Critical Survey: 1st Source (NASDAQ:SRCE) vs. Prosperity Bancshares (NYSE:PB)

Prosperity Bancshares (NYSE:PB) and 1st Source (NASDAQ:SRCE) are both finance companies, but which is the superior business? We will contrast the two businesses based on the strength of their dividends, earnings, analyst recommendations, institutional ownership, risk, profitability and valuation.

Dividends

Prosperity Bancshares pays an annual dividend of $2.32 per share and has a dividend yield of 3.0%. 1st Source pays an annual dividend of $1.44 per share and has a dividend yield of 2.2%. Prosperity Bancshares pays out 45.8% of its earnings in the form of a dividend. 1st Source pays out 26.9% 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. Prosperity Bancshares has increased its dividend for 27 consecutive years and 1st Source has increased its dividend for 37 consecutive years.

Profitability

This table compares Prosperity Bancshares and 1st Source’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Prosperity Bancshares	26.79%	6.64%	1.22%
1st Source	23.10%	11.92%	1.54%

Valuation & Earnings

This table compares Prosperity Bancshares and 1st Source”s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Prosperity Bancshares	$1.15 billion	6.38	$479.39 million	$5.06	15.16
1st Source	$387.12 million	4.12	$132.62 million	$5.36	12.11

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

Volatility and Risk

Prosperity Bancshares has a beta of 0.94, indicating that its share price is 6% less volatile than the S&P 500. Comparatively, 1st Source has a beta of 0.81, indicating that its share price is 19% less volatile than the S&P 500.

Analyst Recommendations

This is a summary of recent ratings and price targets for Prosperity Bancshares and 1st Source, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Prosperity Bancshares	0	6	8	0	2.57
1st Source	0	1	1	0	2.50

Prosperity Bancshares presently has a consensus price target of $82.88, indicating a potential upside of 8.02%. 1st Source has a consensus price target of $70.75, indicating a potential upside of 9.01%. Given 1st Source’s higher possible upside, analysts plainly believe 1st Source is more favorable than Prosperity Bancshares.

Institutional & Insider Ownership

80.7% of Prosperity Bancshares shares are held by institutional investors. Comparatively, 74.4% of 1st Source shares are held by institutional investors. 4.3% of Prosperity Bancshares shares are held by insiders. Comparatively, 19.3% of 1st Source shares are held by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company is poised for long-term growth.

Summary

Prosperity Bancshares beats 1st Source on 10 of the 17 factors compared between the two stocks.

About Prosperity Bancshares

Prosperity Bancshares, Inc. operates as bank holding company for the Prosperity Bank that provides financial products and services to businesses and consumers. It accepts various deposit products, such as demand, savings, money market, and time accounts, as well as and certificates of deposit. The company also offers 1-4 family residential mortgage, commercial real estate and multifamily residential, commercial and industrial, agricultural, and non-real estate agricultural loans, as well as construction, land development, and other land loans; consumer loans, including automobile, recreational vehicle, boat, home improvement, personal, and deposit account collateralized loans; term loans and lines of credit; and consumer durables and home equity loans, as well as loans for working capital, business expansion, and purchase of equipment and machinery. In addition, it provides internet banking, mobile banking, trust and wealth management, retail brokerage, mortgage services, and treasury management, as well as debit and credit cards. The company was incorporated in 1983 and is headquartered in Houston, Texas.

About 1st Source

1st Source Corporation operates as the bank holding company for 1st Source Bank that provides commercial and consumer banking services, trust and wealth advisory services, and insurance products to individual and business clients. Its consumer banking services include checking and savings accounts; certificates of deposit; individual retirement accounts; online and mobile banking products; consumer loans, real estate mortgage loans, and home equity lines of credit; and financial planning, financial literacy, and other consultative services, as well as debit and credit cards. The company also offers commercial, small business, agricultural, and real estate loans for general corporate purposes, including financing for industrial and commercial properties, equipment, inventories, accounts receivables, and renewable energy and acquisition financing; and commercial leasing, treasury management, and retirement planning services. In addition, it provides trust, investment, agency, and custodial services comprising administration of estates and personal trusts, as well as management of investment accounts for individuals, employee benefit plans, and charitable foundations. Further, the company offers equipment loan and lease products for construction equipment, new and pre-owned aircraft, auto and light trucks, and medium and heavy duty trucks; and finances construction equipment, aircrafts, medium and heavy duty trucks, step vans, vocational work trucks, motor coaches, shuttle buses, funeral cars, automobiles, and other equipment. Additionally, it provides corporate and personal property, casualty, and individual and group health and life insurance products and services. 1st Source Corporation was founded in 1863 and is headquartered in South Bend, Indiana.