Washington Trust Bancorp (NASDAQ:WASH) vs. Arrow Financial (NASDAQ:AROW) Critical Analysis

Washington Trust Bancorp (NASDAQ:WASH) and Arrow Financial (NASDAQ:AROW) are both small-cap finance companies, but which is the superior business? We will contrast the two companies based on the strength of their earnings, analyst recommendations, risk, valuation, institutional ownership, profitability and dividends.

Institutional and Insider Ownership

65.8% of Washington Trust Bancorp shares are owned by institutional investors. Comparatively, 46.7% of Arrow Financial shares are owned by institutional investors. 1.1% of Washington Trust Bancorp shares are owned by insiders. Comparatively, 3.3% of Arrow Financial shares are owned by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock will outperform the market over the long term.

Profitability

This table compares Washington Trust Bancorp and Arrow Financial’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Washington Trust Bancorp	-6.22%	8.90%	0.69%
Arrow Financial	14.65%	9.46%	0.87%

Analyst Recommendations

This is a summary of recent ratings for Washington Trust Bancorp and Arrow Financial, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Washington Trust Bancorp	1	3	0	1	2.20
Arrow Financial	0	2	1	0	2.33

Washington Trust Bancorp presently has a consensus price target of $28.33, indicating a potential downside of 3.70%. Arrow Financial has a consensus price target of $30.75, indicating a potential downside of 2.95%. Given Arrow Financial’s stronger consensus rating and higher probable upside, analysts clearly believe Arrow Financial is more favorable than Washington Trust Bancorp.

Risk & Volatility

Washington Trust Bancorp has a beta of 0.86, indicating that its share price is 14% less volatile than the S&P 500. Comparatively, Arrow Financial has a beta of 0.82, indicating that its share price is 18% less volatile than the S&P 500.

Dividends

Washington Trust Bancorp pays an annual dividend of $2.24 per share and has a dividend yield of 7.6%. Arrow Financial pays an annual dividend of $1.16 per share and has a dividend yield of 3.7%. Washington Trust Bancorp pays out -140.9% of its earnings in the form of a dividend. Arrow Financial pays out 56.0% 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. Arrow Financial has raised its dividend for 7 consecutive years. Washington Trust Bancorp is clearly the better dividend stock, given its higher yield and lower payout ratio.

Valuation and Earnings

This table compares Washington Trust Bancorp and Arrow Financial”s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Washington Trust Bancorp	$403.73 million	1.39	-$28.06 million	($1.59)	-18.50
Arrow Financial	$223.07 million	2.34	$29.71 million	$2.07	15.31

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

Summary

Arrow Financial beats Washington Trust Bancorp on 12 of the 18 factors compared between the two stocks.

About Washington Trust Bancorp

Washington Trust Bancorp, Inc. operates as the bank holding company for The Washington Trust Company, of Westerly that provides various banking and financial services to individuals and businesses. The company operates in two segments, Commercial Banking and Wealth Management Services. The Commercial Banking segment offers deposit accounts, including interest-bearing and noninterest-bearing demand deposits, NOW and savings accounts, money market and retirement deposit accounts, and time deposits; various commercial and retail lending products, such as commercial real estate loans, including commercial mortgages, and construction and development loans; commercial and industrial loans comprising working capital, equipment financing, and financing for other business-related purposes; residential real estate loans that consist of mortgage and homeowner construction loans; and consumer loans comprising home equity loans and lines of credit, personal installment loans, and loans to individuals secured by general aviation aircraft. This segment also provides debit cards; automated teller machines (ATMs); telephone banking, internet banking, mobile banking, remote deposit capture, and other cash management services; and investment portfolio and wholesale funding services. The Wealth Management Services segment offers investment management; financial planning; personal trust and estate services, such as trustee, personal representative, custodian, and guardian; and settlement of decedents’ estates, as well as institutional trust services comprising custody and fiduciary services for personal and institutional clients. Washington Trust Bancorp, Inc. was founded in 1800 and is headquartered in Westerly, Rhode Island.

About Arrow Financial

Arrow Financial Corporation, a bank holding company, provides commercial and consumer banking, and financial products and services. The company’s deposit products include demand deposits, interest-bearing checking accounts, savings deposits, time deposits, and other time deposits. Its lending activities comprise commercial loans, such as term loans, time notes, and lines of credit; and commercial real estate loans to finance real estate purchases, refinancing, expansions, and enhancement to commercial properties, as well as commercial construction and land development loans to finance projects. The company’s lending activities also include consumer installment loans to finance personal expenditures, personal lines of credit, overdraft protection, and automobile loans; and residential real estate loans, fixed home equity loans, and home equity lines of credit for consumers to finance home improvements, debt consolidation, education, and other uses. In addition, it maintains an indirect lending program. Further, the company provides retirement planning, trust, and estate administration services for individuals, as well as pension, profit-sharing, and employee benefit plan administration services for corporations. Additionally, it offers insurance agency services comprising group health care policies and life insurance, and property and casualty insurance products; and investment advisory services to its proprietary mutual funds, as well as holds a real estate investment trust. It operates in the northeastern region of New York State in Warren, Washington, Saratoga, Essex, Clinton, Rensselaer, Albany, and Schenectady counties. Arrow Financial Corporation was founded in 1851 and is headquartered in Glens Falls, New York.