Reviewing Norwood Financial (NASDAQ:NWFL) and First Bank (NASDAQ:FRBA)

Norwood Financial (NASDAQ:NWFL) and First Bank (NASDAQ:FRBA) are both small-cap finance companies, but which is the superior business? We will contrast the two businesses based on the strength of their earnings, dividends, profitability, institutional ownership, risk, analyst recommendations and valuation.

Analyst Recommendations

This is a summary of recent ratings and target prices for Norwood Financial and First Bank, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Norwood Financial	0	0	0	0	N/A
First Bank	0	0	1	0	3.00

First Bank has a consensus target price of $18.00, suggesting a potential upside of 17.57%. Given First Bank’s higher probable upside, analysts plainly believe First Bank is more favorable than Norwood Financial.

Earnings and Valuation

This table compares Norwood Financial and First Bank’s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Norwood Financial	$68.61 million	3.05	$16.76 million	$1.91	13.53
First Bank	$120.30 million	2.49	$20.90 million	$1.13	13.55

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

Insider & Institutional Ownership

28.1% of Norwood Financial shares are owned by institutional investors. Comparatively, 64.9% of First Bank shares are owned by institutional investors. 9.1% of Norwood Financial shares are owned by insiders. Comparatively, 13.1% of First Bank shares are owned by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock will outperform the market over the long term.

Dividends

Norwood Financial pays an annual dividend of $1.20 per share and has a dividend yield of 4.6%. First Bank pays an annual dividend of $0.24 per share and has a dividend yield of 1.6%. Norwood Financial pays out 62.8% of its earnings in the form of a dividend. First Bank pays out 21.2% 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. Norwood Financial has increased its dividend for 6 consecutive years. Norwood Financial is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Norwood Financial	11.52%	7.47%	0.59%
First Bank	14.48%	12.55%	1.30%

Volatility and Risk

Norwood Financial has a beta of 0.65, indicating that its stock price is 35% less volatile than the S&P 500. Comparatively, First Bank has a beta of 0.95, indicating that its stock price is 5% less volatile than the S&P 500.

Summary

First Bank beats Norwood Financial on 12 of the 16 factors compared between the two stocks.

About Norwood Financial

Norwood Financial Corp. operates as the bank holding company for Wayne Bank that provides various banking products and services. The company accepts a range of deposit products, including interest-bearing and non-interest-bearing transaction accounts, and statement savings and money market accounts, as well as certificate of deposits. It also provides commercial loans comprising lines of credit, revolving credit, term loans, mortgages, secured lending products, and letter of credit facilities; municipal finance lending; construction loans for commercial construction projects and single-family residences; land loans; construction financing; consumer loans; mortgage lending to finance principal residences and second home dwellings; and indirect dealer financing of new and used automobiles, boats, and recreational vehicles. In addition, the company offers investment securities services; personal and business credit services; trust and investment products; and cash management, direct deposit, remote deposit capture, mobile deposit capture, automated clearing house activity, real estate settlement, and Internet and mobile banking services. Further, it engages in the annuity and mutual fund sale, and discount brokerage activities, as well as insurance agency business. The company serves consumers, businesses, nonprofit organizations, and municipalities. It operates branches in Northeastern Pennsylvania; and in Delaware, Sullivan, Ontario, Otsego, and Yates Counties, New York, as well as automated teller machines. Norwood Financial Corp. was founded in 1870 and is headquartered in Honesdale, Pennsylvania.

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.