Analyzing Preferred Bank (NASDAQ:PFBC) & First Mid-Illinois Bancshares (NASDAQ:FMBH)

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

Analyst Recommendations

This is a breakdown of recent recommendations for Preferred Bank and First Mid-Illinois Bancshares, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Preferred Bank 0 4 2 0 2.33
First Mid-Illinois Bancshares 0 1 2 0 2.67

Preferred Bank presently has a consensus price target of $54.50, suggesting a potential downside of 1.05%. First Mid-Illinois Bancshares has a consensus price target of $38.00, suggesting a potential upside of 9.83%. Given First Mid-Illinois Bancshares’ stronger consensus rating and higher possible upside, analysts plainly believe First Mid-Illinois Bancshares is more favorable than Preferred Bank.

Profitability

This table compares Preferred Bank and First Mid-Illinois Bancshares’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Preferred Bank 32.86% 17.53% 1.78%
First Mid-Illinois Bancshares 22.75% 9.16% 1.19%

Dividends

Preferred Bank pays an annual dividend of $1.20 per share and has a dividend yield of 2.2%. First Mid-Illinois Bancshares pays an annual dividend of $0.80 per share and has a dividend yield of 2.3%. Preferred Bank pays out 26.4% of its earnings in the form of a dividend. First Mid-Illinois Bancshares pays out 29.3% 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.

Volatility and Risk

Preferred Bank has a beta of 1.17, suggesting that its stock price is 17% more volatile than the S&P 500. Comparatively, First Mid-Illinois Bancshares has a beta of 0.5, suggesting that its stock price is 50% less volatile than the S&P 500.

Valuation & Earnings

This table compares Preferred Bank and First Mid-Illinois Bancshares’ gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Preferred Bank $204.57 million 4.05 $70.99 million $4.55 12.11
First Mid-Illinois Bancshares $159.98 million 3.60 $36.60 million $2.73 12.67

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

Insider and Institutional Ownership

77.3% of Preferred Bank shares are owned by institutional investors. Comparatively, 31.7% of First Mid-Illinois Bancshares shares are owned by institutional investors. 13.6% of First Mid-Illinois Bancshares shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock is poised for long-term growth.

Summary

Preferred Bank beats First Mid-Illinois Bancshares on 10 of the 15 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 in the United States. The company's deposit products include 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 and term loans for capital expenditures; and commercial and export letters of credit, import lines of credit, documentary collections, international wire transfers, export financing products, bills purchase programs, and acceptances/trust receipt financing products, as well as standby letters of credit and foreign exchange services for importers and exporters. In addition, it offers various high-wealth banking services to wealthy individuals residing in the Pacific Rim area with residences, real estate investments, or businesses in Southern California. Further, it provides 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. Additionally, it offers remote deposit capture, and Internet and mobile banking services. As of December 31, 2018, it had 13 full-service branch offices in Alhambra, Arcadia, Century City, City of Industry, Diamond Bar, Los Angeles, Pico Rivera, San Francisco, Tarzana, Torrance, and Irvine, California; and Flushing, New York. The company was founded in 1991 and is headquartered in Los Angeles, California.

About First Mid-Illinois Bancshares

First Mid Bancshares, Inc., through its subsidiaries, provides community banking products and services to commercial, retail, and agricultural customers in the United States. It accepts various deposit products, such as demand deposits, savings accounts, money market deposits, and time deposits. The company's loan products include commercial real estate, commercial and industrial, agricultural and agricultural real estate, residential real estate, and consumer loans; and other loans comprising loans to municipalities to support community projects, such as infrastructure improvements or equipment purchases. It also offers wealth management services, which include estate planning, investment, and farm management services for individuals; and employee benefit services for business enterprises. In addition, the company provides commercial lines insurance to businesses, as well as homeowner, automobile, health, life, and other types of personal lines insurance to individuals. As of March 4, 2019, it operated through a network of 67 banking centers in Illinois and Missouri, and a loan production office in Indiana. The company was formerly known as First Mid-Illinois Bancshares, Inc. and changed its name to First Mid Bancshares, Inc. in April 2019. First Mid Bancshares, Inc. was incorporated in 1981 and is headquartered in Mattoon, Illinois.

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