Head to Head Review: Bank of the James Financial Group (NASDAQ:BOTJ) vs. MainStreet Bank (NASDAQ:MNSB)

MainStreet Bank (NASDAQ:MNSB) and Bank of the James Financial Group (NASDAQ:BOTJ) are both small-cap finance companies, but which is the superior business? We will compare the two businesses based on the strength of their valuation, analyst recommendations, institutional ownership, profitability, risk, earnings and dividends.

Analyst Ratings

This is a summary of current ratings and price targets for MainStreet Bank and Bank of the James Financial Group, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
MainStreet Bank	0	1	1	0	2.50
Bank of the James Financial Group	0	0	1	0	3.00

Insider & Institutional Ownership

52.3% of MainStreet Bank shares are owned by institutional investors. Comparatively, 18.5% of Bank of the James Financial Group shares are owned by institutional investors. 10.2% of MainStreet Bank shares are owned by insiders. Comparatively, 11.9% of Bank of the James Financial Group shares are owned by 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.

Dividends

MainStreet Bank pays an annual dividend of $0.40 per share and has a dividend yield of 1.8%. Bank of the James Financial Group pays an annual dividend of $0.40 per share and has a dividend yield of 1.7%. MainStreet Bank pays out 20.5% of its earnings in the form of a dividend. Bank of the James Financial Group pays out 15.1% 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. Bank of the James Financial Group has raised its dividend for 5 consecutive years.

Profitability

This table compares MainStreet Bank and Bank of the James Financial Group’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
MainStreet Bank	12.51%	8.70%	0.74%
Bank of the James Financial Group	18.28%	14.80%	1.15%

Risk and Volatility

MainStreet Bank has a beta of 0.59, indicating that its stock price is 41% less volatile than the S&P 500. Comparatively, Bank of the James Financial Group has a beta of 0.19, indicating that its stock price is 81% less volatile than the S&P 500.

Valuation and Earnings

This table compares MainStreet Bank and Bank of the James Financial Group”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
MainStreet Bank	$135.62 million	1.14	$15.61 million	$1.95	11.10
Bank of the James Financial Group	$62.51 million	1.74	$9.02 million	$2.65	9.04

MainStreet Bank has higher revenue and earnings than Bank of the James Financial Group. Bank of the James Financial Group is trading at a lower price-to-earnings ratio than MainStreet Bank, indicating that it is currently the more affordable of the two stocks.

Summary

Bank of the James Financial Group beats MainStreet Bank on 9 of the 15 factors compared between the two stocks.

About MainStreet Bank

MainStreet Bancshares, Inc. operates as the bank holding company for MainStreet Bank that provides various banking products and services for individuals, small to medium-sized businesses, and professional service organizations. The company offers demand, NOW, money market, savings, and sweep accounts, as well as certificates of deposit; business and consumer checking, interest-bearing checking, business account analysis, and other depository services; and cash management, wire transfer, check imaging, bill pay, remote deposit capture, and courier services. It also provides commercial loans, include government contract receivables, plant and equipment, general working capital, contract administration, and acquisition loans; commercial real estate, real estate construction, and residential real estate loans; and consumer loans comprising term loans and overdraft protection, as well as debit and credit cards. In addition, the company offers deposit insurance solutions; remote deposit of checks; and internet bill payment, online cash management, and online and mobile banking services. It operates in Herndon, Fairfax, McLean, Leesburg, Clarendon, and Washington D.C., as well as automated teller machines. The company was incorporated in 2003 and is headquartered in Fairfax, Virginia.

About Bank of the James Financial Group

Bank of the James Financial Group, Inc. operates as the bank holding company for Bank of the James that provides general retail and commercial banking services to individuals, businesses, associations and organizations, and governmental authorities in Virginia, the United States. It offers checking, savings, individual retirement, and health care saving accounts, as well as other time deposits, including money market accounts and certificates of deposit. The company also provides loans to small- and medium-sized businesses for the purchases of equipment, facilities upgrades, inventory acquisition, and various working capital purposes; commercial and residential construction and development loans; commercial real estate mortgage loans; residential mortgage loans; and secured and unsecured consumer loans, such as lines of credit and overdraft lines of credit, as well as personal, automobile, installment, demand, and home equity loans for personal, family, or household purposes. In addition, it offers other banking services, including safe deposit boxes, traveler's checks, direct deposit of payroll and social security checks, automatic drafts for various accounts, treasury management, and credit card merchant services. Further, the company provides mortgage banking; investment advisory services; securities brokerage and investment services; and telephone and internet banking services comprising online bill pay, as well as acts as an agent for insurance and annuity products. The company was founded in 1999 and is headquartered in Lynchburg, Virginia.