Financial Analysis: Old Second Bancorp (NASDAQ:OSBC) and Chemung Financial (NASDAQ:CHMG)

Chemung Financial (NASDAQ:CHMG) and Old Second Bancorp (NASDAQ:OSBC) are both small-cap finance companies, but which is the better investment? We will contrast the two businesses based on the strength of their earnings, profitability, dividends, risk, valuation, analyst recommendations and institutional ownership.

Dividends

Chemung Financial pays an annual dividend of $1.28 per share and has a dividend yield of 2.5%. Old Second Bancorp pays an annual dividend of $0.24 per share and has a dividend yield of 1.3%. Chemung Financial pays out 25.8% of its earnings in the form of a dividend. Old Second Bancorp pays out 12.8% 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.

Volatility and Risk

Chemung Financial has a beta of 0.19, indicating that its stock price is 81% less volatile than the S&P 500. Comparatively, Old Second Bancorp has a beta of 1.07, indicating that its stock price is 7% more volatile than the S&P 500.

Analyst Ratings

This is a summary of recent ratings and price targets for Chemung Financial and Old Second Bancorp, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Chemung Financial	0	2	0	0	2.00
Old Second Bancorp	0	1	2	1	3.00

Chemung Financial presently has a consensus target price of $58.50, suggesting a potential upside of 13.99%. Old Second Bancorp has a consensus target price of $20.13, suggesting a potential upside of 10.94%. Given Chemung Financial’s higher possible upside, equities analysts clearly believe Chemung Financial is more favorable than Old Second Bancorp.

Insider & Institutional Ownership

47.5% of Chemung Financial shares are held by institutional investors. Comparatively, 67.8% of Old Second Bancorp shares are held by institutional investors. 12.0% of Chemung Financial shares are held by company insiders. Comparatively, 3.8% of Old Second Bancorp shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company will outperform the market over the long term.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Chemung Financial	15.70%	11.47%	0.85%
Old Second Bancorp	24.95%	13.73%	1.52%

Valuation & Earnings

This table compares Chemung Financial and Old Second Bancorp”s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Chemung Financial	$96.11 million	2.54	$23.67 million	$4.96	10.35
Old Second Bancorp	$279.90 million	2.91	$85.26 million	$1.87	9.70

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

Summary

Old Second Bancorp beats Chemung Financial on 12 of the 17 factors compared between the two stocks.

About Chemung Financial

Chemung Financial Corporation operates as a bank holding company for Chemung Canal Trust Company that provides a range of banking, financing, fiduciary, and other financial services. The company provides demand, savings, and time deposits; non-interest and interest-bearing checking accounts; and insured money market accounts. It also offers commercial and agricultural loans comprising loans to small to mid-sized businesses; commercial and residential mortgage loans; and consumer loans, including home equity lines of credit and home equity term loans. In addition, the company provides interest rate swaps, letters of credit, employee benefit plans, insurance products, mutual fund, brokerage, and tax preparation services. Further, it offers guardian, custodian, trustee, investment, pension, estate planning, and employee benefit administrative services, as well as acts as an agent for pension, profit-sharing, and other employee benefit trusts. Chemung Financial Corporation was founded in 1833 and is headquartered in Elmira, New York.

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.