Head to Head Comparison: First Merchants (NASDAQ:FRME) & United Security Bancshares (NASDAQ:UBFO)

United Security Bancshares (NASDAQ:UBFO) and First Merchants (NASDAQ:FRME) are both finance companies, but which is the better investment? We will contrast the two businesses based on the strength of their earnings, institutional ownership, valuation, risk, dividends, profitability and analyst recommendations.

Dividends

United Security Bancshares pays an annual dividend of $0.48 per share and has a dividend yield of 5.5%. First Merchants pays an annual dividend of $1.40 per share and has a dividend yield of 3.9%. United Security Bancshares pays out 46.2% of its earnings in the form of a dividend. First Merchants pays out 40.3% 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. First Merchants has increased its dividend for 13 consecutive years.

Analyst Ratings

This is a breakdown of current ratings and recommmendations for United Security Bancshares and First Merchants, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
United Security Bancshares	0	0	0	0	N/A
First Merchants	0	2	3	0	2.60

First Merchants has a consensus price target of $42.20, suggesting a potential upside of 16.61%. Given First Merchants’ higher probable upside, analysts clearly believe First Merchants is more favorable than United Security Bancshares.

Risk & Volatility

United Security Bancshares has a beta of 0.59, indicating that its share price is 41% less volatile than the S&P 500. Comparatively, First Merchants has a beta of 1.02, indicating that its share price is 2% more volatile than the S&P 500.

Profitability

This table compares United Security Bancshares and First Merchants’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
United Security Bancshares	26.73%	14.48%	1.44%
First Merchants	17.77%	9.17%	1.09%

Earnings and Valuation

This table compares United Security Bancshares and First Merchants”s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
United Security Bancshares	$52.72 million	2.86	$19.80 million	$1.04	8.37
First Merchants	$631.34 million	3.36	$223.79 million	$3.47	10.43

First Merchants has higher revenue and earnings than United Security Bancshares. United Security Bancshares is trading at a lower price-to-earnings ratio than First Merchants, indicating that it is currently the more affordable of the two stocks.

Institutional & Insider Ownership

30.9% of United Security Bancshares shares are owned by institutional investors. Comparatively, 73.9% of First Merchants shares are owned by institutional investors. 20.1% of United Security Bancshares shares are owned by insiders. Comparatively, 1.3% of First Merchants shares are owned by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock will outperform the market over the long term.

Summary

First Merchants beats United Security Bancshares on 11 of the 16 factors compared between the two stocks.

About United Security Bancshares

United Security Bancshares operates as the bank holding company for United Security Bank, a state-chartered bank that provides a range of commercial banking services to the business and professional community, and individuals in California. The company accepts various deposit products, including personal and business checking accounts, savings accounts, interest-bearing negotiable order of withdrawal accounts, money market accounts, and time certificates of deposit. It also provides real estate mortgage, commercial and industrial, real estate construction and development, and consumer loans, as well as agricultural, installment, and student loans. In addition, the company offers online and mobile banking, safe deposit boxes, wire transfers, payroll direct deposit, cashier's check, cash management, and foreign draft services, as well as interactive teller machines; and person-to-person and bank-to-bank transfers for consumer customers. United Security Bancshares was founded in 1987 and is headquartered in Fresno, California.

About First Merchants

First Merchants Corporation operates as the financial holding company for First Merchants Bank that provides community banking services. The company offers a range of financial services, including time, savings, and demand deposits; and consumer, commercial, agri-business, public finance, and real estate mortgage loans. It also provides personal and corporate trust; brokerage and private wealth management; and letters of credit, repurchase agreements, and other corporate services. The company operates banking locations in Indiana, Illinois, Ohio, and Michigan counties. It also offers its services through electronic and mobile delivery channels. First Merchants Corporation was founded in 1893 and is headquartered in Muncie, Indiana.