First Bank (NASDAQ:FRBA) & Franklin Financial Services (NASDAQ:FRAF) Financial Review

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

Analyst Recommendations

This is a summary of current ratings for First Bank and Franklin Financial Services, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
First Bank	0	2	2	0	2.50
Franklin Financial Services	0	0	2	0	3.00

First Bank presently has a consensus target price of $17.75, suggesting a potential upside of 4.72%. Franklin Financial Services has a consensus target price of $59.00, suggesting a potential upside of 3.26%. Given First Bank’s higher possible upside, equities analysts plainly believe First Bank is more favorable than Franklin Financial Services.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
First Bank	17.76%	10.20%	1.10%
Franklin Financial Services	15.90%	13.06%	0.94%

Dividends

First Bank pays an annual dividend of $0.36 per share and has a dividend yield of 2.1%. Franklin Financial Services pays an annual dividend of $1.32 per share and has a dividend yield of 2.3%. First Bank pays out 20.7% of its earnings in the form of a dividend. Franklin Financial Services pays out 27.8% 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. Franklin Financial Services has raised its dividend for 1 consecutive years. Franklin Financial Services is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Volatility & Risk

First Bank has a beta of 0.65, meaning that its share price is 35% less volatile than the S&P 500. Comparatively, Franklin Financial Services has a beta of -0.1, meaning that its share price is 110% less volatile than the S&P 500.

Earnings and Valuation

This table compares First Bank and Franklin Financial Services”s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
First Bank	$245.83 million	1.73	$43.66 million	$1.74	9.74
Franklin Financial Services	$133.55 million	1.92	$21.23 million	$4.74	12.05

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

Institutional and Insider Ownership

64.9% of First Bank shares are held by institutional investors. Comparatively, 24.8% of Franklin Financial Services shares are held by institutional investors. 5.9% of Franklin Financial Services shares are held by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company is poised for long-term growth.

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.

About Franklin Financial Services

Franklin Financial Services Corporation operates as the bank holding company for Farmers and Merchants Trust Company of Chambersburg that provides commercial, retail banking, and trust services to businesses, individuals, governmental entities, and non-profit organizations in Pennsylvania. It offers various deposit products, including checking, savings, money management, and time deposit accounts, as well as demand deposits. The company also provides commercial real estate, construction and land development, commercial and industrial, and residential mortgage loans, as well as installment and revolving loans; consumer loans comprising unsecured personal lines of credit and installment loans; and secured and unsecured commercial and industrial loans, including accounts receivable and inventory financing, and commercial equipment financing. In addition, it offers various investment and trust services comprising estate planning and administration, corporate and personal trust fund management, pension, and profit sharing and other employee benefit funds management services, and custodial services, as well as non-trust related investment services; sells mutual funds, annuities, and insurance products; and offers safe deposit, pension, and fiduciary services. Further, the company engages in non-bank investment activities, such as venture capital investments. The company was founded in 1906 and is headquartered in Chambersburg, Pennsylvania.