Critical Analysis: Preferred Bank (NASDAQ:PFBC) and Riverview Bancorp (NASDAQ:RVSB)

Preferred Bank (NASDAQ:PFBC) and Riverview Bancorp (NASDAQ:RVSB) 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, earnings, valuation, risk, institutional ownership, dividends and analyst recommendations.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Preferred Bank	26.54%	17.27%	1.77%
Riverview Bancorp	-5.87%	3.12%	0.32%

Insider and Institutional Ownership

72.8% of Preferred Bank shares are owned by institutional investors. Comparatively, 69.6% of Riverview Bancorp shares are owned by institutional investors. 3.9% of Riverview Bancorp shares are owned by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company is poised for long-term growth.

Analyst Recommendations

This is a summary of recent ratings for Preferred Bank and Riverview Bancorp, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Preferred Bank	0	5	2	0	2.29
Riverview Bancorp	1	1	0	0	1.50

Preferred Bank presently has a consensus target price of $106.25, suggesting a potential upside of 1.11%. Given Preferred Bank’s stronger consensus rating and higher probable upside, equities analysts clearly believe Preferred Bank is more favorable than Riverview Bancorp.

Earnings & Valuation

This table compares Preferred Bank and Riverview Bancorp”s 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	3.00	$133.63 million	$10.94	9.61
Riverview Bancorp	$64.74 million	1.61	-$4.34 million	($0.19)	-27.47

Preferred Bank has higher revenue and earnings than Riverview Bancorp. Riverview 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.

Risk and Volatility

Preferred Bank has a beta of 0.54, suggesting that its stock price is 46% less volatile than the S&P 500. Comparatively, Riverview Bancorp has a beta of 0.48, suggesting that its stock price is 52% less volatile than the S&P 500.

Dividends

Preferred Bank pays an annual dividend of $3.20 per share and has a dividend yield of 3.0%. Riverview Bancorp pays an annual dividend of $0.08 per share and has a dividend yield of 1.5%. Preferred Bank pays out 29.3% of its earnings in the form of a dividend. Riverview Bancorp pays out -42.1% 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. Preferred Bank is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Summary

Preferred Bank beats Riverview Bancorp on 15 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 Riverview Bancorp

Riverview Bancorp, Inc. operates as a bank holding company for Riverview Bank that provides commercial banking services to small and medium size businesses, professionals, and wealth building individuals. It offers a range of deposit products, including demand deposits, negotiable order of withdrawal accounts, money market accounts, savings accounts, certificates of deposit, and retirement savings plans. The company also provides commercial business, commercial and residential real estate, multi-family real estate, land, real estate construction, and one-to-four family mortgage loans; other consumer loans, such as automobile, boat, motorcycle, recreational vehicle, savings account, and unsecured loans; and home equity lines of credit. In addition, it is involved in the provision of mortgage brokerage and mortgage loan servicing activities, as well as offers asset management services comprising trust, estate planning, and investment management. The company operates in Camas, Washougal, Stevenson, White Salmon, Battle Ground, Goldendale, Ridgefield, and Vancouver, Washington, as well as Portland, Gresham, Tualatin, and Aumsville, Oregon. Riverview Bancorp, Inc. was founded in 1923 and is based in Vancouver, Washington.