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

Profitability

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

Net Margins Return on Equity Return on Assets
Financial Institutions 20.08% 10.03% 0.83%
Bank Mutual Corporation 14.19% 5.72% 0.62%

Insider & Institutional Ownership

67.0% of Financial Institutions shares are owned by institutional investors. Comparatively, 56.1% of Bank Mutual Corporation shares are owned by institutional investors. 5.5% of Financial Institutions shares are owned by insiders. Comparatively, 10.0% of Bank Mutual Corporation shares are owned by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company will outperform the market over the long term.

Valuation and Earnings

This table compares Financial Institutions and Bank Mutual Corporation’s revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Financial Institutions $127.68 million 3.56 $30.75 million $2.05 14.78
Bank Mutual Corporation $95.97 million 5.17 $15.62 million $0.34 31.76

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

Analyst Ratings

This is a summary of recent ratings for Financial Institutions and Bank Mutual Corporation, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Financial Institutions 0 2 1 0 2.33
Bank Mutual Corporation 0 2 0 0 2.00

Financial Institutions currently has a consensus target price of $32.25, indicating a potential upside of 6.44%. Bank Mutual Corporation has a consensus target price of $10.75, indicating a potential downside of 0.46%. Given Financial Institutions’ stronger consensus rating and higher probable upside, analysts clearly believe Financial Institutions is more favorable than Bank Mutual Corporation.

Dividends

Financial Institutions pays an annual dividend of $0.84 per share and has a dividend yield of 2.8%. Bank Mutual Corporation pays an annual dividend of $0.22 per share and has a dividend yield of 2.0%. Financial Institutions pays out 41.0% of its earnings in the form of a dividend. Bank Mutual Corporation pays out 64.7% 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 is clearly the better dividend stock, given its higher yield and lower payout ratio.

Risk and Volatility

Financial Institutions has a beta of 1.2, meaning that its stock price is 20% more volatile than the S&P 500. Comparatively, Bank Mutual Corporation has a beta of 0.57, meaning that its stock price is 43% less volatile than the S&P 500.

Summary

Financial Institutions beats Bank Mutual Corporation on 13 of the 16 factors compared between the two stocks.

Financial Institutions Company Profile

Financial Institutions, Inc. is a financial holding company. The Company conducts its business through its subsidiaries: Five Star Bank (the Bank), a New York chartered bank; Scott Danahy Naylon, LLC (SDN), a full service insurance agency, and Courier Capital, LLC (Courier Capital), an investment advisory and wealth management company. The Company operates through two segments: Banking and Non-Banking. The Banking segment includes all of the Company’s retail and commercial banking operations. The Non-Banking segment includes the activities of SDN and Courier Capital. The Company offers a range of banking and related financial services to consumer, commercial and municipal customers through its bank and nonbank subsidiaries. The Company’s indirect lending network includes relationships with franchised automobile dealers in Western and Central New York, the Capital District of New York and Northern and Central Pennsylvania.

Bank Mutual Corporation Company Profile

Bank Mutual Corporation is a savings and loan holding company. The Company owns Bank Mutual (the Bank), a federally-chartered savings bank. The Bank is engaged in the business of community banking, which includes attracting deposits from and making loans to the general public and private businesses, as well as governmental and non-profit entities. In addition to deposits, the Bank obtains funds through borrowings from the Federal Home Loan Bank (FHLB) of Chicago. These funding sources are used to originate loans, including commercial and industrial loans, multi-family residential loans, non-residential commercial real estate loans, one- to four-family loans, home equity loans and other consumer loans. The Bank also purchases and/or participates in loans from third-party financial institutions and is a seller of residential loans in the secondary market. It also invests in mortgage-related and other investment securities.

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