1st Source (NASDAQ: SRCE) and American River Bankshares (NASDAQ:AMRB) are both small-cap finance companies, but which is the better investment? We will contrast the two businesses based on the strength of their valuation, profitability, risk, analyst recommendations, institutional ownership, dividends and earnings.

Dividends

1st Source pays an annual dividend of $0.80 per share and has a dividend yield of 1.5%. American River Bankshares pays an annual dividend of $0.20 per share and has a dividend yield of 1.3%. 1st Source pays out 32.0% of its earnings in the form of a dividend. American River Bankshares pays out 23.8% 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. 1st Source has increased its dividend for 31 consecutive years. 1st Source is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Institutional & Insider Ownership

70.3% of 1st Source shares are owned by institutional investors. Comparatively, 53.8% of American River Bankshares shares are owned by institutional investors. 20.3% of 1st Source shares are owned by company insiders. Comparatively, 12.2% of American River Bankshares shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock is poised for long-term growth.

Earnings & Valuation

This table compares 1st Source and American River Bankshares’ gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
1st Source $280.70 million 4.77 $57.78 million $2.50 20.66
American River Bankshares $23.20 million 4.14 $6.40 million $0.84 17.92

1st Source has higher revenue and earnings than American River Bankshares. American River Bankshares is trading at a lower price-to-earnings ratio than 1st Source, indicating that it is currently the more affordable of the two stocks.

Risk and Volatility

1st Source has a beta of 1.05, indicating that its share price is 5% more volatile than the S&P 500. Comparatively, American River Bankshares has a beta of 0.34, indicating that its share price is 66% less volatile than the S&P 500.

Profitability

This table compares 1st Source and American River Bankshares’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
1st Source 21.74% 9.43% 1.16%
American River Bankshares 24.61% 6.66% 0.84%

Analyst Recommendations

This is a breakdown of recent ratings and recommmendations for 1st Source and American River Bankshares, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
1st Source 0 2 1 0 2.33
American River Bankshares 1 0 0 0 1.00

1st Source presently has a consensus target price of $51.67, indicating a potential upside of 0.05%. Given 1st Source’s stronger consensus rating and higher probable upside, research analysts plainly believe 1st Source is more favorable than American River Bankshares.

Summary

1st Source beats American River Bankshares on 15 of the 17 factors compared between the two stocks.

About 1st Source

1st Source Corporation is a bank holding company. The Company, through its subsidiaries, provides a range of financial products and services. It is engaged in commercial banking. 1st Source Bank (Bank), its banking subsidiary, offers commercial and consumer banking services, trust and wealth advisory services, and insurance to individual and business clients. The Bank offers a range of consumer and commercial banking services through its lending operations, retail branches and fee based businesses. It provides commercial, small business, agricultural, and real estate loans to primarily business clients mainly located within its regional market area. It provides a range of consumer banking products and services through its banking centers and at 1stsource.com. It also offers insurance products through 1st Source Insurance offices. It also provides a range of trust, investment, agency, and custodial services for individual, corporate and not-for-profit clients.

About American River Bankshares

American River Bankshares is a bank holding company. The Company’s banking subsidiary is American River Bank (the Bank). The Bank’s primary business is serving the commercial banking needs of small to mid-sized businesses. The Bank accepts checking and savings deposits; offers money market deposit accounts and certificates of deposit; makes secured and unsecured commercial loans, secured real estate loans, and other installment and term loans, and offers other customary banking services. The Bank also conducts lease financing for various types of business equipment, from computer software to heavy earth-moving equipment. It serves various communities located in Sacramento, Placer, Yolo, El Dorado, Sonoma and Amador counties. It also serves Alameda, Contra Costa and Santa Clara Counties through loan production offices located in the Cities of San Jose and San Ramon. Its loans include real estate construction loans; lease financing receivable; agriculture loans, and consumer loans.

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