Critical Survey: Banner (NASDAQ:BANR) and Old Second Bancorp (NASDAQ:OSBC)

Old Second Bancorp (NASDAQ:OSBC) and Banner (NASDAQ:BANR) are both finance companies, but which is the superior business? We will compare the two businesses based on the strength of their valuation, profitability, earnings, dividends, institutional ownership, analyst recommendations and risk.

Risk & Volatility

Old Second Bancorp has a beta of 1.08, indicating that its stock price is 8% more volatile than the S&P 500. Comparatively, Banner has a beta of 1.09, indicating that its stock price is 9% more volatile than the S&P 500.

Insider and Institutional Ownership

67.8% of Old Second Bancorp shares are owned by institutional investors. Comparatively, 87.3% of Banner shares are owned by institutional investors. 3.8% of Old Second Bancorp shares are owned by insiders. Comparatively, 1.6% of Banner shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock is poised for long-term growth.

Dividends

Old Second Bancorp pays an annual dividend of $0.24 per share and has a dividend yield of 1.3%. Banner pays an annual dividend of $1.92 per share and has a dividend yield of 2.7%. Old Second Bancorp pays out 13.0% of its earnings in the form of a dividend. Banner pays out 40.2% 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.

Earnings and Valuation

This table compares Old Second Bancorp and Banner”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Old Second Bancorp	$326.15 million	2.50	$91.73 million	$1.85	9.84
Banner	$745.98 million	3.24	$183.62 million	$4.78	14.67

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

Profitability

This table compares Old Second Bancorp and Banner’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Old Second Bancorp	25.02%	13.81%	1.49%
Banner	20.28%	10.22%	1.10%

Analyst Ratings

This is a breakdown of current ratings and target prices for Old Second Bancorp and Banner, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Old Second Bancorp	0	1	2	1	3.00
Banner	0	3	3	0	2.50

Old Second Bancorp currently has a consensus target price of $18.88, indicating a potential upside of 3.71%. Banner has a consensus target price of $67.00, indicating a potential downside of 4.44%. Given Old Second Bancorp’s stronger consensus rating and higher probable upside, equities research analysts clearly believe Old Second Bancorp is more favorable than Banner.

Summary

Banner beats Old Second Bancorp on 9 of the 17 factors compared between the two stocks.

About Old Second Bancorp

Old Second Bancorp, Inc. operates as the bank holding company for Old Second National Bank that provides community banking services. It offers demand, NOW, money market, savings, time deposit, individual retirement, and checking accounts, as well as certificates of deposit accounts. The company also provides commercial loans; lease financing receivables; commercial real estate loans; construction loans; residential real estate loans, such as residential first mortgage and second mortgage loans; home equity line of credit; consumer loans, including motor vehicle, home improvement, and signature loans; installment and agricultural loans; residential mortgages; and overdraft checking. In addition, it offers safe deposit services; trust and wealth management services; and money orders, cashier’s checks, foreign currency, direct deposits, discount brokerage, debit and credit cards, and other services, as well as acquires the U.S. treasury notes and bonds. Further, the company provides online and mobile banking; corporate cash management products, including remote and mobile deposits capture, investment sweep accounts, zero balance accounts, automated tax payments, automatic teller machines access, telephone banking, lockbox accounts, automated clearing house transactions, account reconciliation, controlled disbursement, detail and general information reporting, foreign and domestic wire transfers, and vault services for currency and coin; and investment, agency, and custodial services for individual, corporate, and not-for-profit clients. Old Second Bancorp, Inc. was incorporated in 1981 and is headquartered in Aurora, Illinois.

About Banner

Banner Corporation operates as the bank holding company for Banner Bank that engages in the provision of commercial banking and financial products and services to individuals, businesses, and public sector entities in the United States. It accepts various deposit instruments, including interest-bearing and non-interest-bearing checking accounts, money market deposit accounts, regular savings accounts, and certificates of deposit, as well as treasury management services and retirement savings plans. The company also provides commercial real estate loans, including owner-occupied, investment properties, and multifamily residential real estate loans; construction, land, and land development loans; one- to four-family residential real estate lending; commercial business loans; agricultural loans; consumer and other loans, such as home equity lines of credit, automobile, and boat and recreational vehicle loans, as well as loans secured by deposit accounts; and small business administration loans. In addition, it provides electronic and digital banking services comprising debit cards and ATMs, internet banking, remote deposit, and mobile banking services. The company was founded in 1890 and is based in Walla Walla, Washington.