Critical Contrast: First Financial Northwest (NASDAQ:FFNW) & Midland States Bancorp (NASDAQ:MSBI)

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

Volatility and Risk

Midland States Bancorp has a beta of 0.76, meaning that its stock price is 24% less volatile than the S&P 500. Comparatively, First Financial Northwest has a beta of 0.54, meaning that its stock price is 46% less volatile than the S&P 500.

Dividends

Midland States Bancorp pays an annual dividend of $1.24 per share and has a dividend yield of 5.5%. First Financial Northwest pays an annual dividend of $0.52 per share and has a dividend yield of 2.4%. Midland States Bancorp pays out 42.2% of its earnings in the form of a dividend. First Financial Northwest pays out 157.6% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. First Financial Northwest has increased its dividend for 7 consecutive years. Midland States Bancorp is clearly the better dividend stock, given its higher yield and lower payout ratio.

Analyst Ratings

This is a summary of recent recommendations and price targets for Midland States Bancorp and First Financial Northwest, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Midland States Bancorp	0	4	0	0	2.00
First Financial Northwest	0	2	1	0	2.33

Midland States Bancorp presently has a consensus target price of $25.63, suggesting a potential upside of 13.13%. First Financial Northwest has a consensus target price of $23.00, suggesting a potential upside of 8.34%. Given Midland States Bancorp’s higher probable upside, research analysts plainly believe Midland States Bancorp is more favorable than First Financial Northwest.

Earnings & Valuation

This table compares Midland States Bancorp and First Financial Northwest’s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Midland States Bancorp	$470.89 million	1.03	$75.46 million	$2.94	7.70
First Financial Northwest	$80.93 million	2.41	$6.30 million	$0.33	64.34

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

Profitability

This table compares Midland States Bancorp and First Financial Northwest’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Midland States Bancorp	15.17%	11.50%	0.97%
First Financial Northwest	3.78%	1.94%	0.21%

Insider and Institutional Ownership

60.9% of Midland States Bancorp shares are owned by institutional investors. Comparatively, 55.0% of First Financial Northwest shares are owned by institutional investors. 5.6% of Midland States Bancorp shares are owned by company insiders. Comparatively, 7.2% of First Financial Northwest shares are owned by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock will outperform the market over the long term.

Summary

Midland States Bancorp beats First Financial Northwest on 11 of the 17 factors compared between the two stocks.

About Midland States Bancorp

Midland States Bancorp, Inc. operates as a financial holding company for Midland States Bank that provides various banking products and services to individuals, businesses, municipalities, and other entities. It operates through Banking, Wealth Management, and Other segments. The company provides a range of financial products and services to consumers and businesses, including commercial loans to finance agricultural equipment and production; and commercial real estate loans for owner occupied offices, warehouses and production facilities, office buildings, hotels, mixed-use residential and commercial facilities, retail centers, multifamily properties, and assisted living facilities. In addition, it offers construction and land development loans, such as real estate investment properties and residential developments, and lesser extent loans; and residential real estate loans, which includes first and second mortgage loans, and home equity lines of credit consisting of loans secured by first or second mortgages on primarily owner occupied primary residences. The company also provides consumer installment loans for the purchase of cars, boats and other recreational vehicles, as well as for the purchase of major appliances and other home improvement projects; and commercial equipment leasing programs for manufacturing, construction, transportation, and healthcare industries. Further, it offers merchant services; deposit products, including checking, time, savings, money market, and certificates of deposit, as well as sweep accounts; letters of credit; and trust and wealth management services, such as financial and estate planning, trustee and custodial, investment management, tax, insurance, and business planning, corporate retirement plan consulting and administration, and retail brokerage services. The company was founded in 1881 and is headquartered in Effingham, Illinois.

About First Financial Northwest

First Financial Northwest, Inc. operates as the bank 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 accounts, 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; business loans; and consumer loans, such as home equity loans, lines of credit, second mortgage term loans, auto loans, and savings account loans. The company also provides wealth management services; and online banking services, as well as debit cards and ATMs. The company was founded in 1923 and is headquartered in Renton, Washington.