Financial Review: Severn Bancorp (SVBI) and Pacific Mercantile Bancorp (PMBC)

Severn Bancorp (NASDAQ:SVBI) and Pacific Mercantile Bancorp (NASDAQ:PMBC) are both small-cap finance companies, but which is the better stock? We will contrast the two businesses based on the strength of their profitability, valuation, earnings, dividends, risk, analyst recommendations and institutional ownership.

Profitability

This table compares Severn Bancorp and Pacific Mercantile Bancorp’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Severn Bancorp 18.30% 9.03% 1.02%
Pacific Mercantile Bancorp 40.70% 21.47% 2.05%

Earnings & Valuation

This table compares Severn Bancorp and Pacific Mercantile Bancorp’s revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Severn Bancorp $46.44 million 2.44 $8.50 million N/A N/A
Pacific Mercantile Bancorp $67.18 million 2.62 $27.34 million N/A N/A

Pacific Mercantile Bancorp has higher revenue and earnings than Severn Bancorp.

Dividends

Severn Bancorp pays an annual dividend of $0.12 per share and has a dividend yield of 1.3%. Pacific Mercantile Bancorp does not pay a dividend.

Volatility and Risk

Severn Bancorp has a beta of 0.89, suggesting that its stock price is 11% less volatile than the S&P 500. Comparatively, Pacific Mercantile Bancorp has a beta of 0.57, suggesting that its stock price is 43% less volatile than the S&P 500.

Insider & Institutional Ownership

20.7% of Severn Bancorp shares are owned by institutional investors. Comparatively, 68.8% of Pacific Mercantile Bancorp shares are owned by institutional investors. 17.4% of Severn Bancorp shares are owned by company insiders. Comparatively, 4.3% of Pacific Mercantile Bancorp shares are owned by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company is poised for long-term growth.

Analyst Recommendations

This is a breakdown of recent recommendations and price targets for Severn Bancorp and Pacific Mercantile Bancorp, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Severn Bancorp 0 0 0 0 N/A
Pacific Mercantile Bancorp 0 1 0 0 2.00

Pacific Mercantile Bancorp has a consensus target price of $9.00, suggesting a potential upside of 12.50%. Given Pacific Mercantile Bancorp’s higher possible upside, analysts clearly believe Pacific Mercantile Bancorp is more favorable than Severn Bancorp.

Summary

Pacific Mercantile Bancorp beats Severn Bancorp on 8 of the 12 factors compared between the two stocks.

About Severn Bancorp

Severn Bancorp, Inc. operates as the holding company for Severn Savings Bank, FSB that provides a range of personal and commercial banking products and services in Maryland, Delaware, and Virginia. The company's deposit products include checking, savings, money market, time deposit, and individual retirement accounts. Its loan portfolio comprises residential mortgage loans; commercial real estate loans; construction and land acquisition, and development loans for the construction of one-to-four family dwellings; commercial construction loans; land loans; residential lot loans; business and commercial loans; and home equity loans, home equity lines of credit, and other consumer loans. The company also offers cash management, ATM, credit and debit card, safe deposit box, Internet and telephone banking, and other products and services. In addition, it provides commercial real estate brokerage and property management services, as well as acquires real estate for syndication and investment purposes. The company operates through five branches in Anne Arundel County, Maryland. Severn Bancorp, Inc. was founded in 1946 and is headquartered in Annapolis, Maryland.

About Pacific Mercantile Bancorp

Pacific Mercantile Bancorp operates as the holding company for Pacific Mercantile Bank that provides a range of commercial banking products and services to small and medium-size businesses, professional firms, and individuals in Southern California, the United States. The company's deposit products include checking accounts, interest-bearing term deposit accounts, savings and money market deposits, and time deposits. It also offers various loan products, such as commercial loans and credit lines, accounts receivable and inventory financing, small business administration guaranteed business loans, owner-occupied commercial real estate loans, working capital lines of credit and asset based lending, growth capital loans, equipment financing, letters of credit, and corporate credit cards. In addition, the company provides cash and treasury management solutions, automated clearinghouse payment and wire solutions, fraud protection services, remote deposit capture services, courier services, and online banking services; and letters of credit and import/export financing services. As of March 6, 2019, it operated seven locations in Orange, Los Angeles, San Diego, and San Bernardino counties, Southern California. The company was founded in 1998 and is based in Costa Mesa, California.

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