Peoples Financial Services (NASDAQ:PFIS) versus Southern Michigan Bancorp (OTCMKTS:SOMC) Head-To-Head Review

Peoples Financial Services (NASDAQ:PFIS) and Southern Michigan Bancorp (OTCMKTS:SOMC) 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, risk, earnings, dividends, analyst recommendations, institutional ownership and profitability.

Analyst Ratings

This is a summary of current ratings and recommmendations for Peoples Financial Services and Southern Michigan Bancorp, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Peoples Financial Services	0	2	1	0	2.33
Southern Michigan Bancorp	0	0	0	0	0.00

Peoples Financial Services currently has a consensus price target of $58.50, indicating a potential downside of 12.84%. Given Peoples Financial Services’ stronger consensus rating and higher possible upside, equities research analysts plainly believe Peoples Financial Services is more favorable than Southern Michigan Bancorp.

Dividends

Peoples Financial Services pays an annual dividend of $2.50 per share and has a dividend yield of 3.7%. Southern Michigan Bancorp pays an annual dividend of $0.68 per share and has a dividend yield of 2.1%. Peoples Financial Services pays out 27.7% of its earnings in the form of a dividend. Southern Michigan Bancorp 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. Peoples Financial Services has increased its dividend for 8 consecutive years. Peoples Financial Services is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Profitability

This table compares Peoples Financial Services and Southern Michigan Bancorp’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Peoples Financial Services	21.29%	18.06%	1.76%
Southern Michigan Bancorp	13.00%	10.60%	0.76%

Insider & Institutional Ownership

31.7% of Peoples Financial Services shares are owned by institutional investors. 8.2% of Peoples Financial Services shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company is poised for long-term growth.

Risk & Volatility

Peoples Financial Services has a beta of 0.76, meaning that its share price is 24% less volatile than the S&P 500. Comparatively, Southern Michigan Bancorp has a beta of 0.2, meaning that its share price is 80% less volatile than the S&P 500.

Earnings & Valuation

This table compares Peoples Financial Services and Southern Michigan Bancorp”s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Peoples Financial Services	$283.67 million	2.37	$59.19 million	$9.03	7.43
Southern Michigan Bancorp	$93.18 million	1.60	$12.22 million	$2.68	11.94

Peoples Financial Services has higher revenue and earnings than Southern Michigan Bancorp. Peoples Financial Services is trading at a lower price-to-earnings ratio than Southern Michigan Bancorp, indicating that it is currently the more affordable of the two stocks.

Summary

Peoples Financial Services beats Southern Michigan Bancorp on 15 of the 17 factors compared between the two stocks.

About Peoples Financial Services

Peoples Financial Services Corp. operates as the bank holding company for Peoples Security Bank and Trust Company that provides various commercial and retail banking services. The company accepts money market, negotiable order of withdrawal, savings, individual retirement, demand deposit, and certificates of deposit accounts. It also provides residential real estate, automobile, manufactured housing, personal, and home equity loans; and commercial real estate, working capital, construction, small business administration, and agricultural loans, as well as loans for equipment and other commercial needs, and mineral rights. In addition, the company offers fiduciary and investment services; investment management, IRA trustee, estate administration, living and life insurance trust, trustee under will, guardianship, custodial/IRA custodial, and corporate trust services, as well as pension and profit-sharing plans. Further, it provides wealth management products and services comprising investment portfolio management, estate and business succession planning, annuities, insurance, retirement plan, and tax planning, as well as education funding strategies; and securities, brokerage, and investor services. Additionally, the company offers small business checking and merchant money market accounts, online and telephone banking, business credit cards, merchant line of credit, and financial checkup services; and remote deposit capture, automatic clearing house transaction, cash management, automated teller machine, point of sale transaction, safe deposit box, night depository, direct deposit, and official check services. It serves business, non-profit, governmental, municipal agency, and professional customers, as well as retail customers. Peoples Financial Services Corp. was founded in 1905 and is headquartered in Scranton, Pennsylvania.

About Southern Michigan Bancorp

Southern Michigan Bancorp, Inc. operates as the bank holding company for Southern Michigan Bank & Trust that provides a range of commercial banking services to individuals, businesses, institutions, and governmental agencies primarily in the southwest Michigan communities. Its deposit products include interest and non-interest checking, savings, and various types of money market accounts; time, savings, and demand deposits; and certificates of deposit and IRAs. The company also provides home mortgages and equity loans, home equity lines of credit, VA and FHA home loans, USDA rural development loans, and auto/personal loans; business loans, such as lines of credit, term loans, commercial real estate loans, commercial and industrial loans, agriculture loans, letters of credit, small business administration loans, and capital access loans; industrial, construction, real estate, and inventory loans; and consumer lending products comprising direct and indirect loans to purchasers of residential real property and consumer goods. In addition, it offers trust and investment services that include investment management, trustee, IRA rollovers and retirement plan, institutional and personal custody, estate settlement, wealth management, estate and wealth transfer planning assistance, charitable gift planning assistance, and cash management custody services; and safe deposit box and automated teller machine services. Further, the company provides bill pay, e-statements, ACH, wire transfer, remote deposit capture, and insurance services, as well as ATM, debit, credit, and gift cards. The company was founded in 1871 and is based in Coldwater, Michigan.