Critical Survey: Financial Institutions (NASDAQ:FISI) versus First Bank (NASDAQ:FRBA)

Financial Institutions (NASDAQ:FISI) and First Bank (NASDAQ:FRBA) are both finance companies, but which is the better investment? We will contrast the two companies based on the strength of their earnings, valuation, profitability, institutional ownership, analyst recommendations, dividends and risk.

Institutional & Insider Ownership

60.5% of Financial Institutions shares are owned by institutional investors. Comparatively, 64.9% of First Bank shares are owned by institutional investors. 2.4% of Financial Institutions shares are owned by company insiders. Comparatively, 13.1% of First Bank 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.

Analyst Recommendations

This is a summary of current ratings for Financial Institutions and First Bank, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Financial Institutions	1	1	2	0	2.25
First Bank	0	1	2	1	3.00

Financial Institutions currently has a consensus target price of $33.33, indicating a potential upside of 17.25%. First Bank has a consensus target price of $18.25, indicating a potential upside of 16.84%. Given Financial Institutions’ higher possible upside, equities research analysts plainly believe Financial Institutions is more favorable than First Bank.

Risk & Volatility

Financial Institutions has a beta of 0.71, meaning that its share price is 29% less volatile than the S&P 500. Comparatively, First Bank has a beta of 0.78, meaning that its share price is 22% less volatile than the S&P 500.

Profitability

This table compares Financial Institutions and First Bank’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Financial Institutions	-2.93%	11.27%	1.04%
First Bank	17.27%	10.12%	1.08%

Earnings and Valuation

This table compares Financial Institutions and First Bank”s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Financial Institutions	$366.61 million	1.56	-$41.65 million	($1.37)	-20.75
First Bank	$229.43 million	N/A	$42.24 million	$1.66	9.41

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

Dividends

Financial Institutions pays an annual dividend of $1.24 per share and has a dividend yield of 4.4%. First Bank pays an annual dividend of $0.24 per share and has a dividend yield of 1.5%. Financial Institutions pays out -90.5% of its earnings in the form of a dividend. First Bank pays out 14.5% 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. Financial Institutions has raised its dividend for 1 consecutive years. Financial Institutions is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Summary

First Bank beats Financial Institutions on 10 of the 16 factors compared between the two stocks.

About Financial Institutions

Financial Institutions, Inc. operates as a holding company for the Five Star Bank, a chartered bank that provides banking and financial services to individuals, municipalities, and businesses in New York. The company provides checking and savings account programs, including money market accounts, certificates of deposit, sweep investments, and individual retirement and other qualified plan accounts, as well as NOW accounts. Its loan products include term loans and lines of credit; short and medium-term commercial loans for working capital, business expansion, and purchase of equipment; commercial business loans to the agricultural industry; commercial mortgage loans; one-to-four family residential mortgage loans, home improvement loans, closed-end home equity loans, and home equity lines of credit; and consumer loans, such as automobile, secured installment, and personal loans. The company offers personal insurance products, including automobile, homeowners, boat, recreational vehicle, landlord, and umbrella coverage; commercial insurance comprising property, liability, automobile, inland marine, workers compensation, bonds, crop, and umbrella insurance products; and financial services, such as life and disability insurance, medicare supplements, long-term care, annuities, mutual funds, and retirement programs. In addition, it offers customized investment advisory, wealth management, investment consulting, and retirement plan services, as well as operates a real estate investment trust that holds residential mortgages and commercial real estate loans. Financial Institutions, Inc. was founded in 1817 and is headquartered in Warsaw, New York.

About First Bank

First Bank provides various banking products and services to small to mid-sized businesses and individuals. The company accepts various deposits, including non-interest-bearing demand deposits, interest bearing demand accounts, money market accounts, savings accounts, and certificates of deposit, as well as commercial checking accounts. It also offers various loan products comprising commercial and industrial loans, which include line of credit, inventory, equipment, and short-term working capital financing; commercial real estate loans, such as owner-occupied, investor, construction and development, and multi-family loans; residential real estate loans comprising residential mortgages, first and second lien home equity loans, and revolving lines of credit; and consumer and other loans consists of auto, personal, traditional installment, and other loans. The company also provides electronic banking services, including Internet and mobile banking, electronic bill payment, and banking by phone; ATM and debit cards, and wire and ACH transfer services; remote deposit capture; and cash management services, as well as engages in the capital markets activities. It operates full-service branches in Cinnaminson, Delanco, Denville, Ewing, Fairfield, Flemington, Hamilton, Lawrence, Monroe, Pennington, Randolph, Somerset, and Williamstown, New Jersey; Doylestown, Trevose, Warminster, and West Chester, Paoli, Malvern, Coventry, Devon, Lionville, and Glen Mills Pennsylvania; and Palm Beach, Florida. First Bank was incorporated in 2007 and is headquartered in Hamilton, New Jersey.