Critical Analysis: First Bancorp (NASDAQ:FBNC) versus HomeStreet (NASDAQ:HMST)

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

Earnings & Valuation

This table compares First Bancorp and HomeStreet”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
First Bancorp	$343.85 million	4.97	$76.21 million	$1.84	22.44
HomeStreet	$45.83 million	3.91	-$144.34 million	($7.66)	-1.24

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

Analyst Ratings

This is a breakdown of current ratings and price targets for First Bancorp and HomeStreet, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
First Bancorp	0	1	1	1	3.00
HomeStreet	0	2	1	0	2.33

First Bancorp currently has a consensus price target of $52.00, suggesting a potential upside of 25.94%. HomeStreet has a consensus price target of $14.33, suggesting a potential upside of 51.36%. Given HomeStreet’s higher possible upside, analysts plainly believe HomeStreet is more favorable than First Bancorp.

Dividends

First Bancorp pays an annual dividend of $0.88 per share and has a dividend yield of 2.1%. HomeStreet pays an annual dividend of $0.40 per share and has a dividend yield of 4.2%. First Bancorp pays out 47.8% of its earnings in the form of a dividend. HomeStreet pays out -5.2% 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. HomeStreet is clearly the better dividend stock, given its higher yield and lower payout ratio.

Volatility and Risk

First Bancorp has a beta of 1.04, meaning that its stock price is 4% more volatile than the S&P 500. Comparatively, HomeStreet has a beta of 1.45, meaning that its stock price is 45% more volatile than the S&P 500.

Profitability

This table compares First Bancorp and HomeStreet’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
First Bancorp	14.19%	8.04%	0.95%
HomeStreet	-40.30%	-4.23%	-0.23%

Insider & Institutional Ownership

68.4% of First Bancorp shares are held by institutional investors. Comparatively, 74.7% of HomeStreet shares are held by institutional investors. 3.7% of First Bancorp shares are held by company insiders. Comparatively, 4.6% of HomeStreet shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock will outperform the market over the long term.

Summary

First Bancorp beats HomeStreet on 10 of the 16 factors compared between the two stocks.

About First Bancorp

First Bancorp operates as the bank holding company for First Bank that provides banking products and services for individuals and small to medium-sized businesses. The company accepts deposit products, such as checking, savings, and money market accounts, as well as time deposits, including certificate of deposits and individual retirement accounts. It also offers loans for a range of consumer and commercial purposes comprising loans for business, real estate, personal, home improvement, and automobiles, as well as residential mortgages and small business administration loans; and accounts receivable financing and factoring, inventory financing, and purchase order financing services. In addition, the company provides credit and debit cards, letter of credits, and safe deposit box rental services, as well as electronic funds transfer services consisting of wire transfers; and internet and mobile banking, cash management, bank-by-phone services, and remote deposit capture services. Further, it offers investment and insurance products, such as mutual funds, annuities, long-term care insurance, life insurance, and company retirement plans, as well as property and casualty insurance products; and financial planning services. The company was founded in 1934 and is headquartered in Southern Pines, North Carolina.

About HomeStreet

HomeStreet, Inc. operates as the bank holding company for HomeStreet Bank that provides commercial, mortgage, and consumer/retail banking services in the Western United States. The company offers personal and business checking, savings, interest-bearing negotiable order of withdrawal, and money market accounts, as well as certificates of deposit; credit cards; insurance; and treasury management services. Its loan products include commercial real estate (CRE), multifamily, construction and land development, owner occupied CRE and commercial business loans; and single family, home equity, and other loans. In addition, the company offers online, mobile, and telephone banking. It serves small and medium sized businesses, real estate investors, professional firms, and individuals. The company operates through branches and ATMs. The company was formerly known as Continental Mortgage and Loan Company. HomeStreet, Inc. was incorporated in 1921 and is headquartered in Seattle, Washington.