First Financial Corporation Indiana (NASDAQ:THFF) versus Heritage Financial (NASDAQ:HFWA) Critical Review

First Financial Corporation Indiana (NASDAQ:THFF) and Heritage Financial (NASDAQ:HFWA) are both small-cap finance companies, but which is the superior business? We will compare the two businesses based on the strength of their profitability, dividends, institutional ownership, analyst recommendations, valuation, earnings and risk.

Institutional & Insider Ownership

72.7% of First Financial Corporation Indiana shares are owned by institutional investors. Comparatively, 78.3% of Heritage Financial shares are owned by institutional investors. 5.0% of First Financial Corporation Indiana shares are owned by company insiders. Comparatively, 1.5% of Heritage Financial shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock is poised for long-term growth.

Analyst Ratings

This is a breakdown of current recommendations and price targets for First Financial Corporation Indiana and Heritage Financial, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
First Financial Corporation Indiana	0	4	1	1	2.50
Heritage Financial	1	3	4	0	2.38

First Financial Corporation Indiana currently has a consensus target price of $87.25, suggesting a potential upside of 14.53%. Heritage Financial has a consensus target price of $32.67, suggesting a potential upside of 14.54%. Given Heritage Financial’s higher probable upside, analysts plainly believe Heritage Financial is more favorable than First Financial Corporation Indiana.

Dividends

First Financial Corporation Indiana pays an annual dividend of $2.24 per share and has a dividend yield of 2.9%. Heritage Financial pays an annual dividend of $1.00 per share and has a dividend yield of 3.5%. First Financial Corporation Indiana pays out 31.4% of its earnings in the form of a dividend. Heritage Financial pays out 47.6% 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. First Financial Corporation Indiana has raised its dividend for 2 consecutive years and Heritage Financial has raised its dividend for 14 consecutive years. Heritage Financial is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Valuation and Earnings

This table compares First Financial Corporation Indiana and Heritage Financial”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
First Financial Corporation Indiana	$347.56 million	2.61	$79.21 million	$7.14	10.67
Heritage Financial	$335.97 million	3.47	$67.53 million	$2.10	13.58

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

Profitability

This table compares First Financial Corporation Indiana and Heritage Financial’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
First Financial Corporation Indiana	23.32%	13.02%	1.43%
Heritage Financial	20.44%	8.78%	1.15%

Risk & Volatility

First Financial Corporation Indiana has a beta of 0.44, meaning that its share price is 56% less volatile than the S&P 500. Comparatively, Heritage Financial has a beta of 0.5, meaning that its share price is 50% less volatile than the S&P 500.

Summary

First Financial Corporation Indiana beats Heritage Financial on 10 of the 18 factors compared between the two stocks.

About First Financial Corporation Indiana

First Financial Corporation, through its subsidiaries, provides various financial services. The company offers non-interest-bearing demand, interest-bearing demand, savings, time, and other time deposits. It also provides commercial loans primarily to expand a business or finance asset purchases; residential real estate and residential real estate construction loans; and home equity loans and lines, secured loans, and cash/CD secured and unsecured loans. In addition, the company offers lease financing, trust account, depositor, and insurance services. The company was founded in 1834 and is headquartered in Terre Haute, Indiana.

About Heritage Financial

Heritage Financial Corporation operates as the bank holding company for Heritage Bank that provides various financial services to small and medium sized businesses and individuals in the United States. It accepts various deposit products, such as noninterest demand deposits, interest bearing demand deposits, money market accounts, savings accounts, personal checking accounts, and certificates of deposit. The company’s loan portfolio includes commercial and industrial loans, owner-occupied and non-owner occupied commercial real estate loans, one-to-four family residential loans, real estate construction and land development loans, consumer loans, commercial business loans, lines of credit, term equipment financing, and term real estate loans, as well as commercial business loans to a range of businesses in industries that include real estate and rental and leasing, healthcare, accommodation and food services, retail trade, and construction. It also originates loans that are guaranteed by the U.S. Small Business Administration; and provides objective advice from trusted advisers. The company was formerly known as Heritage Financial Corporation, M.H.C. and changed its name to Heritage Financial Corporation in 1998. Heritage Financial Corporation was founded in 1927 and is headquartered in Olympia, Washington.