LCNB (NASDAQ:LCNB) vs. Alerus Financial (NASDAQ:ALRS) Critical Review

LCNB (NASDAQ:LCNB) and Alerus Financial (NASDAQ:ALRS) are both small-cap finance companies, but which is the superior investment? We will compare the two businesses based on the strength of their earnings, risk, institutional ownership, dividends, profitability, valuation and analyst recommendations.

Earnings & Valuation

This table compares LCNB and Alerus Financial”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
LCNB	$72.42 million	3.01	$12.63 million	$0.92	16.76
Alerus Financial	$167.96 million	2.60	$11.70 million	$0.49	45.02

LCNB has higher earnings, but lower revenue than Alerus Financial. LCNB is trading at a lower price-to-earnings ratio than Alerus Financial, indicating that it is currently the more affordable of the two stocks.

Volatility and Risk

LCNB has a beta of 0.76, indicating that its stock price is 24% less volatile than the S&P 500. Comparatively, Alerus Financial has a beta of 0.66, indicating that its stock price is 34% less volatile than the S&P 500.

Dividends

LCNB pays an annual dividend of $0.88 per share and has a dividend yield of 5.7%. Alerus Financial pays an annual dividend of $0.80 per share and has a dividend yield of 3.6%. LCNB pays out 95.7% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Alerus Financial pays out 163.3% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Alerus Financial has increased its dividend for 21 consecutive years. LCNB is clearly the better dividend stock, given its higher yield and lower payout ratio.

Institutional and Insider Ownership

34.7% of LCNB shares are held by institutional investors. Comparatively, 51.3% of Alerus Financial shares are held by institutional investors. 5.8% of LCNB shares are held by insiders. Comparatively, 5.6% of Alerus Financial shares are held by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock is poised for long-term growth.

Analyst Ratings

This is a summary of recent recommendations for LCNB and Alerus Financial, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
LCNB	0	0	0	0	N/A
Alerus Financial	0	3	2	0	2.40

Alerus Financial has a consensus target price of $23.40, suggesting a potential upside of 6.07%. Given Alerus Financial’s higher probable upside, analysts clearly believe Alerus Financial is more favorable than LCNB.

Profitability

This table compares LCNB and Alerus Financial’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
LCNB	5.97%	6.55%	0.67%
Alerus Financial	2.39%	7.25%	0.64%

Summary

LCNB beats Alerus Financial on 9 of the 16 factors compared between the two stocks.

About LCNB

LCNB Corp. operates as the financial holding company for LCNB National Bank that provides banking services in Ohio. Its deposit products include checking accounts, demand deposits, savings accounts, NOW and money market deposits, as well as individual retirement accounts and time certificates. The company's loan products comprise commercial and industrial, commercial and residential real estate, agricultural, construction, and small business administration loans; and residential mortgage loans that consists of loans for purchasing or refinancing personal residences, home equity lines of credit, and loans for commercial or consumer purposes secured by residential mortgages. It offers consumer loans, such as automobile, recreational vehicles, boat, home improvement, and personal loans. In addition, the company provides trust administration, estate settlement, and fiduciary services; and investment management services for trusts, agency accounts, individual retirement accounts, and foundations/endowments. Further, it offers investment services and products, including financial needs analysis, mutual funds, securities trading, annuities, and life insurance; and security brokerage services. Additionally, the company provides safe deposit boxes, night depositories, cashier's checks, bank-by-mail, ATMs, cash and transaction services, debit cards, wire transfers, electronic funds transfer, utility bill collections, notary public service, cash management services, telephone banking, PC Internet banking, mobile banking, and other services for individuals and businesses. LCNB Corp. was founded in 1877 and is headquartered in Lebanon, Ohio.

About Alerus Financial

Alerus Financial Corporation operates as the bank holding company for Alerus Financial, National Association that engages in the provision of various financial services to businesses and consumers. The company operates in four segments: Banking, Mortgage, Retirement and Benefit Services, and Wealth Management. It offers various deposit products, including demand deposits, interest-bearing transaction accounts, money market accounts, time and savings deposits, checking accounts, and certificates of deposit; and treasury management products, including electronic receivables management, remote deposit capture, cash vault services, merchant services, and other cash management services. The company also provides commercial loans, business term loans, lines of credit, and commercial real estate loans, as well as construction and land development loans; consumer lending products, including residential first mortgage loans; installment loans and lines of credit; and second mortgage loans. In addition, it offers retirement plan administration and investment advisory services, employee stock ownership plan, fiduciary services, payroll, health savings accounts, and other benefit services, as well as individual retirement accounts; and financial planning, investment management, personal and corporate trust, estate administration, and custody services. Further, the company provides debit and credit cards, online banking, mobile banking/wallet, payment, private banking, payroll accounts, flex spending accounts, administration, and government health insurance program services. It offers banking services in North Dakota, Minnesota, and Arizona; and retirement and benefit plans through offices located in Michigan, Minnesota, and Colorado. The company was formerly known as First National Bank North Dakota and changed its name to Alerus Financial Corporation in 2000. Alerus Financial Corporation was founded in 1879 and is headquartered in Grand Forks, North Dakota.