Financial Review: Hanmi Financial (HAFC) & LCNB (LCNB)

Hanmi Financial (NASDAQ: HAFC) and LCNB (NASDAQ:LCNB) are both small-cap finance companies, but which is the superior stock? We will contrast the two businesses based on the strength of their risk, earnings, dividends, analyst recommendations, institutional ownership, valuation and profitability.

Dividends

Hanmi Financial pays an annual dividend of $0.96 per share and has a dividend yield of 3.8%. LCNB pays an annual dividend of $0.64 per share and has a dividend yield of 3.4%. Hanmi Financial pays out 53.0% of its earnings in the form of a dividend. LCNB pays out 50.4% 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. Hanmi Financial has increased its dividend for 4 consecutive years. Hanmi Financial is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Valuation and Earnings

This table compares Hanmi Financial and LCNB’s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Hanmi Financial $242.74 million 3.41 $54.66 million $1.81 14.06
LCNB $54.92 million 3.44 $12.97 million $1.27 14.80

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

Analyst Ratings

This is a breakdown of current ratings and price targets for Hanmi Financial and LCNB, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Hanmi Financial 0 2 2 0 2.50
LCNB 0 1 0 0 2.00

Hanmi Financial currently has a consensus target price of $30.00, indicating a potential upside of 17.88%. Given Hanmi Financial’s stronger consensus rating and higher possible upside, research analysts clearly believe Hanmi Financial is more favorable than LCNB.

Institutional and Insider Ownership

89.7% of Hanmi Financial shares are owned by institutional investors. Comparatively, 36.1% of LCNB shares are owned by institutional investors. 2.7% of Hanmi Financial shares are owned by company insiders. Comparatively, 4.1% of LCNB shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock will outperform the market over the long term.

Risk and Volatility

Hanmi Financial has a beta of 0.78, indicating that its share price is 22% less volatile than the S&P 500. Comparatively, LCNB has a beta of 0.38, indicating that its share price is 62% less volatile than the S&P 500.

Profitability

This table compares Hanmi Financial and LCNB’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Hanmi Financial 22.68% 10.76% 1.15%
LCNB 19.98% 8.88% 1.02%

Summary

Hanmi Financial beats LCNB on 13 of the 17 factors compared between the two stocks.

About Hanmi Financial

Hanmi Financial Corporation operates as the holding company for Hanmi Bank that provides business banking products and services in the United States. The company offers various deposit products, including noninterest-bearing checking accounts, interest-bearing checking and savings accounts, negotiable order of withdrawal accounts, money market accounts, and certificates of deposit. It also provides real estate loans, including commercial property, construction, and residential property loans; and commercial and industrial loans, such as commercial term loans and commercial lines of credit, as well as international finance, and trade services and products comprising letters of credit, and import and export financing. In addition, the company offers consumer loans that include automobile loans, secured and unsecured personal loans, home improvement loans, home equity lines of credit, unsecured lines of credit, and credit cards; and small business administration loans for business purposes, which comprise owner-occupied commercial real estate, business acquisitions, start-ups, franchise financing, working capital, improvements and renovations, inventory and equipment, and debt-refinancing, as well as equipment lease financing. As of January 25, 2018, it operated a network of 40 full-service branches and 8 loan production offices in California, Texas, Illinois, Virginia, New Jersey, New York, Colorado, Washington, and Georgia. The company was founded in 2000 and is headquartered in Los Angeles, California.

About LCNB

LCNB Corp., a financial holding company, provides commercial and personal banking services in Ohio. Its deposit products include checking, NOW, savings, Christmas and vacation club, money market deposit, lifetime checking, and individual retirement accounts, as well as certificates of deposit. The company's loan portfolio comprises commercial and industrial, commercial and residential real estate, agricultural, construction, small business administration, and residential mortgage loans. It also offers consumer loans, such as automobile, boat, home improvement, and personal loans. In addition, the company provides trust administrative, estate settlement, and fiduciary services; and investment management services for trusts, agency accounts, individual retirement accounts, and foundations/endowments. Further, it offers investment services and products, including financial needs analysis, mutual funds, securities trading, annuities, and life insurance; and security brokerage services. Additionally, the company provides safe deposit boxes, night depositories, cashier's checks, bank-by-mail, ATMs, cash and transaction services, debit cards, wire transfers, electronic funds transfer, utility bill collections, notary public service, personal computer-based cash management services, telephone banking, PC Internet banking, mobile banking, and other services for individuals and businesses. As of December 31, 2017, the company operated through 34 offices, including a main office in Warren County; branch offices in Warren, Butler, Clinton, Clermont, Hamilton, Montgomery, Preble, Ross, and Fayette Counties; a loan production office in Franklin County; and an operations center in Warren County, Ohio, as well as 38 ATMs. LCNB Corp. was founded in 1877 and is headquartered in Lebanon, Ohio.

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