Analyzing FS Bancorp (NASDAQ:FSBW) & Northrim BanCorp (NASDAQ:NRIM)

FS Bancorp (NASDAQ:FSBW) and Northrim BanCorp (NASDAQ:NRIM) are both small-cap finance companies, but which is the better investment? We will compare the two businesses based on the strength of their dividends, risk, analyst recommendations, institutional ownership, profitability, valuation and earnings.

Insider & Institutional Ownership

63.9% of FS Bancorp shares are held by institutional investors. Comparatively, 66.0% of Northrim BanCorp shares are held by institutional investors. 12.7% of FS Bancorp shares are held by company insiders. Comparatively, 3.9% of Northrim BanCorp shares are held by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock will outperform the market over the long term.

Profitability

This table compares FS Bancorp and Northrim BanCorp’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
FS Bancorp	16.63%	11.87%	1.15%
Northrim BanCorp	20.23%	15.97%	1.41%

Analyst Recommendations

This is a breakdown of current recommendations for FS Bancorp and Northrim BanCorp, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
FS Bancorp	0	1	0	0	2.00
Northrim BanCorp	0	0	1	0	3.00

FS Bancorp currently has a consensus target price of $44.00, indicating a potential upside of 2.44%. Northrim BanCorp has a consensus target price of $104.00, indicating a potential upside of 5.08%. Given Northrim BanCorp’s stronger consensus rating and higher possible upside, analysts plainly believe Northrim BanCorp is more favorable than FS Bancorp.

Earnings and Valuation

This table compares FS Bancorp and Northrim BanCorp”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
FS Bancorp	$206.39 million	1.60	$35.02 million	$4.35	9.87
Northrim BanCorp	$195.96 million	2.79	$36.97 million	$7.52	13.16

Northrim BanCorp has lower revenue, but higher earnings than FS Bancorp. FS Bancorp is trading at a lower price-to-earnings ratio than Northrim BanCorp, indicating that it is currently the more affordable of the two stocks.

Volatility & Risk

FS Bancorp has a beta of 0.71, indicating that its stock price is 29% less volatile than the S&P 500. Comparatively, Northrim BanCorp has a beta of 0.96, indicating that its stock price is 4% less volatile than the S&P 500.

Dividends

FS Bancorp pays an annual dividend of $1.12 per share and has a dividend yield of 2.6%. Northrim BanCorp pays an annual dividend of $2.56 per share and has a dividend yield of 2.6%. FS Bancorp pays out 25.7% of its earnings in the form of a dividend. Northrim BanCorp pays out 34.0% 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. FS Bancorp has raised its dividend for 12 consecutive years and Northrim BanCorp has raised its dividend for 16 consecutive years. FS Bancorp is clearly the better dividend stock, given its higher yield and lower payout ratio.

Summary

Northrim BanCorp beats FS Bancorp on 13 of the 17 factors compared between the two stocks.

About FS Bancorp

FS Bancorp, Inc. operates as a bank holding company for 1st Security Bank of Washington that provides banking and financial services to local families, local and regional businesses, and industry niches. The company operates in two segments, Commercial and Consumer Banking; and Home Lending. It offers various deposit instruments, including checking accounts, money market deposit accounts, savings accounts, and certificates of deposit. The company provides one-to-four-family residential first mortgages, second mortgage/home equity loan products, non-mortgage commercial business loans, commercial real estate loans, and construction and development loans, as well as consumer loans, which primarily include personal lines of credit, credit cards, automobile, direct home improvement, loans on deposit, and recreational loans. It operates full bank service branches and home loan production offices in suburban communities in the greater Puget Sound area, including Snohomish, King, Pierce, Jefferson, Kitsap, Clallam, Grays Harbor, and Thurston counties; and a loan production office in the market area of the Tri-Cities. FS Bancorp, Inc. was founded in 1936 and is headquartered in Mountlake Terrace, Washington.

About Northrim BanCorp

Northrim BanCorp, Inc. operates as the bank holding company for Northrim Bank that provides commercial banking products and services to businesses and professional individuals. It operates through two segments, Community Banking and Home Mortgage Lending. The company offers noninterest-bearing checking accounts and interest-bearing time deposits, checking and savings accounts, individual retirement and money market deposit accounts, certificates of deposit, and business sweep accounts. It also provides short and medium-term commercial loans, commercial credit lines, construction and real estate loans, and consumer loans, as well as short-term working capital. In addition, the company offers other services comprising consumer and business online banking, mobile app, and mobile deposits; and debit and credit cards. Further, it provides mobile web and app banking, consumer online account opening, personal finance, online documents, consumer debit cards, business debit cards, my rewards for consumer debit cards, retail lockbox, card control, corporate purchase cards, integrated payables, home equity advantage access cards, telebanking, and automated teller services. Additionally, the company offers personalized checks at account opening, overdraft protection from a savings account, commercial drive-up banking, automatic transfer and payment, People Pay, external transfer, Bill Pay, wire transfer, direct payroll deposit, electronic tax payment, Automated Clearing House origination and receipt, remote deposit capture, account reconciliation and positive pay, merchant, cash management, annuity, and long-term investment portfolio products and services. It also provides investment advisory, trust, wealth management, factoring, and mortgage services. The company was founded in 1990 and is headquartered in Anchorage, Alaska.