Analyzing Preferred Bank (NASDAQ:PFBC) & Northrim BanCorp (NASDAQ:NRIM)

Preferred Bank (NASDAQ:PFBC) and Northrim BanCorp (NASDAQ:NRIM) are both small-cap finance companies, but which is the superior investment? We will contrast the two businesses based on the strength of their earnings, risk, valuation, institutional ownership, profitability, dividends and analyst recommendations.

Dividends

Preferred Bank pays an annual dividend of $3.20 per share and has a dividend yield of 3.5%. Northrim BanCorp pays an annual dividend of $0.64 per share and has a dividend yield of 2.7%. Preferred Bank pays out 30.8% of its earnings in the form of a dividend. Northrim BanCorp pays out 22.3% 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. Preferred Bank has raised its dividend for 5 consecutive years and Northrim BanCorp has raised its dividend for 16 consecutive years.

Institutional & Insider Ownership

72.8% of Preferred Bank shares are held by institutional investors. Comparatively, 66.0% of Northrim BanCorp shares are held by institutional investors. 3.9% of Northrim BanCorp shares are held by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock is poised for long-term growth.

Profitability

This table compares Preferred Bank and Northrim BanCorp’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Preferred Bank	26.41%	17.31%	1.82%
Northrim BanCorp	25.17%	17.66%	1.65%

Analyst Ratings

This is a breakdown of recent recommendations for Preferred Bank and Northrim BanCorp, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Preferred Bank	0	4	3	0	2.43
Northrim BanCorp	0	1	2	0	2.67

Preferred Bank currently has a consensus target price of $100.50, indicating a potential upside of 9.98%. Northrim BanCorp has a consensus target price of $33.00, indicating a potential upside of 38.25%. Given Northrim BanCorp’s stronger consensus rating and higher probable upside, analysts plainly believe Northrim BanCorp is more favorable than Preferred Bank.

Risk and Volatility

Preferred Bank has a beta of 0.57, suggesting that its share price is 43% less volatile than the S&P 500. Comparatively, Northrim BanCorp has a beta of 0.91, suggesting that its share price is 9% less volatile than the S&P 500.

Earnings & Valuation

This table compares Preferred Bank and Northrim BanCorp”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Preferred Bank	$283.40 million	4.65	$133.63 million	$10.38	8.80
Northrim BanCorp	$255.58 million	2.07	$64.61 million	$2.87	8.32

Preferred Bank has higher revenue and earnings than Northrim BanCorp. Northrim BanCorp is trading at a lower price-to-earnings ratio than Preferred Bank, indicating that it is currently the more affordable of the two stocks.

Summary

Preferred Bank beats Northrim BanCorp on 10 of the 17 factors compared between the two stocks.

About Preferred Bank

Preferred Bank provides various commercial banking products and services to small and mid-sized businesses and their owners, entrepreneurs, real estate developers and investors, professionals, and high net worth individuals. The company accepts checking, savings, and money market deposit accounts; fixed-rate and fixed maturity retail, and non-retail certificates of deposit; and individual retirement accounts. It also provides real estate mortgage loans that are secured by retail, industrial, office, special purpose, and residential single and multi-family properties; real estate construction loans; commercial loans comprising lines of credit for working capital, term loans for capital expenditures, and commercial and stand-by letters of credit; and small business administration loans. In addition, the company offers trade finance services, including commercial and export letters of credit, import lines of credit, documentary collections, international wire transfers, acceptances/trust receipt financing products, export financing, and bills purchase programs. Further, it provides cash management services; and internet, mobile, and tablet banking services. The company operates through full-service branch offices in the California counties of Los Angeles, Orange and San Francisco; Flushing, New York; Houston suburb of Sugar Land, Texas; and a satellite office in Manhattan, New York. The company was incorporated in 1991 and is headquartered in Los Angeles, California.

About Northrim BanCorp

Northrim BanCorp, Inc. operates as the bank holding company for Northrim Bank that provides commercial banking products and services to businesses and professional individuals. It operates through two segments, Community Banking and Home Mortgage Lending. The company offers noninterest-bearing checking accounts and interest-bearing time deposits, checking and savings accounts, individual retirement and money market deposit accounts, certificates of deposit, and business sweep accounts. It also provides short and medium-term commercial loans, commercial credit lines, construction and real estate loans, and consumer loans, as well as short-term working capital. In addition, the company offers other services comprising consumer and business online banking, mobile app, and mobile deposits; and debit and credit cards. Further, it provides mobile web and app banking, consumer online account opening, personal finance, online documents, consumer debit cards, business debit cards, my rewards for consumer debit cards, retail lockbox, card control, corporate purchase cards, integrated payables, home equity advantage access cards, telebanking, and automated teller services. Additionally, the company offers personalized checks at account opening, overdraft protection from a savings account, commercial drive-up banking, automatic transfer and payment, People Pay, external transfer, Bill Pay, wire transfer, direct payroll deposit, electronic tax payment, Automated Clearing House origination and receipt, remote deposit capture, account reconciliation and positive pay, merchant, cash management, annuity, and long-term investment portfolio products and services. It also provides investment advisory, trust, wealth management, factoring, and mortgage services. The company was founded in 1990 and is headquartered in Anchorage, Alaska.