Analyzing Towne Bank (NASDAQ:TOWN) & First National (NASDAQ:FXNC)

First National (NASDAQ:FXNC) and Towne Bank (NASDAQ:TOWN) are both finance companies, but which is the superior business? We will contrast the two companies based on the strength of their earnings, dividends, analyst recommendations, profitability, risk, institutional ownership and valuation.

Insider & Institutional Ownership

33.9% of First National shares are owned by institutional investors. Comparatively, 56.0% of Towne Bank shares are owned by institutional investors. 14.3% of First National shares are owned by insiders. Comparatively, 8.1% of Towne Bank shares are owned by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock will outperform the market over the long term.

Profitability

This table compares First National and Towne Bank’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
First National	9.53%	11.34%	0.96%
Towne Bank	15.69%	9.64%	1.20%

Dividends

First National pays an annual dividend of $0.68 per share and has a dividend yield of 2.6%. Towne Bank pays an annual dividend of $1.08 per share and has a dividend yield of 3.0%. First National pays out 54.0% of its earnings in the form of a dividend. Towne Bank pays out 48.2% 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 National has raised its dividend for 10 consecutive years and Towne Bank has raised its dividend for 13 consecutive years. Towne Bank is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Earnings and Valuation

This table compares First National and Towne Bank”s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
First National	$85.94 million	2.75	$6.97 million	$1.26	20.79
Towne Bank	$791.07 million	3.36	$161.76 million	$2.24	15.84

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

Analyst Recommendations

This is a breakdown of current ratings and recommmendations for First National and Towne Bank, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
First National	0	2	0	0	2.00
Towne Bank	0	1	2	0	2.67

First National currently has a consensus target price of $28.50, indicating a potential upside of 8.78%. Towne Bank has a consensus target price of $41.00, indicating a potential upside of 15.53%. Given Towne Bank’s stronger consensus rating and higher probable upside, analysts plainly believe Towne Bank is more favorable than First National.

Risk and Volatility

First National has a beta of 0.51, meaning that its stock price is 49% less volatile than the S&P 500. Comparatively, Towne Bank has a beta of 0.79, meaning that its stock price is 21% less volatile than the S&P 500.

Summary

Towne Bank beats First National on 14 of the 17 factors compared between the two stocks.

About First National

First National Corporation operates as the bank holding company for First Bank that provides various commercial banking services to small and medium-sized businesses, individuals, estates, local governmental entities, and non-profit organizations in Virginia. The company's deposit products include checking, savings, money market, and individual retirement accounts, as well as certificates of deposit and treasury management solutions. Its loan products comprise construction loans, including residential, land acquisition, and development loans; 1-4 family residential real estate loans; and commercial real estate loans that are secured by commercial real estate, including multi-family residential buildings, office and retail buildings, hotels, industrial buildings, and religious facilities. In addition, the company's loan products include commercial and industrial loans that are secured by business assets, such as accounts receivable, equipment, and inventory; home equity loans; and secured and unsecured consumer loans, such as lines of credit, automobile loans, deposit account loans, and installment and demand loans. Further, it provides wealth management services, including estate planning, investment management of assets, trustee under an agreement, trustee under a will, and estate settlement. Additionally, the company offers title insurance and investment services; and holds other real estate owned and office sites, as well as provides internet and mobile banking, remote deposit capture, and other traditional banking services. First National Corporation was founded in 1907 and is headquartered in Strasburg, Virginia.

About Towne Bank

TowneBank provides retail and commercial banking services for individuals, commercial enterprises, and professionals. The company operates through three segments: Banking, Realty, and Insurance. It accepts various deposits, including demand deposits, savings accounts, money rate savings, certificates of deposit, and individual retirement accounts. The company also offers secured and unsecured personal loans for financing automobiles, home improvements, education, and personal investments; commercial loans for working capital, business expansion, and equipment and machinery purchases; and mortgage loans, as well as real estate acquisition, development, and construction loans. In addition, it provides other services, such as safe deposit boxes, treasury management services, direct deposit of payroll and social security checks, and automatic drafts for various accounts, as well as online, mobile, and on-call banking services. Further, the company offers documentation services to accomplish tax deferral to investors; investment and asset management services; commercial mortgage brokerage services; and other financial services, such as financial, retirement, and estate planning services, as well as assistance on various investment options comprising alternative investments, annuities, margin accounts, convertible bonds, and pension and profit-sharing plans. Additionally, it provides residential real estate, relocation, property management, vacation rentals, and title and settlement services; and originates residential mortgage loans. The company also offers life, property, casualty, and vehicle insurance services; and employee benefit programs, such as health, dental, vision, and disability insurance. It operates in Richmond, Virginia, the Greater Hampton Roads region in southeastern Virginia, northeastern North Carolina, Raleigh, Charlotte, Greensboro, and Greenville, North Carolina. TowneBank was incorporated in 1998 and is based in Portsmouth, Virginia.