Comparing Heritage Commerce (NASDAQ:HTBK) and Columbia Banking System (NASDAQ:COLB)

Columbia Banking System (NASDAQ:COLB) and Heritage Commerce (NASDAQ:HTBK) are both finance companies, but which is the superior investment? We will contrast the two companies based on the strength of their earnings, profitability, dividends, institutional ownership, valuation, analyst recommendations and risk.

Valuation and Earnings

This table compares Columbia Banking System and Heritage Commerce”s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Columbia Banking System	$2.30 billion	3.62	$550.00 million	$2.26	12.70
Heritage Commerce	$269.09 million	3.02	$47.83 million	$0.78	16.92

Columbia Banking System has higher revenue and earnings than Heritage Commerce. Columbia Banking System is trading at a lower price-to-earnings ratio than Heritage Commerce, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares Columbia Banking System and Heritage Commerce’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Columbia Banking System	17.11%	11.40%	1.26%
Heritage Commerce	17.77%	8.07%	1.01%

Institutional and Insider Ownership

92.5% of Columbia Banking System shares are owned by institutional investors. Comparatively, 75.6% of Heritage Commerce shares are owned by institutional investors. 0.7% of Columbia Banking System shares are owned by company insiders. Comparatively, 2.7% of Heritage Commerce shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company will outperform the market over the long term.

Risk and Volatility

Columbia Banking System has a beta of 0.61, indicating that its stock price is 39% less volatile than the S&P 500. Comparatively, Heritage Commerce has a beta of 0.69, indicating that its stock price is 31% less volatile than the S&P 500.

Analyst Ratings

This is a summary of recent ratings and recommmendations for Columbia Banking System and Heritage Commerce, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Columbia Banking System	0	10	4	1	2.40
Heritage Commerce	0	4	3	1	2.63

Columbia Banking System currently has a consensus target price of $31.58, suggesting a potential upside of 10.04%. Heritage Commerce has a consensus target price of $12.25, suggesting a potential downside of 7.16%. Given Columbia Banking System’s higher probable upside, analysts clearly believe Columbia Banking System is more favorable than Heritage Commerce.

Dividends

Columbia Banking System pays an annual dividend of $1.48 per share and has a dividend yield of 5.2%. Heritage Commerce pays an annual dividend of $0.52 per share and has a dividend yield of 3.9%. Columbia Banking System pays out 65.5% of its earnings in the form of a dividend. Heritage Commerce pays out 66.7% 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. Columbia Banking System has raised its dividend for 4 consecutive years. Columbia Banking System is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Summary

Columbia Banking System beats Heritage Commerce on 12 of the 17 factors compared between the two stocks.

About Columbia Banking System

Columbia Banking System, Inc. operates as the holding company of Umpqua Bank that provides banking, private banking, mortgage, and other financial services in the United States. The company offers deposit products, including business, non-interest bearing checking, interest-bearing checking and savings, money market, and certificate of deposit accounts; and insured cash sweep and other investment sweep solutions. It also provides commercial lending products, such as commercial lines of credit and term loans, accounts receivable and inventory financing, international trade finance, commercial property loans, multifamily loans, equipment loans, commercial equipment leases, real estate construction loans and permanent financing, and small business administration program financing, as well as capital markets. In addition, the company offers wealth management comprising financial planning, investment, trust, and insurance; treasury management, which includes digital and mobile banking solutions, ACH, wires, positive pay, remote deposit capture, integrated payments, integrated receivables, lockbox, cash vault, real-time payments, commercial card, and foreign exchange and international banking related products, as well as merchant services; and brokerage services, residential real estate loans and consumer loans. It serves its products to corporate, institutional, small business, and individual customers. The company was founded in 1953 and is headquartered in Tacoma, Washington.

About Heritage Commerce

Heritage Commerce Corp operates as the bank holding company for Heritage Bank of Commerce that provides various commercial and personal banking services to residents and the business/professional community in California. Its deposit products for business banking and retail markets include interest and non-interest-bearing demand, savings, and money market accounts, as well as certificates of deposit and time deposits. The company’s loan portfolio comprises commercial loans, such as operating secured and unsecured loans advanced for working capital, equipment purchases, and other business purposes; commercial real estate loans; commercial construction loans for rental properties, commercial buildings, and homes; small business administration loans; home equity lines of credit; multifamily loans on residential properties; residential mortgage loans; and consumer loans consisting of loans for financing automobiles, various consumer goods, and other personal purposes. In addition, it offers other banking services, including cashier’s checks, bank by mail, night depositories, safe deposit boxes, direct deposit, automated payroll, electronic funds transfer, online bill pay, homeowner association, remote deposit capture, automated clearing house origination, electronic data interchange, and check imaging services, as well as other customary banking, factoring financing, and electronic banking services. Heritage Commerce Corp was founded in 1994 and is headquartered in San Jose, California.