Contrasting Hanover Bancorp (NASDAQ:HNVR) and Potomac Bancshares (OTCMKTS:PTBS)

Hanover Bancorp (NASDAQ:HNVR) and Potomac Bancshares (OTCMKTS:PTBS) are both small-cap finance companies, but which is the superior investment? We will compare the two companies based on the strength of their risk, analyst recommendations, earnings, valuation, profitability, dividends and institutional ownership.

Institutional and Insider Ownership

15.0% of Hanover Bancorp shares are held by institutional investors. Comparatively, 5.3% of Potomac Bancshares shares are held by institutional investors. 24.4% of Hanover Bancorp shares are held by company insiders. Comparatively, 4.4% of Potomac Bancshares shares are held by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company is poised for long-term growth.

Volatility and Risk

Hanover Bancorp has a beta of 0.11, indicating that its share price is 89% less volatile than the S&P 500. Comparatively, Potomac Bancshares has a beta of 0.26, indicating that its share price is 74% less volatile than the S&P 500.

Analyst Recommendations

This is a breakdown of recent recommendations for Hanover Bancorp and Potomac Bancshares, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Hanover Bancorp	1	3	1	0	2.00
Potomac Bancshares	0	0	0	0	0.00

Hanover Bancorp currently has a consensus price target of $24.33, suggesting a potential upside of 3.11%. Given Hanover Bancorp’s stronger consensus rating and higher possible upside, equities analysts clearly believe Hanover Bancorp is more favorable than Potomac Bancshares.

Profitability

This table compares Hanover Bancorp and Potomac Bancshares’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Hanover Bancorp	5.53%	5.09%	0.42%
Potomac Bancshares	N/A	N/A	N/A

Dividends

Hanover Bancorp pays an annual dividend of $0.40 per share and has a dividend yield of 1.7%. Potomac Bancshares pays an annual dividend of $0.60 per share and has a dividend yield of 2.5%. Hanover Bancorp pays out 38.1% of its earnings in the form of a dividend. Potomac Bancshares pays out 25.4% 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. Potomac Bancshares is clearly the better dividend stock, given its higher yield and lower payout ratio.

Earnings and Valuation

This table compares Hanover Bancorp and Potomac Bancshares”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Hanover Bancorp	$143.32 million	1.18	$7.49 million	$1.05	22.48
Potomac Bancshares	$54.90 million	1.95	$10.60 million	$2.36	10.08

Potomac Bancshares has lower revenue, but higher earnings than Hanover Bancorp. Potomac Bancshares is trading at a lower price-to-earnings ratio than Hanover Bancorp, indicating that it is currently the more affordable of the two stocks.

Summary

Hanover Bancorp beats Potomac Bancshares on 10 of the 16 factors compared between the two stocks.

About Hanover Bancorp

Hanover Bancorp, Inc., a bank holding company for Hanover Community Bank, provides personal and business lending and deposit services to businesses, municipalities, and individuals in the New York metro area. The company offers checking, credit cards, debit cards, money market, savings, government and municipal banking, and professional services, as well as time deposits, including certificate of deposit and individual retirement accounts. It also provides business loans, commercial real estate financing, small business administration, lending directory services, and residential mortgage. In addition, the company offers cash management, online and mobile banking, merchant services, and digital solutions. Its banking offices are located in Nassau, Suffolk, Queens, Kings, New York Counties, New York, Monmouth County, Freehold, and New Jersey. The company was founded in 2008 and is headquartered in Mineola, New York.

About Potomac Bancshares

Potomac Bancshares, Inc. operates as the bank holding company for Bank of Charles Town that provides various banking products and services to individuals and businesses. The company offers checking, savings, and individual retirement accounts; and certificates of deposit (CD). It also provides personal loans, including new and used vehicle, home equity, unsecured home improvement and personal, retail equipment, and lot loans, as well as loans secured by CD, and home equity lines of credit; commercial loans for building or office purchases, commercial real estate and construction, and production and administrative equipment purchases; lines of credit; mortgage, commercial, term, residential and commercial construction, commercial real estate, and agricultural loans; and credit and debit cards. In addition, the company offers Card Pay, cash management, merchant, financial planning, trust and estate, investment management, wealth management, full-service brokerage, retirement and insurance planning and products, asset allocation and management, and college planning services, as well as telephone, mobile, and online banking services. Potomac Bancshares, Inc. was founded in 1871 and is based in Charles Town, West Virginia.