Critical Contrast: Southside Bancshares (NASDAQ:SBSI) versus Touchstone Bankshares (OTCMKTS:TSBA)

Touchstone Bankshares (OTCMKTS:TSBA) and Southside Bancshares (NASDAQ:SBSI) are both small-cap finance companies, but which is the superior business? We will contrast the two companies based on the strength of their dividends, analyst recommendations, institutional ownership, risk, profitability, earnings and valuation.

Insider and Institutional Ownership

0.4% of Touchstone Bankshares shares are held by institutional investors. Comparatively, 55.7% of Southside Bancshares shares are held by institutional investors. 10.4% of Touchstone Bankshares shares are held by company insiders. Comparatively, 6.0% of Southside Bancshares shares are held by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock will outperform the market over the long term.

Analyst Recommendations

This is a breakdown of recent ratings and price targets for Touchstone Bankshares and Southside Bancshares, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Touchstone Bankshares	0	0	0	0	0.00
Southside Bancshares	0	3	0	0	2.00

Southside Bancshares has a consensus price target of $33.50, indicating a potential upside of 17.26%. Given Southside Bancshares’ stronger consensus rating and higher possible upside, analysts clearly believe Southside Bancshares is more favorable than Touchstone Bankshares.

Profitability

This table compares Touchstone Bankshares and Southside Bancshares’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Touchstone Bankshares	N/A	N/A	N/A
Southside Bancshares	19.40%	11.10%	1.06%

Earnings & Valuation

This table compares Touchstone Bankshares and Southside Bancshares”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Touchstone Bankshares	N/A	N/A	$1.61 million	$0.65	21.92
Southside Bancshares	$240.20 million	3.58	$88.49 million	$2.30	12.42

Southside Bancshares has higher revenue and earnings than Touchstone Bankshares. Southside Bancshares is trading at a lower price-to-earnings ratio than Touchstone Bankshares, indicating that it is currently the more affordable of the two stocks.

Volatility and Risk

Touchstone Bankshares has a beta of 0.61, suggesting that its share price is 39% less volatile than the S&P 500. Comparatively, Southside Bancshares has a beta of 0.64, suggesting that its share price is 36% less volatile than the S&P 500.

Dividends

Touchstone Bankshares pays an annual dividend of $0.32 per share and has a dividend yield of 2.2%. Southside Bancshares pays an annual dividend of $1.44 per share and has a dividend yield of 5.0%. Touchstone Bankshares pays out 49.2% of its earnings in the form of a dividend. Southside Bancshares pays out 62.6% 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. Southside Bancshares has raised its dividend for 30 consecutive years. Southside Bancshares is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Summary

Southside Bancshares beats Touchstone Bankshares on 12 of the 15 factors compared between the two stocks.

About Touchstone Bankshares

Touchstone Bankshares, Inc. operates as the bank holding company for Touchstone Bank that provides various community banking products and services in the United States. The company offers personal and business savings and checking accounts. It also provides home mortgage, professional mortgage, home equity, auto, and personal term loans; personal lines of credit; and business loans comprising commercial real estate, operating capital, business term, and construction loans, as well as business lines of credit. In addition, the company offers credit and debit cards; and digital banking, treasury, wealth management, and financial planning services. It has branches in northern North Carolina and south-central Virginia. The company was founded in 1906 and is headquartered in Prince George, Virginia.

About Southside Bancshares

Southside Bancshares, Inc. operates as the bank holding company for Southside Bank that provides a range of financial services to individuals, businesses, municipal entities, and nonprofit organizations. Its deposit products include savings, money market, and interest and noninterest bearing checking accounts, as well as certificates of deposits. The company’s loan portfolio comprises consumer loans that include 1-4 family residential loans, home equity loans, home improvement loans, automobile loans, and other consumer related loans; commercial loans, such as short-term working capital loans for inventory and accounts receivable, short and medium-term loans for equipment or other business capital expansion, commercial real estate loans, and municipal loans; and construction loans for 1-4 family residential and commercial real estate. It also offers wealth management and trust services consisting of investment management, administration of irrevocable, revocable, and testamentary trusts, estate administration, and custodian services for individuals, partnerships, and corporations; safe deposit services; and brokerage services. In addition, the company provides retirement and employee benefit accounts, including plans and profit sharing plans; and telephone, internet, and mobile banking services. The company offers various banking services through branches, drive-thru facilities, automated teller machines, and interactive teller machines. Southside Bancshares, Inc. was founded in 1960 and is headquartered in Tyler, Texas.