First Financial Northwest (NASDAQ:FFNW) and Allegiance Bancshares (NASDAQ:ABTX) are both small-cap finance companies, but which is the better investment? We will compare the two businesses based on the strength of their earnings, risk, profitability, dividends, analyst recommendations, valuation and institutional ownership.

Institutional & Insider Ownership

44.1% of First Financial Northwest shares are held by institutional investors. Comparatively, 36.1% of Allegiance Bancshares shares are held by institutional investors. 6.9% of First Financial Northwest shares are held by company insiders. Comparatively, 10.2% of Allegiance Bancshares shares are held by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock is poised for long-term growth.

Analyst Recommendations

This is a summary of recent ratings and price targets for First Financial Northwest and Allegiance Bancshares, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
First Financial Northwest 0 0 1 0 3.00
Allegiance Bancshares 0 3 0 0 2.00

Allegiance Bancshares has a consensus target price of $37.42, indicating a potential downside of 2.65%. Given Allegiance Bancshares’ higher possible upside, analysts clearly believe Allegiance Bancshares is more favorable than First Financial Northwest.

Valuation and Earnings

This table compares First Financial Northwest and Allegiance Bancshares’ gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
First Financial Northwest $63.76 million 2.45 $10.37 million $1.03 14.72
Allegiance Bancshares $246.33 million 3.20 $52.96 million $2.57 14.96

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

Risk & Volatility

First Financial Northwest has a beta of 0.21, meaning that its share price is 79% less volatile than the S&P 500. Comparatively, Allegiance Bancshares has a beta of 1.42, meaning that its share price is 42% more volatile than the S&P 500.

Profitability

This table compares First Financial Northwest and Allegiance Bancshares’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
First Financial Northwest 16.26% 6.75% 0.80%
Allegiance Bancshares 21.50% 7.66% 1.11%

Summary

Allegiance Bancshares beats First Financial Northwest on 11 of the 14 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 nine additional branches in King and Snohomish counties, Washington. First Financial Northwest, Inc. was founded in 1923 and is based in Renton, Washington.

About Allegiance Bancshares

Allegiance Bancshares, Inc. operates as the bank holding company for Allegiance Bank that provides a range of commercial banking services primarily to small and medium-sized businesses, professionals, and individual customers. It accepts deposit products, including checking accounts, commercial accounts, and savings accounts, as well as other time deposits comprising money market accounts and certificates of deposit. The company also grants various loan products, which include commercial and industrial loans; mortgage warehouse loans; commercial real estate loans, including multi-family residential loans; commercial real estate construction and land development loans; residential real estate loans, such as 1-4 family residential mortgage loans; residential construction loans; and consumer and other loans. In addition, it offers automated teller machines, drive-through services, and depository facilities; mobile banking services; and telephone, mail, and Internet banking services. Further, the company provides safe deposit boxes, debit cards, cash management and wire transfer services, night depository services, direct deposits, cashier's checks, and letters of credit. As of December 31, 2018, it operated 27 bank offices and 1 loan production office in the Houston metropolitan area, as well as 1 bank office location in Beaumont. The company was founded in 2007 and is headquartered in Houston, Texas.

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