Head-To-Head Comparison: First United (NASDAQ:FUNC) & Heritage Financial (NASDAQ:HFWA)

Heritage Financial (NASDAQ:HFWA) and First United (NASDAQ:FUNC) are both small-cap finance companies, but which is the better business? We will compare the two companies based on the strength of their profitability, institutional ownership, valuation, risk, analyst recommendations, earnings and dividends.

Valuation and Earnings

This table compares Heritage Financial and First United”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Heritage Financial	$335.97 million	3.49	$67.53 million	$2.10	13.65
First United	$121.42 million	2.29	$24.51 million	$3.86	11.18

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

Analyst Recommendations

This is a breakdown of recent recommendations for Heritage Financial and First United, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Heritage Financial	0	3	3	0	2.50
First United	0	0	3	0	3.00

Heritage Financial presently has a consensus target price of $32.50, suggesting a potential upside of 13.36%. First United has a consensus target price of $49.50, suggesting a potential upside of 14.69%. Given First United’s stronger consensus rating and higher possible upside, analysts plainly believe First United is more favorable than Heritage Financial.

Dividends

Heritage Financial pays an annual dividend of $1.00 per share and has a dividend yield of 3.5%. First United pays an annual dividend of $1.04 per share and has a dividend yield of 2.4%. Heritage Financial pays out 47.6% of its earnings in the form of a dividend. First United pays out 26.9% 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. Heritage Financial has raised its dividend for 14 consecutive years and First United has raised its dividend for 6 consecutive years. Heritage Financial is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Volatility & Risk

Heritage Financial has a beta of 0.5, meaning that its share price is 50% less volatile than the S&P 500. Comparatively, First United has a beta of 0.52, meaning that its share price is 48% less volatile than the S&P 500.

Insider & Institutional Ownership

78.3% of Heritage Financial shares are owned by institutional investors. Comparatively, 33.3% of First United shares are owned by institutional investors. 1.5% of Heritage Financial shares are owned by insiders. Comparatively, 8.1% of First United shares are owned by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock will outperform the market over the long term.

Profitability

This table compares Heritage Financial and First United’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Heritage Financial	20.44%	8.78%	1.15%
First United	20.05%	13.69%	1.36%

About Heritage Financial

Heritage Financial Corporation operates as the bank holding company for Heritage Bank that provides various financial services to small and medium sized businesses and individuals in the United States. It accepts various deposit products, such as noninterest demand deposits, interest bearing demand deposits, money market accounts, savings accounts, personal checking accounts, and certificates of deposit. The company’s loan portfolio includes commercial and industrial loans, owner-occupied and non-owner occupied commercial real estate loans, one-to-four family residential loans, real estate construction and land development loans, consumer loans, commercial business loans, lines of credit, term equipment financing, and term real estate loans, as well as commercial business loans to a range of businesses in industries that include real estate and rental and leasing, healthcare, accommodation and food services, retail trade, and construction. It also originates loans that are guaranteed by the U.S. Small Business Administration; and provides objective advice from trusted advisers. The company was formerly known as Heritage Financial Corporation, M.H.C. and changed its name to Heritage Financial Corporation in 1998. Heritage Financial Corporation was founded in 1927 and is headquartered in Olympia, Washington.

About First United

First United Corporation operates as the bank holding company for First United Bank & Trust that provides various retail and commercial banking services to businesses and individuals. It offers various deposit products, which includes checking, savings, money market deposit, and regular and individual retirement accounts (IRAs), as well as certificates of deposit. The company loan portfolio includes commercial loans secured by real estate, commercial equipment, vehicles, or other assets of the borrower; commercial real estate loans for residential and commercial development, agricultural purpose properties, and service industry buildings, such as restaurants and motels, retail buildings, and general purpose business space; residential mortgage loans; home equity lines of credit; residential real estate construction loans; and indirect and direct auto loans, student loans, and other secured and unsecured lines of credit and term loans. It also offers access to multi-million-dollar certificates of deposit and the Intrafi cash service, including multi-million-dollar savings and demand deposits to municipalities, businesses, and consumers; and treasury management, cash sweep, and various checking services. In addition, the company provides trust services, which includes personal trust, investment agency accounts, charitable trusts, retirement accounts, including IRA roll-overs, 401(k) accounts and defined benefit plans, estate administration, and estate planning; and insurance products, brokerage services, and safe deposit and night depository facilities. First United Corporation was founded in 1900 and is headquartered in Oakland, Maryland.