Unity Bancorp (NASDAQ:UNTY – Get Free Report) and Merchants Bancorp (NASDAQ:MBIN – Get Free Report) are both finance companies, but which is the better business? We will contrast the two companies based on the strength of their profitability, institutional ownership, earnings, risk, analyst recommendations, dividends and valuation.
Dividends
Unity Bancorp pays an annual dividend of $0.64 per share and has a dividend yield of 1.1%. Merchants Bancorp pays an annual dividend of $0.44 per share and has a dividend yield of 0.9%. Unity Bancorp pays out 10.8% of its earnings in the form of a dividend. Merchants Bancorp pays out 10.7% 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. Unity Bancorp has increased its dividend for 12 consecutive years and Merchants Bancorp has increased its dividend for 8 consecutive years. Unity Bancorp is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.
Analyst Ratings
This is a breakdown of recent ratings and target prices for Unity Bancorp and Merchants Bancorp, as provided by MarketBeat.com.
| Sell Ratings | Hold Ratings | Buy Ratings | Strong Buy Ratings | Rating Score | |
| Unity Bancorp | 0 | 0 | 5 | 0 | 3.00 |
| Merchants Bancorp | 0 | 2 | 3 | 0 | 2.60 |
Profitability
This table compares Unity Bancorp and Merchants Bancorp’s net margins, return on equity and return on assets.
| Net Margins | Return on Equity | Return on Assets | |
| Unity Bancorp | 31.33% | 16.06% | 1.85% |
| Merchants Bancorp | 16.64% | 13.40% | 1.17% |
Valuation and Earnings
This table compares Unity Bancorp and Merchants Bancorp”s top-line revenue, earnings per share (EPS) and valuation.
| Gross Revenue | Price/Sales Ratio | Net Income | Earnings Per Share | Price/Earnings Ratio | |
| Unity Bancorp | $188.41 million | 3.17 | $57.95 million | $5.94 | 10.02 |
| Merchants Bancorp | $706.21 million | 3.25 | $218.77 million | $4.10 | 12.20 |
Merchants Bancorp has higher revenue and earnings than Unity Bancorp. Unity Bancorp is trading at a lower price-to-earnings ratio than Merchants Bancorp, indicating that it is currently the more affordable of the two stocks.
Risk and Volatility
Unity Bancorp has a beta of 0.61, suggesting that its share price is 39% less volatile than the S&P 500. Comparatively, Merchants Bancorp has a beta of 1.14, suggesting that its share price is 14% more volatile than the S&P 500.
Insider & Institutional Ownership
42.3% of Unity Bancorp shares are held by institutional investors. Comparatively, 24.6% of Merchants Bancorp shares are held by institutional investors. 28.9% of Unity Bancorp shares are held by insiders. Comparatively, 44.9% of Merchants Bancorp shares are held by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company is poised for long-term growth.
Summary
Unity Bancorp beats Merchants Bancorp on 10 of the 17 factors compared between the two stocks.
About Unity Bancorp
Unity Bancorp, Inc. operates as a bank holding company for Unity Bank that provides range of commercial and retail banking services to individuals, small and medium sized businesses, and professional communities. It offers personal and business checking accounts, time deposits, money market accounts, savings accounts, and retirement accounts, as well as noninterest and interest-bearing demand deposits. The company also provides small business administration loans; commercial loans; and residential mortgage and consumer loans, including residential real estate, home equity lines and loans, and residential construction lines, as well as personal loans. In addition, it offers credit and debit cards, wire transfer, safe deposit box, automated teller, and internet and mobile banking services; and automated clearing house origination and remote deposit capture services. Unity Bancorp, Inc. was incorporated in 1991 and is headquartered in Clinton, New Jersey.
About Merchants Bancorp
Merchants Bancorp operates as the diversified bank holding company in the United States. It operates through three segments: Multi-family Mortgage Banking, Mortgage Warehousing, and Banking. The Multi-family Mortgage Banking segment engages in the mortgage banking, which originates and services government sponsored mortgages, including bridge financing products to refinance, acquire, or reposition multi-family housing projects, and construction lending for multi-family and healthcare facilities. This segment also offers customized loan products for need-based skilled nursing facilities, such as independent living, assisted living, and memory care; and tax credit equity syndicator service. The Mortgage Warehousing segment funds agency eligible residential loans, as well as commercial loans to non-depository financial institutions. The Banking segment offers a range of financial products and services to consumers and businesses, which includes retail banking, commercial lending, agricultural lending, retail and correspondent residential mortgage banking, and small business administration lending. Merchants Bancorp was founded in 1990 and is headquartered in Carmel, Indiana.
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