Financial Comparison: United Security Bancshares (NASDAQ:UBFO) and Preferred Bank (NASDAQ:PFBC)

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

Profitability

This table compares Preferred Bank and United Security Bancshares’ 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%
United Security Bancshares	18.65%	9.11%	1.01%

Institutional & Insider Ownership

72.8% of Preferred Bank shares are owned by institutional investors. Comparatively, 30.9% of United Security Bancshares shares are owned by institutional investors. 22.1% of United Security Bancshares shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock is poised for long-term growth.

Analyst Recommendations

This is a summary of current ratings for Preferred Bank and United Security Bancshares, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Preferred Bank	0	4	3	0	2.43
United Security Bancshares	0	0	1	0	3.00

Preferred Bank presently has a consensus target price of $102.00, indicating a potential upside of 14.21%. Given Preferred Bank’s higher possible upside, equities analysts plainly believe Preferred Bank is more favorable than United Security Bancshares.

Valuation and Earnings

This table compares Preferred Bank and United Security Bancshares”s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Preferred Bank	$505.97 million	2.55	$133.63 million	$10.38	8.60
United Security Bancshares	$65.90 million	2.75	$12.29 million	$0.71	14.52

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

Dividends

Preferred Bank pays an annual dividend of $3.20 per share and has a dividend yield of 3.6%. United Security Bancshares pays an annual dividend of $0.48 per share and has a dividend yield of 4.7%. Preferred Bank pays out 30.8% of its earnings in the form of a dividend. United Security Bancshares pays out 67.6% 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. Preferred Bank has raised its dividend for 5 consecutive years and United Security Bancshares has raised its dividend for 2 consecutive years.

Risk and Volatility

Preferred Bank has a beta of 0.62, indicating that its stock price is 38% less volatile than the S&P 500. Comparatively, United Security Bancshares has a beta of 0.34, indicating that its stock price is 66% less volatile than the S&P 500.

Summary

Preferred Bank beats United Security Bancshares on 12 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 United Security Bancshares

United Security Bancshares operates as the bank holding company for United Security Bank, a state-chartered bank that provides a range of commercial banking services to the business and professional community, and individuals in California. The company accepts various deposit products, including personal and business checking accounts, savings accounts, interest-bearing negotiable order of withdrawal accounts, money market accounts, and time certificates of deposit. It also provides real estate mortgage, commercial and industrial, real estate construction and development, and consumer loans, as well as agricultural, installment, and student loans. In addition, the company offers online and mobile banking, safe deposit boxes, wire transfers, payroll direct deposit, cashier's check, cash management, and foreign draft services, as well as interactive teller machines; and person-to-person and bank-to-bank transfers for consumer customers. United Security Bancshares was founded in 1987 and is headquartered in Fresno, California.