First Foundation (NASDAQ:FFWM) versus QNB (OTCMKTS:QNBC) Critical Analysis

QNB (OTCMKTS:QNBC) and First Foundation (NASDAQ:FFWM) are both small-cap finance companies, but which is the better investment? We will compare the two businesses based on the strength of their analyst recommendations, earnings, risk, dividends, profitability, institutional ownership and valuation.

Analyst Ratings

This is a summary of recent ratings and target prices for QNB and First Foundation, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
QNB	0	0	0	0	N/A
First Foundation	0	4	1	0	2.20

First Foundation has a consensus target price of $7.80, indicating a potential upside of 12.23%. Given First Foundation’s higher possible upside, analysts clearly believe First Foundation is more favorable than QNB.

Profitability

This table compares QNB and First Foundation’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
QNB	10.28%	9.90%	0.50%
First Foundation	1.34%	1.07%	0.07%

Risk & Volatility

QNB has a beta of 0.52, suggesting that its stock price is 48% less volatile than the S&P 500. Comparatively, First Foundation has a beta of 1.34, suggesting that its stock price is 34% more volatile than the S&P 500.

Insider & Institutional Ownership

0.7% of QNB shares are held by institutional investors. Comparatively, 73.1% of First Foundation shares are held by institutional investors. 16.0% of QNB shares are held by insiders. Comparatively, 8.3% of First Foundation shares are held by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock is poised for long-term growth.

Earnings and Valuation

This table compares QNB and First Foundation’s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
QNB	$73.92 million	1.48	$9.48 million	$2.19	13.60
First Foundation	$623.04 million	0.63	-$199.06 million	($3.66)	-1.90

QNB has higher earnings, but lower revenue than First Foundation. First Foundation is trading at a lower price-to-earnings ratio than QNB, indicating that it is currently the more affordable of the two stocks.

Dividends

QNB pays an annual dividend of $1.48 per share and has a dividend yield of 5.0%. First Foundation pays an annual dividend of $0.04 per share and has a dividend yield of 0.6%. QNB pays out 67.6% of its earnings in the form of a dividend. First Foundation pays out -1.1% 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.

Summary

QNB beats First Foundation on 9 of the 15 factors compared between the two stocks.

About QNB

QNB Corp. operates as the bank holding company for QNB Bank that engages in the provision of commercial and retail banking products, and retail brokerage services. It offers various deposit products, which include demand and savings accounts, such as money market, interest-bearing demand, club, traditional statement savings, and online savings accounts; and time deposits comprising certificates of deposit and individual retirement accounts. The company also provides commercial and industrial loans, commercial and residential real estate loans, construction and land development loans, indirect lease financing, 1-4 family residential mortgage loans, home equity loans and lines of credit, and consumer loans. In addition, it offers retail brokerage and advisory services; credit cards and insurance products; merchant services; ATM and debit card services; and internet and mobile-banking, electronic bill pay, and remote deposit capture services. The company serves other community banks, thrift institutions, credit unions and other non-bank financial organizations, such as mutual fund companies, insurance companies, and brokerage companies. QNB Corp. was founded in 1877 and is based in Quakertown, Pennsylvania.

About First Foundation

First Foundation Inc., through its subsidiaries, provides banking services, investment advisory, wealth management, and trust services to individuals, businesses, and other organizations in the United States. The company operates in two segments, Banking and Wealth Management. It offers a range of deposit products, including personal and business checking accounts, savings accounts, interest-bearing demand deposit accounts, money market accounts, and time certificate of deposits; and loan products consisting of multifamily and single family residential real estate loans, commercial real estate loans, commercial term loans, and line of credits, as well as consumer loans, such as personal installment loans and line of credits, and home equity line of credits. The company also provides various specialized services comprising trust services, online and mobile banking, remote deposit capture services, merchant credit card services, ATM cards, Visa debit cards, and business sweep accounts, as well as insurance brokerage services and equipment financing solutions. In addition, it offers investment management and financial planning services; financial, investment, and economic advisory and related services; and treasury management services, such as bill pay, check/payee/ACH positive pay, wire origination, internal and external transfers, account reconciliation reporting, mobile deposit, lockbox, cash vault services and merchant processing. Further, the company provides support services, including the processing and transmission of financial and economic data for charitable organizations. It operates through a network of branch offices and loan production offices. The company was founded in 1985 and is headquartered in Dallas, Texas.