Head-To-Head Comparison: Towne Bank (NASDAQ:TOWN) versus M&F Bancorp (OTCMKTS:MFBP)

M&F Bancorp (OTCMKTS:MFBP) and Towne Bank (NASDAQ:TOWN) are both finance companies, but which is the better business? We will contrast the two businesses based on the strength of their earnings, profitability, analyst recommendations, valuation, risk, dividends and institutional ownership.

Institutional & Insider Ownership

56.0% of Towne Bank shares are held by institutional investors. 2.9% of M&F Bancorp shares are held by company insiders. Comparatively, 8.1% of Towne Bank shares are held 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.

Profitability

This table compares M&F Bancorp and Towne Bank’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
M&F Bancorp	N/A	N/A	N/A
Towne Bank	13.51%	9.91%	1.24%

Analyst Recommendations

This is a breakdown of recent ratings and recommmendations for M&F Bancorp and Towne Bank, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
M&F Bancorp	0	0	0	0	0.00
Towne Bank	1	1	2	0	2.25

Towne Bank has a consensus target price of $39.50, indicating a potential upside of 8.64%. Given Towne Bank’s stronger consensus rating and higher probable upside, analysts clearly believe Towne Bank is more favorable than M&F Bancorp.

Volatility & Risk

M&F Bancorp has a beta of -0.53, meaning that its share price is 153% less volatile than the S&P 500. Comparatively, Towne Bank has a beta of 0.7, meaning that its share price is 30% less volatile than the S&P 500.

Earnings and Valuation

This table compares M&F Bancorp and Towne Bank”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
M&F Bancorp	$29.72 million	1.89	$4.30 million	$1.30	22.32
Towne Bank	$1.12 billion	2.57	$169.53 million	$1.98	18.36

Towne Bank has higher revenue and earnings than M&F Bancorp. Towne Bank is trading at a lower price-to-earnings ratio than M&F Bancorp, indicating that it is currently the more affordable of the two stocks.

Dividends

M&F Bancorp pays an annual dividend of $0.24 per share and has a dividend yield of 0.8%. Towne Bank pays an annual dividend of $1.08 per share and has a dividend yield of 3.0%. M&F Bancorp pays out 18.5% of its earnings in the form of a dividend. Towne Bank pays out 54.5% 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. Towne Bank has increased its dividend for 13 consecutive years. Towne Bank is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Summary

Towne Bank beats M&F Bancorp on 15 of the 17 factors compared between the two stocks.

About M&F Bancorp

M&F Bancorp, Inc. operates as a bank holding company for the Mechanics and Farmers Bank that provides consumer and commercial banking products and services in North Carolina. It offers deposit products, including demand deposits; checking, savings, and money market accounts, as well as certificates of deposit. The company provides loans for commercial and residential real estate, and construction; and consumer and other loans; as well as ATM services. M&F Bancorp, Inc. was founded in 1907 and is headquartered in Durham, North Carolina.

About Towne Bank

TowneBank provides retail and commercial banking services for individuals, commercial enterprises, and professionals. The company operates through three segments: Banking, Realty, and Insurance. It accepts various deposits, including demand deposits, savings accounts, money rate savings, certificates of deposit, and individual retirement accounts. The company also offers secured and unsecured personal loans for financing automobiles, home improvements, education, and personal investments; commercial loans for working capital, business expansion, and equipment and machinery purchases; and mortgage loans, as well as real estate acquisition, development, and construction loans. In addition, it provides other services, such as safe deposit boxes, treasury management services, direct deposit of payroll and social security checks, and automatic drafts for various accounts, as well as online, mobile, and on-call banking services. Further, the company offers documentation services to accomplish tax deferral to investors; investment and asset management services; commercial mortgage brokerage services; and other financial services, such as financial, retirement, and estate planning services, as well as assistance on various investment options comprising alternative investments, annuities, margin accounts, convertible bonds, and pension and profit-sharing plans. Additionally, it provides residential real estate, relocation, property management, vacation rentals, and title and settlement services; and originates residential mortgage loans. The company also offers life, property, casualty, and vehicle insurance services; and employee benefit programs, such as health, dental, vision, and disability insurance. It operates in Richmond, Virginia, the Greater Hampton Roads region in southeastern Virginia, northeastern North Carolina, Raleigh, Charlotte, Greensboro, and Greenville, North Carolina. TowneBank was incorporated in 1998 and is based in Portsmouth, Virginia.