Contrasting Old Second Bancorp (NASDAQ:OSBC) & UMB Financial (NASDAQ:UMBF)

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

Analyst Recommendations

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

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Old Second Bancorp	0	1	4	1	3.00
UMB Financial	0	3	9	1	2.85

Old Second Bancorp currently has a consensus price target of $21.63, indicating a potential upside of 17.34%. UMB Financial has a consensus price target of $137.20, indicating a potential upside of 24.95%. Given UMB Financial’s higher possible upside, analysts clearly believe UMB Financial is more favorable than Old Second Bancorp.

Earnings and Valuation

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

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Old Second Bancorp	$311.24 million	3.12	$85.26 million	$1.51	12.21
UMB Financial	$2.16 billion	3.86	$441.24 million	$8.83	12.43

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

Dividends

Old Second Bancorp pays an annual dividend of $0.28 per share and has a dividend yield of 1.5%. UMB Financial pays an annual dividend of $1.72 per share and has a dividend yield of 1.6%. Old Second Bancorp pays out 18.5% of its earnings in the form of a dividend. UMB Financial pays out 19.5% 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. Old Second Bancorp has increased its dividend for 1 consecutive years and UMB Financial has increased its dividend for 32 consecutive years. UMB Financial is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Volatility & Risk

Old Second Bancorp has a beta of 0.86, suggesting that its stock price is 14% less volatile than the S&P 500. Comparatively, UMB Financial has a beta of 0.81, suggesting that its stock price is 19% less volatile than the S&P 500.

Insider and Institutional Ownership

67.8% of Old Second Bancorp shares are held by institutional investors. Comparatively, 87.8% of UMB Financial shares are held by institutional investors. 3.8% of Old Second Bancorp shares are held by company insiders. Comparatively, 5.5% of UMB Financial 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 Old Second Bancorp and UMB Financial’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Old Second Bancorp	18.89%	13.10%	1.60%
UMB Financial	16.01%	12.15%	1.11%

Summary

UMB Financial beats Old Second Bancorp on 11 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 UMB Financial

UMB Financial Corporation operates as the bank holding company that provides banking services and asset servicing in the United States and internationally. The Commercial Banking segment provides commercial loans and credit card; commercial real estate financing; letters of credit; loan syndication, and consultative service; various business solutions including asset-based lending, mezzanine debt, and minority equity investment; and treasury management service, such as depository service, account reconciliation, cash management tool, accounts payable and receivable solution, electronic fund transfer and automated payment, controlled disbursement, lockbox service, and remote deposit capture service. The Institutional Banking segment offers fund, asset management, and healthcare service to institutional clients; and fund administration and accounting, investor service and transfer agency, mutual fund service, alternative investment service, fixed income sale, trading and underwriting, and corporate trust and escrow service, as well as institutional custody service. This segment also provides healthcare payment solution includes custodial service for health saving accounts and private label, multipurpose debit cards to insurance carriers, third-party administrator, software companies, employers, and financial institutions. The Personal Banking segment offers deposit account, retail credit card, private banking, installment loan, home equity line of credit, residential mortgage, as well as internet banking, ATM network, private banking, brokerage and insurance service, and investment advisory, custody, and trust services. It operates through a network of branches and offices. The company was founded in 1913 and is headquartered in Kansas City, Missouri.