Provident Financial Services (PFS) and Territorial Bancorp (NASDAQ:TBNK) Critical Comparison

Territorial Bancorp (NASDAQ: TBNK) and Provident Financial Services (NYSE:PFS) are both small-cap finance companies, but which is the better business? We will compare the two companies based on the strength of their dividends, analyst recommendations, profitability, earnings, risk, institutional ownership and valuation.

Risk & Volatility

Territorial Bancorp has a beta of 0.27, meaning that its share price is 73% less volatile than the S&P 500. Comparatively, Provident Financial Services has a beta of 0.95, meaning that its share price is 5% less volatile than the S&P 500.

Earnings and Valuation

This table compares Territorial Bancorp and Provident Financial Services’ revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Territorial Bancorp $72.18 million 4.16 $14.96 million $1.78 17.33
Provident Financial Services $379.54 million 4.98 $93.94 million $1.52 18.54

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

Insider and Institutional Ownership

44.5% of Territorial Bancorp shares are held by institutional investors. Comparatively, 64.4% of Provident Financial Services shares are held by institutional investors. 11.7% of Territorial Bancorp shares are held by company insiders. Comparatively, 3.0% of Provident Financial Services shares are held by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company will outperform the market over the long term.

Profitability

This table compares Territorial Bancorp and Provident Financial Services’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Territorial Bancorp 21.08% 7.45% 0.88%
Provident Financial Services 25.30% 7.89% 1.06%

Dividends

Territorial Bancorp pays an annual dividend of $0.80 per share and has a dividend yield of 2.6%. Provident Financial Services pays an annual dividend of $0.80 per share and has a dividend yield of 2.8%. Territorial Bancorp pays out 44.9% of its earnings in the form of a dividend. Provident Financial Services pays out 52.6% 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. Provident Financial Services has increased its dividend for 7 consecutive years. Provident Financial Services is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Analyst Ratings

This is a summary of recent ratings and target prices for Territorial Bancorp and Provident Financial Services, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Territorial Bancorp 2 2 0 0 1.50
Provident Financial Services 0 4 2 0 2.33

Territorial Bancorp currently has a consensus price target of $33.50, suggesting a potential upside of 8.63%. Provident Financial Services has a consensus price target of $28.10, suggesting a potential downside of 0.28%. Given Territorial Bancorp’s higher possible upside, equities research analysts clearly believe Territorial Bancorp is more favorable than Provident Financial Services.

Summary

Provident Financial Services beats Territorial Bancorp on 13 of the 17 factors compared between the two stocks.

About Territorial Bancorp

Territorial Bancorp Inc. operates as the holding company for Territorial Savings Bank that provides various financial services to individuals, families, and businesses. The company offers a range of deposit accounts, including passbook and statement savings accounts, certificates of deposit, money market accounts, commercial and regular checking accounts, and NOW accounts. It also provides various loan products comprising one- to four-family residential mortgage loans; home equity loans and lines of credit; construction, commercial, and other non-residential real estate loans; consumer loans; multi-family mortgage loans; commercial business loans; and other loans, as well as offers investment securities. In addition, the company, through its subsidiary, Territorial Financial Services, Inc. engages in insurance agency activities. Further, it provides various non-deposit investments, including annuities and mutual funds through a third-party broker-dealer. The company operates through a network of 29 full-service branches located in the State of Hawaii. Territorial Bancorp Inc. was founded in 1921 and is based in Honolulu, Hawaii.

About Provident Financial Services

Provident Financial Services, Inc. operates as the holding company for Provident Bank that provides various banking services to individuals, families, and businesses in the United States. Its deposit products include savings, checking, interest-bearing checking, money market deposit, and certificate of deposit accounts, as well as IRA and KEOGH accounts. The company's loan portfolio comprises commercial real estate loans that are secured by properties, such as multi-family apartment buildings, office buildings, and retail and industrial properties; commercial business loans; fixed-rate and adjustable-rate mortgage loans collateralized by one- to four-family residential real estate properties; commercial construction loans; and consumer loans consisting of home equity loans, home equity lines of credit, and marine loans. It also offers cash management, remote deposit capture, payroll origination, escrow account management, and online and mobile banking services; and business credit cards. In addition, the company provides trust and estate administrative services; and asset management services comprising investment management, asset allocation, trust and fiduciary, financial and tax planning, family office, estate settlement, and custody services to individuals, municipalities, non-profits, corporations, and pension funds. Further, it sells insurance and investment products, including annuities; operates as a real estate investment trust for acquiring mortgage loans and other real estate related assets; and manages and sells real estate properties acquired through foreclosure, as well as offers investment advisory services. As of December 31, 2017, the company operated 84 full-service branch offices in northern and central New Jersey, as well as in Pennsylvania. Provident Financial Services, Inc. was founded in 1839 and is headquartered in Jersey City, New Jersey.

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