Critical Comparison: Bank of Montreal (NYSE:BMO) and Farmers & Merchants Bank of Long Beach (OTCMKTS:FMBL)

Bank of Montreal (NYSE:BMO) and Farmers & Merchants Bank of Long Beach (OTCMKTS:FMBL) are both finance companies, but which is the better investment? We will compare the two businesses based on the strength of their earnings, risk, analyst recommendations, institutional ownership, dividends, valuation and profitability.

Insider and Institutional Ownership

45.8% of Bank of Montreal shares are held by institutional investors. Comparatively, 7.6% of Farmers & Merchants Bank of Long Beach shares are held by institutional investors. 1.0% of Bank of Montreal shares are held by insiders. Comparatively, 12.8% of Farmers & Merchants Bank of Long Beach shares are held by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company will outperform the market over the long term.

Earnings & Valuation

This table compares Bank of Montreal and Farmers & Merchants Bank of Long Beach’s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Bank of Montreal	$50.48 billion	1.21	$3.24 billion	$6.02	13.94
Farmers & Merchants Bank of Long Beach	$431.97 million	1.31	$70.01 million	$485.58	9.68

Bank of Montreal has higher revenue and earnings than Farmers & Merchants Bank of Long Beach. Farmers & Merchants Bank of Long Beach is trading at a lower price-to-earnings ratio than Bank of Montreal, indicating that it is currently the more affordable of the two stocks.

Volatility & Risk

Bank of Montreal has a beta of 1.12, meaning that its share price is 12% more volatile than the S&P 500. Comparatively, Farmers & Merchants Bank of Long Beach has a beta of 0.42, meaning that its share price is 58% less volatile than the S&P 500.

Profitability

This table compares Bank of Montreal and Farmers & Merchants Bank of Long Beach’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Bank of Montreal	8.25%	11.60%	0.62%
Farmers & Merchants Bank of Long Beach	13.71%	4.57%	0.50%

Dividends

Bank of Montreal pays an annual dividend of $4.47 per share and has a dividend yield of 5.3%. Farmers & Merchants Bank of Long Beach pays an annual dividend of $112.00 per share and has a dividend yield of 2.4%. Bank of Montreal pays out 74.3% of its earnings in the form of a dividend. Farmers & Merchants Bank of Long Beach pays out 23.1% 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 Recommendations

This is a summary of current recommendations for Bank of Montreal and Farmers & Merchants Bank of Long Beach, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Bank of Montreal	0	2	4	0	2.67
Farmers & Merchants Bank of Long Beach	0	0	0	0	N/A

Bank of Montreal presently has a consensus price target of $127.50, indicating a potential upside of 51.98%. Given Bank of Montreal’s higher probable upside, analysts clearly believe Bank of Montreal is more favorable than Farmers & Merchants Bank of Long Beach.

Summary

Bank of Montreal beats Farmers & Merchants Bank of Long Beach on 10 of the 15 factors compared between the two stocks.

About Bank of Montreal

Bank of Montreal provides diversified financial services primarily in North America. It operates through Canadian P&C, U.S P&C, BMO Wealth Management, and BMO Capital Markets segments. The company's personal banking products and services include deposits, mortgages, home lending, consumer credit, small business lending, credit cards, cash management, financial and investment advice, and other banking services; and commercial banking products and services comprise various of financing options and treasury and payment solutions, as well as risk management products. It also offers investing, banking, and wealth management advisory; digital investing services; financial solutions for individuals, families, and businesses; provides investment management services to institutional, retail, and high net worth investors; and diversified insurance, and wealth and pension de-risking solutions. In addition, the company provides individual life, critical illness and annuity products, as well as segregated funds, and group creditor and travel insurance to customers; debt and equity capital-raising, loan origination and syndication, balance sheet management, treasury management, mergers and acquisitions advice, restructurings and recapitalizations, trade finance, and risk mitigation services, as well as a range of banking and other operating services. Further, the company offers research and access to financial markets for institutional, corporate and retail clients through an integrated suite of sales and trading solutions related to debt, foreign exchange, interest rates, credit, equities, securitization, and commodities; provides new product development and origination services, as well as risk management and advisory services for hedging strategies, including in interest rates, foreign exchange rates and commodities prices; and funding and liquidity management services. The company was founded in 1817 and is headquartered in Montreal, Canada.

About Farmers & Merchants Bank of Long Beach

Farmers & Merchants Bank of Long Beach provides various banking products and services to individuals, professionals, and small to medium-sized businesses in Los Angeles, Orange, and Santa Barbara Counties. It offers checking, savings, Christmas club savings, health savings, market rate savings, and money market accounts; demand and time deposits; certificates of deposit; and individual retirement account. The company also provides personal, home, commercial real estate, real estate and construction, and commercial business loans, as well as lines of credit; financing for residential loans comprising single-family and multifamily loans; and credit and debit cards. In addition, it offers account management, receivables and payables, and risk management services; commercial lending services; and faith-based and healthcare banking services, as well as online and mobile banking services. Farmers & Merchants Bank of Long Beach was founded in 1907 and is headquartered in Long Beach, California.