dividend of $1.12 per share and has a dividend yield of 3.5%. Live Oak Bancshares pays out 4.2% of its earnings in the form of a dividend. Hanmi Financial pays out 37.7% 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. 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.

Summary

Live Oak Bancshares beats Hanmi Financial on 8 of the 15 factors compared between the two stocks.

About Live Oak Bancshares

Live Oak Bancshares, Inc. operates as the bank holding company for Live Oak Banking Company that provides various commercial banking products and services to individuals, small businesses, and professionals in North Carolina, the United States. The company accepts various deposit products, including noninterest-bearing demand, as well as interest-bearing checking, money market, savings, and time deposits. It also offers commercial and industrial loans; construction and development loans; owner occupied and non-owner occupied collateral commercial real estate loans; and commercial land loans. In addition, the company provides settlement, accounting, and securitization services for government guaranteed loans; wealth and investment management services to high-net-worth individuals and families; investment advisory services to a series of funds focused on providing venture capital to new and emerging financial technology companies; and an on-site restaurant location to company employees and business visitors. Live Oak Bancshares, Inc. was incorporated in 2008 and is headquartered in Wilmington, North Carolina.

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.