German American Bancorp (NASDAQ:GABC) versus Old Second Bancorp (NASDAQ:OSBC) Financial Review

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

Dividends

German American Bancorp pays an annual dividend of $1.24 per share and has a dividend yield of 2.8%. Old Second Bancorp pays an annual dividend of $0.28 per share and has a dividend yield of 1.3%. German American Bancorp pays out 34.3% of its earnings in the form of a dividend. Old Second Bancorp pays out 16.7% 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. German American Bancorp has raised its dividend for 13 consecutive years and Old Second Bancorp has raised its dividend for 1 consecutive years. German American Bancorp is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Volatility & Risk

German American Bancorp has a beta of 0.59, meaning that its stock price is 41% less volatile than the S&P 500. Comparatively, Old Second Bancorp has a beta of 0.71, meaning that its stock price is 29% less volatile than the S&P 500.

Institutional and Insider Ownership

46.9% of German American Bancorp shares are owned by institutional investors. Comparatively, 67.8% of Old Second Bancorp shares are owned by institutional investors. 3.2% of German American Bancorp shares are owned by insiders. Comparatively, 3.6% of Old Second Bancorp shares are owned by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company will outperform the market over the long term.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
German American Bancorp	27.09%	11.98%	1.62%
Old Second Bancorp	20.07%	12.67%	1.62%

Analyst Recommendations

This is a summary of current ratings and price targets for German American Bancorp and Old Second Bancorp, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
German American Bancorp	0	1	3	0	2.75
Old Second Bancorp	0	1	4	0	2.80

German American Bancorp presently has a consensus target price of $47.67, indicating a potential upside of 8.85%. Old Second Bancorp has a consensus target price of $23.50, indicating a potential upside of 10.02%. Given Old Second Bancorp’s stronger consensus rating and higher probable upside, analysts plainly believe Old Second Bancorp is more favorable than German American Bancorp.

Valuation and Earnings

This table compares German American Bancorp and Old Second Bancorp”s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
German American Bancorp	$487.40 million	3.37	$112.64 million	$3.61	12.13
Old Second Bancorp	$401.54 million	2.74	$80.31 million	$1.68	12.71

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

Summary

Old Second Bancorp beats German American Bancorp on 9 of the 16 factors compared between the two stocks.

About German American Bancorp

German American Bancorp, Inc. operates as a financial holding company for German American Bank that provides retail and commercial banking services. The company operates through three segments: Core Banking, Wealth Management Services, and Insurance Operations. The Core Banking segment accepts deposits from the general public; and originates consumer, commercial and agricultural, commercial and agricultural real estate, and residential mortgage loans, as well as sells residential mortgage loans in the secondary market. The Wealth Management segment provides trust, investment advisory, brokerage, and retirement planning services. The Insurance Operations segment offers a range of personal and corporate property and casualty insurance products. It also offers checking, saving, and individual retirement accounts; certificates of deposit; wire transfer; credit cards; home equity, mortgages, and small business; treasury management; and online and mobile banking, bill pay, digital wallet, mobile check deposit, credit score and report, money management, and estatements, as well as wealth advisory. German American Bancorp, Inc. was founded in 1910 and is based in Jasper, Indiana.

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.