Reviewing Sound Financial Bancorp (NASDAQ:SFBC) and 1st Constitution Bancorp (NASDAQ:FCCY)

1st Constitution Bancorp (NASDAQ:FCCY) and Sound Financial Bancorp (NASDAQ:SFBC) are both small-cap finance companies, but which is the better business? We will contrast the two businesses based on the strength of their analyst recommendations, risk, valuation, profitability, earnings, institutional ownership and dividends.

Risk and Volatility

1st Constitution Bancorp has a beta of 0.3, indicating that its share price is 70% less volatile than the S&P 500. Comparatively, Sound Financial Bancorp has a beta of 0.35, indicating that its share price is 65% less volatile than the S&P 500.

Institutional & Insider Ownership

38.0% of 1st Constitution Bancorp shares are owned by institutional investors. Comparatively, 39.9% of Sound Financial Bancorp shares are owned by institutional investors. 14.3% of 1st Constitution Bancorp shares are owned by insiders. Comparatively, 12.7% of Sound Financial Bancorp 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.

Earnings & Valuation

This table compares 1st Constitution Bancorp and Sound Financial Bancorp’s gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
1st Constitution Bancorp $59.39 million 3.24 $12.05 million $1.56 14.21
Sound Financial Bancorp $37.45 million 2.54 $7.04 million N/A N/A

1st Constitution Bancorp has higher revenue and earnings than Sound Financial Bancorp.

Profitability

This table compares 1st Constitution Bancorp and Sound Financial Bancorp’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
1st Constitution Bancorp 21.02% 10.61% 1.12%
Sound Financial Bancorp 16.79% 8.37% 0.88%

Dividends

1st Constitution Bancorp pays an annual dividend of $0.30 per share and has a dividend yield of 1.4%. Sound Financial Bancorp pays an annual dividend of $0.56 per share and has a dividend yield of 1.5%. 1st Constitution Bancorp pays out 19.2% of its earnings in the form of a dividend. 1st Constitution Bancorp has increased its dividend for 2 consecutive years and Sound Financial Bancorp has increased its dividend for 5 consecutive years. Sound Financial Bancorp is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Analyst Ratings

This is a breakdown of recent recommendations and price targets for 1st Constitution Bancorp and Sound Financial Bancorp, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
1st Constitution Bancorp 0 1 1 0 2.50
Sound Financial Bancorp 0 0 0 0 N/A

1st Constitution Bancorp currently has a consensus price target of $19.80, suggesting a potential downside of 10.67%. Given 1st Constitution Bancorp’s higher probable upside, equities research analysts plainly believe 1st Constitution Bancorp is more favorable than Sound Financial Bancorp.

Summary

1st Constitution Bancorp beats Sound Financial Bancorp on 9 of the 15 factors compared between the two stocks.

About 1st Constitution Bancorp

1st Constitution Bancorp operates as the bank holding company for 1st Constitution Bank that provides commercial and retail banking services in the central, coastal, and northeastern areas of New Jersey. The company offers deposit products, including interest bearing demand deposits, such as interest-bearing checking accounts, money market accounts, and negotiable order of withdrawal accounts; and non-interest bearing demand, savings, and time deposits, as well as certificates of deposit. It also provides commercial loans, including term loans, lines of credit, and loans secured by equipment and receivables; secured and unsecured short-to-medium term commercial loans to businesses for working capital, business expansion, and the purchase of equipment and machinery; and construction loans to real estate developers for the acquisition, development, and construction of residential and commercial properties. In addition, the company offers residential first mortgage loans secured by owner-occupied property; construction loans; reverse mortgages; second mortgage home improvement loans; home equity lines of credit; and non-residential consumer loans for automobiles, recreation vehicles, and boats, as well as secured and unsecured personal loans, and deposit account secured loans. It serves corporations, individuals, partnerships, and other community organizations, as well as small businesses and not-for-profit organizations. As of December 31, 2018, the company operated through 19 additional branch offices in Asbury Park, Cranbury, Fair Haven, Fort Lee, Freehold, Hamilton Square, Hightstown, Hillsborough, Hopewell, Jamesburg, Lawrenceville, Little Silver, Neptune City, Perth Amboy, Plainsboro, Skillman, Princeton, Rumson, and Shrewsbury, New Jersey; and 2 residential mortgage loan production offices in Forked River and Jersey City, New Jersey. 1st Constitution Bancorp was founded in 1989 and is based in Cranbury, New Jersey.

About Sound Financial Bancorp

Sound Financial Bancorp, Inc. operates as the holding company for Sound Community Bank that provides traditional banking and other financial services for individuals and businesses. It accepts various deposits products comprising savings accounts, money market deposit accounts, NOW accounts, demand accounts, certificates of deposit, and checking accounts. The company also offers various loan products, such as loans secured by first and second mortgages on one-to four-family residences; home equity loans comprising fixed-rate loans and variable-rate lines of credit; commercial and multifamily real estate loans; construction loans secured by single-family residences, and commercial and multifamily real estate; secured and unsecured consumer loans, including new and used manufactured home loans, floating home loans, automobile loans, boat loans, and recreational vehicle loans, and loans secured by deposit accounts; land loans; and commercial business loans to finance commercial vehicles and equipment, as well as loans secured by accounts receivable and/or inventory. It operates through main office in Seattle; seven branch offices, of which four are located in the Seattle Metropolitan Statistical area, two are located in Clallam County, and one is located in Jefferson County; and two loan production offices, including one located in the Madison Park neighborhood of Seattle and one located in Sequim. Sound Financial Bancorp, Inc. was incorporated in 2008 and is headquartered in Seattle, Washington.

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