First Financial Northwest (NASDAQ:FFNW) vs. Independent Bank Co.(MI) (IBCP) Critical Comparison

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First Financial Northwest (NASDAQ:FFNW) and Independent Bank Co.(MI) (NASDAQ:IBCP) are both small-cap finance companies, but which is the better investment? We will contrast the two companies based on the strength of their institutional ownership, valuation, earnings, analyst recommendations, profitability, risk and dividends.

Analyst Recommendations

This is a summary of current ratings and recommmendations for First Financial Northwest and Independent Bank Co.(MI), as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
First Financial Northwest 0 2 0 0 2.00
Independent Bank Co.(MI) 0 3 2 0 2.40

First Financial Northwest presently has a consensus target price of $19.00, indicating a potential upside of 28.99%. Independent Bank Co.(MI) has a consensus target price of $26.00, indicating a potential upside of 9.80%. Given First Financial Northwest’s higher probable upside, equities analysts clearly believe First Financial Northwest is more favorable than Independent Bank Co.(MI).

Dividends

First Financial Northwest pays an annual dividend of $0.32 per share and has a dividend yield of 2.2%. Independent Bank Co.(MI) pays an annual dividend of $0.60 per share and has a dividend yield of 2.5%. First Financial Northwest pays out 36.0% of its earnings in the form of a dividend. Independent Bank Co.(MI) pays out 49.2% 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. Independent Bank Co.(MI) has raised its dividend for 2 consecutive years. Independent Bank Co.(MI) is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Earnings and Valuation

This table compares First Financial Northwest and Independent Bank Co.(MI)’s gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
First Financial Northwest $49.85 million 3.22 $8.47 million $0.89 16.55
Independent Bank Co.(MI) $140.84 million 4.06 $20.47 million $1.22 19.41

Independent Bank Co.(MI) has higher revenue and earnings than First Financial Northwest. First Financial Northwest is trading at a lower price-to-earnings ratio than Independent Bank Co.(MI), indicating that it is currently the more affordable of the two stocks.

Risk & Volatility

First Financial Northwest has a beta of 0.14, indicating that its stock price is 86% less volatile than the S&P 500. Comparatively, Independent Bank Co.(MI) has a beta of 0.06, indicating that its stock price is 94% less volatile than the S&P 500.

Profitability

This table compares First Financial Northwest and Independent Bank Co.(MI)’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
First Financial Northwest 25.72% 10.27% 1.25%
Independent Bank Co.(MI) 16.92% 11.84% 1.16%

Insider and Institutional Ownership

45.5% of First Financial Northwest shares are owned by institutional investors. Comparatively, 77.2% of Independent Bank Co.(MI) shares are owned by institutional investors. 6.8% of First Financial Northwest shares are owned by insiders. Comparatively, 2.2% of Independent Bank Co.(MI) shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company is poised for long-term growth.

Summary

Independent Bank Co.(MI) beats First Financial Northwest on 11 of the 17 factors compared between the two stocks.

About First Financial Northwest

First Financial Northwest, Inc. operates as the holding company for First Financial Northwest Bank that provides commercial banking services in Washington. The company offers a range of deposit products, including noninterest bearing accounts, interest-bearing demand accounts, money market deposit accounts, statement savings accounts, and certificates of deposit. Its loan products comprise one-to-four family residential loans; multifamily and commercial real estate loans; construction/land loans for the construction of single-family residences, condominiums, townhouses, multifamily properties, and residential developments; business loans; and consumer loans, such as home equity loans and savings account loans. The company primarily serves the greater Puget Sound region of King, as well as Pierce, Snohomish, and Kitsap counties, Washington through its full-service banking office in Renton, Washington; and eight additional branches in King and Snohomish counties, Washington. First Financial Northwest, Inc. was founded in 1923 and is headquartered in Renton, Washington.

About Independent Bank Co.(MI)

Independent Bank Corporation operates as the bank holding company for Independent Bank that provides various banking services to individuals and businesses in Michigan. The company offers checking and savings accounts, commercial lending, direct and indirect consumer financing, mortgage lending, and safe deposit box services, as well as automatic teller machines, and Internet and mobile banking services. It also provides title insurance, investment, and insurance brokerage services. The company offers its services through approximately 61 branches, 1 drive-thru facility, and 14 loan production offices. Independent Bank Corporation was founded in 1864 and is based in Grand Rapids, Michigan.

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