ConnectOne Bancorp (NASDAQ:CNOB) versus Southern Michigan Bancorp (OTCMKTS:SOMC) Critical Review

Southern Michigan Bancorp (OTCMKTS:SOMC) and ConnectOne Bancorp (NASDAQ:CNOB) are both small-cap finance companies, but which is the superior investment? We will compare the two companies based on the strength of their dividends, valuation, institutional ownership, risk, profitability, earnings and analyst recommendations.

Analyst Ratings

This is a breakdown of recent recommendations for Southern Michigan Bancorp and ConnectOne Bancorp, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Southern Michigan Bancorp	0	0	0	0	0.00
ConnectOne Bancorp	0	1	1	0	2.50

ConnectOne Bancorp has a consensus target price of $28.00, indicating a potential upside of 20.02%. Given ConnectOne Bancorp’s stronger consensus rating and higher possible upside, analysts clearly believe ConnectOne Bancorp is more favorable than Southern Michigan Bancorp.

Dividends

Southern Michigan Bancorp pays an annual dividend of $0.60 per share and has a dividend yield of 3.2%. ConnectOne Bancorp pays an annual dividend of $0.72 per share and has a dividend yield of 3.1%. Southern Michigan Bancorp pays out 26.3% of its earnings in the form of a dividend. ConnectOne Bancorp pays out 40.7% 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. Southern Michigan Bancorp is clearly the better dividend stock, given its higher yield and lower payout ratio.

Valuation & Earnings

This table compares Southern Michigan Bancorp and ConnectOne Bancorp”s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Southern Michigan Bancorp	$84.61 million	1.03	$10.40 million	$2.28	8.33
ConnectOne Bancorp	$264.07 million	3.39	$73.79 million	$1.77	13.18

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

Volatility & Risk

Southern Michigan Bancorp has a beta of 0.27, suggesting that its stock price is 73% less volatile than the S&P 500. Comparatively, ConnectOne Bancorp has a beta of 1.3, suggesting that its stock price is 30% more volatile than the S&P 500.

Insider & Institutional Ownership

67.7% of ConnectOne Bancorp shares are owned by institutional investors. 6.4% of ConnectOne Bancorp shares are owned by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock is poised for long-term growth.

Profitability

This table compares Southern Michigan Bancorp and ConnectOne Bancorp’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Southern Michigan Bancorp	12.29%	10.30%	0.71%
ConnectOne Bancorp	13.80%	6.77%	0.78%

Summary

ConnectOne Bancorp beats Southern Michigan Bancorp on 12 of the 16 factors compared between the two stocks.

About Southern Michigan Bancorp

Southern Michigan Bancorp, Inc. operates as the bank holding company for Southern Michigan Bank & Trust that provides a range of commercial banking services to individuals, businesses, institutions, and governmental agencies primarily in the southwest Michigan communities. Its deposit products include interest and non-interest checking, savings, and various types of money market accounts; time, savings, and demand deposits; and certificates of deposit and IRAs. The company also provides home mortgages and equity loans, home equity lines of credit, VA and FHA home loans, USDA rural development loans, and auto/personal loans; business loans, such as lines of credit, term loans, commercial real estate loans, commercial and industrial loans, agriculture loans, letters of credit, small business administration loans, and capital access loans; industrial, construction, real estate, and inventory loans; and consumer lending products comprising direct and indirect loans to purchasers of residential real property and consumer goods. In addition, it offers trust and investment services that include investment management, trustee, IRA rollovers and retirement plan, institutional and personal custody, estate settlement, wealth management, estate and wealth transfer planning assistance, charitable gift planning assistance, and cash management custody services; and safe deposit box and automated teller machine services. Further, the company provides bill pay, e-statements, ACH, wire transfer, remote deposit capture, and insurance services, as well as ATM, debit, credit, and gift cards. The company was founded in 1871 and is based in Coldwater, Michigan.

About ConnectOne Bancorp

ConnectOne Bancorp, Inc. operates as the bank holding company for ConnectOne Bank that provides commercial banking products and services for small and mid-sized businesses, local professionals, and individuals in the New York Metropolitan area and South Florida market. The company offers personal and business checking, money market, and time and savings accounts; credit cards, wire transfers, safe deposit boxes, automated teller services and telephone, and internet and mobile banking. It provides retirement accounts, consumers and cash management services for business clients, including treasury direct, automated clearing house, remote deposit capture, and digital invoicing. In addition, the company offers consumer and commercial business loans, including lines of credit, commercial and residential mortgages, home equity and bridge loans, and other personal loans; commercial loans secured by collateral, such as business assets comprising accounts receivable, inventory and equipment, and mortgages filed on commercial and residential real estate, as well as cash balances and marketable securities. Further, it provides real estate loans, which includes loans secured by first liens on completed commercial properties, including multi-family properties, to purchase or refinance properties; residential mortgages, such as loans secured by first liens on 1-4 family and condominium; and cooperative residential real estate loans. The company was formerly known as Center Bancorp, Inc. and changed its name to ConnectOne Bancorp, Inc. in July 2014. ConnectOne Bancorp, Inc. was incorporated in 1982 and is headquartered in Englewood Cliffs, New Jersey.