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

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

Analyst Recommendations

This is a summary of recent ratings and recommmendations for Northrim BanCorp and Preferred Bank, as provided by MarketBeat.

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

Northrim BanCorp currently has a consensus price target of $33.00, indicating a potential upside of 44.23%. Preferred Bank has a consensus price target of $102.00, indicating a potential upside of 12.47%. Given Northrim BanCorp’s stronger consensus rating and higher possible upside, analysts plainly believe Northrim BanCorp is more favorable than Preferred Bank.

Institutional & Insider Ownership

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

Profitability

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

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

Volatility & Risk

Northrim BanCorp has a beta of 0.93, suggesting that its stock price is 7% less volatile than the S&P 500. Comparatively, Preferred Bank has a beta of 0.62, suggesting that its stock price is 38% less volatile than the S&P 500.

Valuation and Earnings

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

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Northrim BanCorp	$212.81 million	2.38	$64.61 million	$2.87	7.97
Preferred Bank	$505.97 million	2.59	$133.63 million	$10.38	8.74

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.

Dividends

Northrim BanCorp pays an annual dividend of $0.64 per share and has a dividend yield of 2.8%. Preferred Bank pays an annual dividend of $3.20 per share and has a dividend yield of 3.5%. Northrim BanCorp pays out 22.3% of its earnings in the form of a dividend. Preferred Bank pays out 30.8% 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. Northrim BanCorp has raised its dividend for 16 consecutive years and Preferred Bank has raised its dividend for 5 consecutive years.

Summary

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

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.

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.