Financial Analysis: HMN Financial (NASDAQ:HMNF) and Finward Bancorp (NASDAQ:FNWD)

HMN Financial (NASDAQ:HMNF) and Finward Bancorp (NASDAQ:FNWD) are both small-cap finance companies, but which is the superior investment? We will contrast the two businesses based on the strength of their risk, analyst recommendations, earnings, dividends, valuation, profitability and institutional ownership.

Profitability

This table compares HMN Financial and Finward Bancorp’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
HMN Financial	10.57%	5.41%	0.50%
Finward Bancorp	14.11%	11.12%	0.73%

Insider & Institutional Ownership

78.3% of HMN Financial shares are owned by institutional investors. Comparatively, 26.6% of Finward Bancorp shares are owned by institutional investors. 8.2% of HMN Financial shares are owned by company insiders. Comparatively, 13.7% of Finward Bancorp shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company is poised for long-term growth.

Volatility & Risk

HMN Financial has a beta of 0.19, meaning that its stock price is 81% less volatile than the S&P 500. Comparatively, Finward Bancorp has a beta of 0.53, meaning that its stock price is 47% less volatile than the S&P 500.

Analyst Recommendations

This is a breakdown of recent recommendations and price targets for HMN Financial and Finward Bancorp, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
HMN Financial	0	0	0	0	N/A
Finward Bancorp	0	0	0	0	N/A

Valuation and Earnings

This table compares HMN Financial and Finward Bancorp’s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
HMN Financial	$51.76 million	1.85	$6.01 million	$1.29	16.63
Finward Bancorp	$96.53 million	1.09	$8.38 million	$3.60	6.80

Finward Bancorp has higher revenue and earnings than HMN Financial. Finward Bancorp is trading at a lower price-to-earnings ratio than HMN Financial, indicating that it is currently the more affordable of the two stocks.

Dividends

HMN Financial pays an annual dividend of $0.40 per share and has a dividend yield of 1.9%. Finward Bancorp pays an annual dividend of $0.48 per share and has a dividend yield of 2.0%. HMN Financial pays out 31.0% of its earnings in the form of a dividend. Finward Bancorp pays out 13.3% 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. HMN Financial has increased its dividend for 2 consecutive years. Finward Bancorp is clearly the better dividend stock, given its higher yield and lower payout ratio.

Summary

Finward Bancorp beats HMN Financial on 10 of the 14 factors compared between the two stocks.

About HMN Financial

HMN Financial, Inc. operates as a bank holding company for Home Federal Savings Bank that provides various retail banking products and services. The company offers various deposit accounts, such as savings, interest bearing checking, non-interest-bearing checking, money market, individual retirement, and certificate accounts. It also provides various loan products comprising single family residential loans; commercial real estate and multi-family mortgage loans; construction loans; consumer loans, such as home equity, automobile, recreational vehicle, mobile home, and lot loans, as well as loans secured by deposit accounts, and other loans for household and personal purposes; and commercial business loans. In addition, the company offers financial planning products and services; and invests in mortgage-backed and related securities, the United States government agency obligations, and other permissible investments. It operates community banking and loan production offices in Minnesota, Iowa, and Wisconsin. HMN Financial, Inc. was founded in 1934 and is headquartered in Rochester, Minnesota.

About Finward Bancorp

Finward Bancorp operates as the holding company for Peoples Bank that provides various banking products and services. The company's deposit products include non-interest- and interest-bearing demand accounts, savings accounts, money market deposit accounts, certificate accounts, and retirement savings plans. Its loan products portfolio comprises residential mortgage loans that enable borrowers to purchase existing homes, refinance existing homes, or construct new homes; construction loans primarily to individuals and contractors; commercial real estate loans; consumer loans to individuals for personal, household, or family purposes; home equity line of credit; home improvement loans and equity loans; commercial business loans; government loans; and loans to municipalities. The company also offers estate and retirement planning, guardianships, land trusts, profit sharing and 401(k) retirement plans, IRA and Keogh accounts, and investment agency accounts, as well as serves as the personal representative of estates, and acts as trustee for revocable and irrevocable trusts. In addition, it provides insurance and annuity investments to wealth management customers; holds real estate properties; and operates as a real estate investment trust. The company was formerly known as NorthWest Indiana Bancorp and changed its name to Finward Bancorp in May 2021. Finward Bancorp was founded in 1916 and is headquartered in Munster, Indiana.