Contrasting First Financial Bankshares (NASDAQ:FFIN) & Southern Michigan Bancorp (OTCMKTS:SOMC)

Southern Michigan Bancorp (OTCMKTS:SOMC) and First Financial Bankshares (NASDAQ:FFIN) are both finance companies, but which is the better investment? We will compare the two businesses based on the strength of their profitability, risk, institutional ownership, earnings, analyst recommendations, valuation and dividends.

Analyst Recommendations

This is a summary of current ratings for Southern Michigan Bancorp and First Financial Bankshares, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Southern Michigan Bancorp	0	0	0	0	0.00
First Financial Bankshares	0	4	0	0	2.00

First Financial Bankshares has a consensus price target of $40.00, indicating a potential upside of 8.84%. Given First Financial Bankshares’ stronger consensus rating and higher possible upside, analysts clearly believe First Financial Bankshares is more favorable than Southern Michigan Bancorp.

Insider and Institutional Ownership

69.8% of First Financial Bankshares shares are held by institutional investors. 4.2% of First Financial Bankshares shares are held by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock will outperform the market over the long term.

Earnings & Valuation

This table compares Southern Michigan Bancorp and First Financial Bankshares”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Southern Michigan Bancorp	$73.31 million	1.20	$10.90 million	$2.25	8.56
First Financial Bankshares	$509.47 million	10.31	$198.98 million	$1.45	25.34

First Financial Bankshares has higher revenue and earnings than Southern Michigan Bancorp. Southern Michigan Bancorp is trading at a lower price-to-earnings ratio than First Financial Bankshares, indicating that it is currently the more affordable of the two stocks.

Dividends

Southern Michigan Bancorp pays an annual dividend of $0.60 per share and has a dividend yield of 3.1%. First Financial Bankshares pays an annual dividend of $0.72 per share and has a dividend yield of 2.0%. Southern Michigan Bancorp pays out 26.7% of its earnings in the form of a dividend. First Financial Bankshares pays out 49.7% 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. First Financial Bankshares has increased its dividend for 13 consecutive years. Southern Michigan Bancorp is clearly the better dividend stock, given its higher yield and lower payout ratio.

Risk & Volatility

Southern Michigan Bancorp has a beta of 0.28, meaning that its share price is 72% less volatile than the S&P 500. Comparatively, First Financial Bankshares has a beta of 0.81, meaning that its share price is 19% less volatile than the S&P 500.

Profitability

This table compares Southern Michigan Bancorp and First Financial Bankshares’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Southern Michigan Bancorp	12.27%	10.19%	0.70%
First Financial Bankshares	28.76%	13.43%	1.56%

Summary

First Financial Bankshares beats Southern Michigan Bancorp on 13 of the 16 factors compared between the two stocks.

About Southern Michigan Bancorp

Southern Michigan Bancorp, Inc. operates as the bank holding company for Southern Michigan Bank & Trust that provides a range of commercial banking services to individuals, businesses, institutions, and governmental agencies primarily in the southwest Michigan communities. Its deposit products include interest and non-interest checking, savings, and various types of money market accounts; time, savings, and demand deposits; and certificates of deposit and IRAs. The company also provides home mortgages and equity loans, home equity lines of credit, VA and FHA home loans, USDA rural development loans, and auto/personal loans; business loans, such as lines of credit, term loans, commercial real estate loans, commercial and industrial loans, agriculture loans, letters of credit, small business administration loans, and capital access loans; industrial, construction, real estate, and inventory loans; and consumer lending products comprising direct and indirect loans to purchasers of residential real property and consumer goods. In addition, it offers trust and investment services that include investment management, trustee, IRA rollovers and retirement plan, institutional and personal custody, estate settlement, wealth management, estate and wealth transfer planning assistance, charitable gift planning assistance, and cash management custody services; and safe deposit box and automated teller machine services. Further, the company provides bill pay, e-statements, ACH, wire transfer, remote deposit capture, and insurance services, as well as ATM, debit, credit, and gift cards. The company was founded in 1871 and is based in Coldwater, Michigan.

About First Financial Bankshares

First Financial Bankshares, Inc., through its subsidiaries, provides commercial banking products and services in Texas. The company offers checking, savings and time deposits; automated teller machines, drive-in, and night deposit services; safe deposit facilities, remote deposit capture, internet banking, mobile banking, payroll cards, funds transfer, and performing other customary commercial banking services; securities brokerage services; and trust and wealth management services, including wealth management, estates administration, oil and gas management, testamentary trusts, revocable and irrevocable trusts, and agency accounts. It also provides commercial and industrial, municipal, agricultural, construction and development, farm, residential, and consumer auto and non-auto, as well as non-owner occupied and owner occupied commercial real estate loans. In addition, the company offers advisory and specialized services related to asset management, investing, purchasing, advertising, public relations, and technology services. First Financial Bankshares, Inc. was founded in 1890 and is headquartered in Abilene, Texas.