Critical Survey: MidWestOne Financial Group (NASDAQ:MOFG) vs. Preferred Bank (NASDAQ:PFBC)

Preferred Bank (NASDAQ:PFBCGet Rating) and MidWestOne Financial Group (NASDAQ:MOFGGet Rating) are both small-cap finance companies, but which is the superior investment? We will compare the two companies based on the strength of their profitability, risk, analyst recommendations, earnings, institutional ownership, valuation and dividends.

Institutional and Insider Ownership

73.2% of Preferred Bank shares are owned by institutional investors. Comparatively, 65.0% of MidWestOne Financial Group shares are owned by institutional investors. 2.6% of MidWestOne Financial Group shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company is poised for long-term growth.

Volatility & Risk

Preferred Bank has a beta of 1.25, meaning that its share price is 25% more volatile than the S&P 500. Comparatively, MidWestOne Financial Group has a beta of 0.97, meaning that its share price is 3% less volatile than the S&P 500.

Dividends

Preferred Bank pays an annual dividend of $1.72 per share and has a dividend yield of 2.6%. MidWestOne Financial Group pays an annual dividend of $0.95 per share and has a dividend yield of 3.2%. Preferred Bank pays out 25.5% of its earnings in the form of a dividend. MidWestOne Financial Group pays out 24.4% 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. Preferred Bank has increased its dividend for 1 consecutive years and MidWestOne Financial Group has increased its dividend for 12 consecutive years. MidWestOne Financial Group is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Analyst Recommendations

This is a summary of current ratings and price targets for Preferred Bank and MidWestOne Financial Group, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Preferred Bank 0 0 5 0 3.00
MidWestOne Financial Group 0 0 0 0 N/A

Preferred Bank currently has a consensus price target of $89.60, suggesting a potential upside of 35.74%. Given Preferred Bank’s higher probable upside, equities analysts clearly believe Preferred Bank is more favorable than MidWestOne Financial Group.

Profitability

This table compares Preferred Bank and MidWestOne Financial Group’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Preferred Bank 44.96% 17.38% 1.69%
MidWestOne Financial Group 28.49% 11.66% 1.05%

Valuation and Earnings

This table compares Preferred Bank and MidWestOne Financial Group’s revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Preferred Bank $218.78 million 4.57 $95.24 million $6.74 9.86
MidWestOne Financial Group $219.22 million 2.09 $69.49 million $3.90 7.51

Preferred Bank has higher earnings, but lower revenue than MidWestOne Financial Group. MidWestOne Financial Group 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 MidWestOne Financial Group on 11 of the 16 factors compared between the two stocks.

Preferred Bank Company Profile (Get Rating)

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 in the United States. 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; and commercial loans comprising lines of credit for working capital, term loans for capital expenditures, and commercial and stand-by letters of credit; and SBA 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, documentary collections, and bills purchase programs. Further, it provides various high-wealth banking services to wealthy individuals residing in the Pacific Rim area; and remote deposit capture, and online and mobile banking services. Additionally, the company offers various banking services to physicians, accountants, attorneys, business managers, and other professionals; and safe deposit boxes, account reconciliation, courier service, and cash management services to the manufacturing, service, and distribution companies. As of December 31, 2021, it had eleven full-service branch offices in Alhambra, Century City, City of Industry, Torrance, Arcadia, Irvine, Diamond Bar, Pico Rivera, Tarzana, and San Francisco; and one branch in Flushing, New York. The company was incorporated in 1991 and is headquartered in Los Angeles, California.

MidWestOne Financial Group Company Profile (Get Rating)

MidWestOne Financial Group, Inc. operates as the bank holding company for MidWestOne Bank that provides commercial and retail banking products and services to individuals, businesses, governmental units, and institutional customers. It offers deposit products, such as noninterest bearing and interest-bearing demand deposit accounts, interest checking accounts, savings accounts, money market accounts, certificates of deposit, and time deposits. The company also provides commercial and industrial, commercial and residential real estate, agricultural, and credit card loans, as well as consumer loans, such as secured and unsecured personal, and automobile loans. In addition, it offers various trust and investment services, including administering estates, personal trusts, and conservatorships, as well as property management, farm management, investment advisory, retail securities brokerage, and financial planning and custodial services, as well as investment-related services, including securities trading, mutual funds sales, fixed and variable annuities, tax-exempted, and conventional unit trusts. Further, the company provides other products and services comprising treasury management, debit cards, automated teller machines, online and mobile banking, and safe deposit boxes. It offers its products and services primarily through a network of 56 banking offices located in central and eastern Iowa, the Minneapolis/St. Paul metropolitan area of Minnesota, southwestern Wisconsin, southwestern Florida, and Denver, Colorado. MidWestOne Financial Group, Inc. was incorporated in 1983 and is headquartered in Iowa City, Iowa.

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