Burke & Herbert Financial Services (NASDAQ:BHRB) vs. Financial Institutions (NASDAQ:FISI) Critical Survey

Financial Institutions (NASDAQ:FISI) and Burke & Herbert Financial Services (NASDAQ:BHRB) are both small-cap finance companies, but which is the superior business? We will contrast the two companies based on the strength of their dividends, analyst recommendations, institutional ownership, risk, profitability, earnings and valuation.

Dividends

Financial Institutions pays an annual dividend of $1.28 per share and has a dividend yield of 3.3%. Burke & Herbert Financial Services pays an annual dividend of $2.20 per share and has a dividend yield of 3.2%. Financial Institutions pays out 31.8% of its earnings in the form of a dividend. Burke & Herbert Financial Services pays out 35.3% 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. Financial Institutions has raised its dividend for 1 consecutive years and Burke & Herbert Financial Services has raised its dividend for 1 consecutive years. Financial Institutions is clearly the better dividend stock, given its higher yield and lower payout ratio.

Volatility and Risk

Financial Institutions has a beta of 0.62, suggesting that its share price is 38% less volatile than the S&P 500. Comparatively, Burke & Herbert Financial Services has a beta of 0.58, suggesting that its share price is 42% less volatile than the S&P 500.

Earnings and Valuation

This table compares Financial Institutions and Burke & Herbert Financial Services”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Financial Institutions	$377.94 million	2.02	$74.87 million	$4.03	9.61
Burke & Herbert Financial Services	$491.11 million	2.82	$117.31 million	$6.24	10.99

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

Profitability

This table compares Financial Institutions and Burke & Herbert Financial Services’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Financial Institutions	21.78%	13.45%	1.31%
Burke & Herbert Financial Services	18.86%	13.66%	1.46%

Insider and Institutional Ownership

60.5% of Financial Institutions shares are held by institutional investors. 2.4% of Financial Institutions shares are held by company insiders. Comparatively, 12.0% of Burke & Herbert Financial Services shares are held by company 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.

Analyst Recommendations

This is a breakdown of recent ratings and price targets for Financial Institutions and Burke & Herbert Financial Services, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Financial Institutions	0	2	2	0	2.50
Burke & Herbert Financial Services	0	3	2	1	2.67

Financial Institutions currently has a consensus price target of $45.00, indicating a potential upside of 16.25%. Burke & Herbert Financial Services has a consensus price target of $75.25, indicating a potential upside of 9.77%. Given Financial Institutions’ higher possible upside, equities analysts clearly believe Financial Institutions is more favorable than Burke & Herbert Financial Services.

Summary

Burke & Herbert Financial Services beats Financial Institutions on 10 of the 16 factors compared between the two stocks.

About Financial Institutions

Financial Institutions, Inc. operates as a holding company for the Five Star Bank, a chartered bank that provides banking and financial services to individuals, municipalities, and businesses in New York. The company provides checking and savings account programs, including money market accounts, certificates of deposit, sweep investments, and individual retirement and other qualified plan accounts, as well as NOW accounts. Its loan products include term loans and lines of credit; short and medium-term commercial loans for working capital, business expansion, and purchase of equipment; commercial business loans to the agricultural industry; commercial mortgage loans; one-to-four family residential mortgage loans, home improvement loans, closed-end home equity loans, and home equity lines of credit; and consumer loans, such as automobile, secured installment, and personal loans. The company offers personal insurance products, including automobile, homeowners, boat, recreational vehicle, landlord, and umbrella coverage; commercial insurance comprising property, liability, automobile, inland marine, workers compensation, bonds, crop, and umbrella insurance products; and financial services, such as life and disability insurance, medicare supplements, long-term care, annuities, mutual funds, and retirement programs. In addition, it offers customized investment advisory, wealth management, investment consulting, and retirement plan services, as well as operates a real estate investment trust that holds residential mortgages and commercial real estate loans. Financial Institutions, Inc. was founded in 1817 and is headquartered in Warsaw, New York.

About Burke & Herbert Financial Services

Burke Herbert Financial Services Corp. is a bank holding company, which engages in the provision of banking products and financial services to small to medium-sized businesses, their owners and employees, professional corporations, non-profits, and individuals. It operates through the following loan portfolio segments: Commercial Real Estate, Owner-Occupied Commercial Real Estate, Acquisition, Construction, and Development, Commercial and Industrial, Single Family Residential (1-4 Units), and Consumer Non-Real Estate and Other. The Commercial Real Estate segment includes leasing of the real estate collateral or income generated from the sale of the collateral. The Owner-Occupied Commercial Real Estate segment focuses on the operations of the business that occupies the property and the value of the collateral. The Acquisition, Construction, and Development segment offers creditworthiness of the borrower, project completion within budget, sale after completion, and the value of the collateral. The Commercial and Industrial segment is involved in the operations of the business and the value of the collateral. The Single Family Residential (1-4 Units) segment provides loans for investment purpose carry risk associated with the continued creditworthiness of the borrower, the value of the collateral, and either the net operating income generated from the lease of the real estate collateral or income generated from the sale of the collateral. The Consumer Non-Real Estate and Other segment covers loans carry risk associated with the creditworthiness of the borrower and the value of the collateral. The company was founded on September 14, 2022 and is headquartered in Alexandria, VA.