Financial Contrast: First National (NASDAQ:FXNC) vs. City (NASDAQ:CHCO)

First National (NASDAQ:FXNC) and City (NASDAQ:CHCO) are both small-cap finance companies, but which is the better business? We will contrast the two companies based on the strength of their dividends, risk, valuation, earnings, institutional ownership, analyst recommendations and profitability.

Profitability

This table compares First National and City’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%
City	32.56%	16.81%	1.96%

Insider and Institutional Ownership

33.9% of First National shares are owned by institutional investors. Comparatively, 72.4% of City shares are owned by institutional investors. 14.3% of First National shares are owned by insiders. Comparatively, 1.9% of City shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company will outperform the market over the long term.

Analyst Recommendations

This is a breakdown of recent ratings and target prices for First National and City, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
First National	0	2	0	0	2.00
City	0	5	1	0	2.17

First National currently has a consensus price target of $28.50, suggesting a potential upside of 8.00%. City has a consensus price target of $133.25, suggesting a potential upside of 5.30%. Given First National’s higher probable upside, equities analysts clearly believe First National is more favorable than City.

Valuation and Earnings

This table compares First National and City”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
First National	$92.70 million	2.56	$6.97 million	$1.26	20.94
City	$398.98 million	4.57	$117.10 million	$8.70	14.54

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

Volatility and Risk

First National has a beta of 0.49, meaning that its share price is 51% less volatile than the S&P 500. Comparatively, City has a beta of 0.52, meaning that its share price is 48% less volatile than the S&P 500.

Dividends

First National pays an annual dividend of $0.68 per share and has a dividend yield of 2.6%. City pays an annual dividend of $3.48 per share and has a dividend yield of 2.8%. First National pays out 54.0% of its earnings in the form of a dividend. City 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 National has increased its dividend for 10 consecutive years and City has increased its dividend for 6 consecutive years. City is clearly the better dividend stock, given its higher yield and lower payout ratio.

Summary

City beats First National on 13 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 City

City Holding Company operates as a holding company for City National Bank of West Virginia that provides various banking, trust, and investment management, and other financial solutions in the United States. The company offers checking, savings, and money market accounts, as well as certificates of deposit and individual retirement accounts. It also provides commercial and industrial loans that consist of loans to corporate and other legal entity borrowers primarily in small to mid-size industrial and commercial companies; commercial real estate loans comprising commercial mortgages, which are secured by nonresidential and multi-family residential properties; residential real estate loans to consumers for the purchase or refinance of residence; first-priority home equity loans; home equity lines of credit; amortized home equity loans; consumer loans that are secured and unsecured by automobiles, boats, recreational vehicles, certificates of deposit, and other personal property; and demand deposit account overdrafts, as well as owner-occupied real estate and construction, land development, and lines of credit. In addition, the company offers mortgage banking services, including fixed and adjustable-rate mortgages, construction financing, land loans, production of conventional and government-insured mortgages, secondary marketing, and mortgage servicing. Further, it provides deposit services for commercial customers comprising treasury management, lockbox, and other cash management services; merchant credit card services; wealth management, trust, investment, and custodial services for commercial and individual customers; and corporate trust and institutional custody, financial and estate planning, and retirement plan services, as well as automated-teller-machine, interactive-teller-machine, mobile banking, interactive voice response systems, and credit and debit card services. City Holding Company was founded in 1957 and is headquartered in Charleston, West Virginia.