Contrasting National Bankshares (NASDAQ:NKSH) & Security Federal (OTCMKTS:SFDL)

Security Federal (OTCMKTS:SFDL) and National Bankshares (NASDAQ:NKSH) are both small-cap finance companies, but which is the better investment? We will compare the two companies based on the strength of their profitability, institutional ownership, analyst recommendations, dividends, risk, earnings and valuation.

Profitability

This table compares Security Federal and National Bankshares’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Security Federal	15.17%	12.35%	0.85%
National Bankshares	20.39%	10.53%	1.03%

Analyst Ratings

This is a summary of recent recommendations and price targets for Security Federal and National Bankshares, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Security Federal	0	0	0	0	0.00
National Bankshares	0	0	1	1	3.50

Dividends

Security Federal pays an annual dividend of $0.64 per share and has a dividend yield of 1.8%. National Bankshares pays an annual dividend of $1.56 per share and has a dividend yield of 4.3%. Security Federal pays out 16.0% of its earnings in the form of a dividend. National Bankshares pays out 56.7% 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.

Volatility and Risk

Security Federal has a beta of 0.42, meaning that its stock price is 58% less volatile than the S&P 500. Comparatively, National Bankshares has a beta of 0.63, meaning that its stock price is 37% less volatile than the S&P 500.

Earnings and Valuation

This table compares Security Federal and National Bankshares”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Security Federal	$90.14 million	1.23	$13.67 million	$4.00	8.94
National Bankshares	$85.32 million	2.72	$15.83 million	$2.75	13.24

National Bankshares has lower revenue, but higher earnings than Security Federal. Security Federal is trading at a lower price-to-earnings ratio than National Bankshares, indicating that it is currently the more affordable of the two stocks.

Insider and Institutional Ownership

29.7% of National Bankshares shares are held by institutional investors. 36.4% of Security Federal shares are held by company insiders. Comparatively, 3.3% of National Bankshares shares are held by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company is poised for long-term growth.

Summary

National Bankshares beats Security Federal on 11 of the 16 factors compared between the two stocks.

About Security Federal

Security Federal Corporation operates as the bank holding company for Security Federal Bank that provides various banking products and services. It offers various deposit products, such as savings and checking accounts, money market accounts, fixed interest rate certificates with varying maturities, and individual retirement accounts. The company provides real estate loans comprising commercial real estate loans secured by non-residential commercial properties, churches, hotels, residential developments, and multi-family dwellings; one-to-four family residential real estate loans; and construction loans and loans for the acquisition, development, and construction of residential subdivisions and commercial projects. In addition, it offers commercial and agricultural business loans secured by business equipment, furniture and fixtures, inventory, and receivables, or unsecured; and consumer loans including home improvements, residential lots, mortgage, automobiles, boats, mobile homes, recreational vehicles, and education. The company offers trust, financial planning, and financial management services; and insurance agency services, such as auto, business, and home insurance. Additionally, it invests in various types of liquid assets, including U.S. Treasury obligations and securities of various federal agencies, certificates of deposit at insured institutions, mutual funds, bankers' acceptances, and federal funds, as well as commercial paper and corporate debt securities. It through branch offices in Aiken, Lexington, Richland and Saluda counties in South Carolina and Columbia; and Richmond counties in Georgia. Security Federal Corporation was founded in 1922 and is headquartered in Aiken, South Carolina.

About National Bankshares

National Bankshares, Inc. operates as the bank holding company for the National Bank of Blacksburg that provides retail and commercial banking products and services to individuals, businesses, non-profits, and local governments. The company accepts interest-bearing and non-interest-bearing demand deposit accounts, money market deposit accounts, savings accounts, certificates of deposit, health savings accounts, and individual retirement accounts. Its loan products include commercial and agricultural, commercial real estate, residential real estate, home equity, and various consumer loan products, as well as loans for the construction of commercial and residential properties. The company also provides business and consumer debit and credit cards; letters of credit, night depository services, safe deposit boxes, utility payment services, and automatic funds transfer; wealth management, trust, and estate services; non-deposit investment and insurance products; and telephone, mobile, and Internet banking services. The company was founded in 1891 and is headquartered in Blacksburg, Virginia.