First Interstate Bancsystem (NASDAQ:FIBK) and Independent Bank Co.(MI) (NASDAQ:IBCP) are both small-cap finance companies, but which is the better investment? We will contrast the two companies based on the strength of their analyst recommendations, institutional ownership, earnings, dividends, profitability, valuation and risk.

Risk & Volatility

First Interstate Bancsystem has a beta of 1.14, suggesting that its share price is 14% more volatile than the S&P 500. Comparatively, Independent Bank Co.(MI) has a beta of 0.95, suggesting that its share price is 5% less volatile than the S&P 500.

Profitability

This table compares First Interstate Bancsystem and Independent Bank Co.(MI)’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
First Interstate Bancsystem 23.56% 8.61% 1.17%
Independent Bank Co.(MI) 22.58% 13.42% 1.28%

Institutional and Insider Ownership

50.1% of First Interstate Bancsystem shares are held by institutional investors. Comparatively, 81.3% of Independent Bank Co.(MI) shares are held by institutional investors. 22.0% of First Interstate Bancsystem shares are held by insiders. Comparatively, 4.4% of Independent Bank Co.(MI) shares are held by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company is poised for long-term growth.

Dividends

First Interstate Bancsystem pays an annual dividend of $1.36 per share and has a dividend yield of 4.7%. Independent Bank Co.(MI) pays an annual dividend of $0.80 per share and has a dividend yield of 5.7%. First Interstate Bancsystem pays out 44.3% of its earnings in the form of a dividend. Independent Bank Co.(MI) pays out 40.0% 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. First Interstate Bancsystem has raised its dividend for 6 consecutive years and Independent Bank Co.(MI) has raised its dividend for 4 consecutive years. Independent Bank Co.(MI) is clearly the better dividend stock, given its higher yield and lower payout ratio.

Valuation and Earnings

This table compares First Interstate Bancsystem and Independent Bank Co.(MI)’s revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
First Interstate Bancsystem $703.90 million 2.67 $181.00 million $3.07 9.48
Independent Bank Co.(MI) $196.66 million 1.55 $46.44 million $2.00 6.98

First Interstate Bancsystem has higher revenue and earnings than Independent Bank Co.(MI). Independent Bank Co.(MI) is trading at a lower price-to-earnings ratio than First Interstate Bancsystem, indicating that it is currently the more affordable of the two stocks.

Analyst Recommendations

This is a summary of current ratings and price targets for First Interstate Bancsystem and Independent Bank Co.(MI), as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
First Interstate Bancsystem 0 1 3 0 2.75
Independent Bank Co.(MI) 0 2 3 0 2.60

First Interstate Bancsystem currently has a consensus price target of $37.33, indicating a potential upside of 28.25%. Independent Bank Co.(MI) has a consensus price target of $24.00, indicating a potential upside of 71.86%. Given Independent Bank Co.(MI)’s higher possible upside, analysts clearly believe Independent Bank Co.(MI) is more favorable than First Interstate Bancsystem.

Summary

First Interstate Bancsystem beats Independent Bank Co.(MI) on 10 of the 16 factors compared between the two stocks.

First Interstate Bancsystem Company Profile

First Interstate BancSystem, Inc. operates as the bank holding company for First Interstate Bank that provides range of banking products and services in the United States. Its deposit products include checking, savings, time, and demand deposits; and repurchase agreements primarily for commercial and municipal depositors. The company's loan portfolio consists of real estate loans, including commercial real estate, construction, residential, agricultural, and other real estate loans; consumer loans; commercial loans; and other loans, including fixed and variable rate loans. It also provides a range of trust, employee benefit, investment management, insurance, agency, and custodial services to individuals, businesses, and nonprofit organizations, which include the administration of estates and personal trusts; management of investment accounts for individuals, employee benefit plans, and charitable foundations; and insurance planning. In addition, the company offers Internet and mobile banking services. It serves individuals, businesses, municipalities, and other entities in various industries, including agriculture, construction, energy, healthcare and professional services, education and governmental services, mining, technology, retail and wholesale trade, and tourism. The company operates 147 banking offices located in Idaho, Montana, Oregon, South Dakota, Washington, and Wyoming. First Interstate BancSystem, Inc. was incorporated in 1971 and is headquartered in Billings, Montana.

Independent Bank Co.(MI) Company Profile

Independent Bank Corporation operates as the holding company for Independent Bank that provides various banking services to individuals and businesses in Michigan. The company offers checking and savings accounts, commercial lending, direct and indirect consumer financing, mortgage lending, and safe deposit box services, as well as automatic teller machines, and Internet and mobile banking services. It also provides title insurance, investment, and insurance brokerage services. The company offers its services through approximately 67 branches, 1 drive-thru facility, and 12 loan production offices. Independent Bank Corporation was founded in 1864 and is based in Grand Rapids, Michigan.

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