Reviewing Hanover Bancorp (NASDAQ:HNVR) & Southern Michigan Bancorp (OTCMKTS:SOMC)

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

Insider and Institutional Ownership

15.0% of Hanover Bancorp shares are owned by institutional investors. 23.9% of Hanover Bancorp shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock will outperform the market over the long term.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Hanover Bancorp	5.22%	5.18%	0.44%
Southern Michigan Bancorp	13.08%	10.72%	0.76%

Analyst Recommendations

This is a breakdown of current recommendations and price targets for Hanover Bancorp and Southern Michigan Bancorp, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Hanover Bancorp	1	2	2	0	2.20
Southern Michigan Bancorp	0	0	0	0	0.00

Hanover Bancorp currently has a consensus price target of $24.33, suggesting a potential upside of 17.16%. Given Hanover Bancorp’s stronger consensus rating and higher probable upside, analysts clearly believe Hanover Bancorp is more favorable than Southern Michigan Bancorp.

Earnings & Valuation

This table compares Hanover Bancorp and Southern Michigan Bancorp”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Hanover Bancorp	$143.32 million	1.04	$7.49 million	$1.00	20.77
Southern Michigan Bancorp	$93.18 million	1.28	$12.22 million	$2.63	9.70

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

Volatility & Risk

Hanover Bancorp has a beta of 0.07, meaning that its share price is 93% less volatile than the S&P 500. Comparatively, Southern Michigan Bancorp has a beta of 0.11, meaning that its share price is 89% less volatile than the S&P 500.

Dividends

Hanover Bancorp pays an annual dividend of $0.40 per share and has a dividend yield of 1.9%. Southern Michigan Bancorp pays an annual dividend of $0.64 per share and has a dividend yield of 2.5%. Hanover Bancorp pays out 40.0% of its earnings in the form of a dividend. Southern Michigan Bancorp pays out 24.3% 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.

Summary

Southern Michigan Bancorp beats Hanover Bancorp on 9 of the 16 factors compared between the two stocks.

About Hanover Bancorp

Hanover Bancorp, Inc., a bank holding company for Hanover Community Bank, provides personal and business lending and deposit services to businesses, municipalities, and individuals in the New York metro area. The company offers checking, credit cards, debit cards, money market, savings, government and municipal banking, and professional services, as well as time deposits, including certificate of deposit and individual retirement accounts. It also provides business loans, commercial real estate financing, small business administration, lending directory services, and residential mortgage. In addition, the company offers cash management, online and mobile banking, merchant services, and digital solutions. Its banking offices are located in Nassau, Suffolk, Queens, Kings, New York Counties, New York, Monmouth County, Freehold, and New Jersey. The company was founded in 2008 and is headquartered in Mineola, New York.

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.