Reviewing Banc of California (NYSE:BANC) & Prosperity Bancshares (NYSE:PB)

Banc of California (NYSE:BANC) and Prosperity Bancshares (NYSE:PB) are both mid-cap finance companies, but which is the superior investment? We will compare the two businesses based on the strength of their risk, earnings, profitability, dividends, analyst recommendations, valuation and institutional ownership.

Dividends

Banc of California pays an annual dividend of $0.48 per share and has a dividend yield of 2.4%. Prosperity Bancshares pays an annual dividend of $2.40 per share and has a dividend yield of 3.4%. Banc of California pays out 36.6% of its earnings in the form of a dividend. Prosperity Bancshares pays out 43.5% 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. Prosperity Bancshares has increased its dividend for 27 consecutive years. Prosperity Bancshares is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Institutional and Insider Ownership

86.9% of Banc of California shares are owned by institutional investors. Comparatively, 80.7% of Prosperity Bancshares shares are owned by institutional investors. 2.8% of Banc of California shares are owned by insiders. Comparatively, 4.0% of Prosperity Bancshares shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock is poised for long-term growth.

Earnings and Valuation

This table compares Banc of California and Prosperity Bancshares”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Banc of California	$1.82 billion	1.67	$228.97 million	$1.31	15.00
Prosperity Bancshares	$1.74 billion	4.13	$542.84 million	$5.52	12.89

Prosperity Bancshares has lower revenue, but higher earnings than Banc of California. Prosperity Bancshares is trading at a lower price-to-earnings ratio than Banc of California, indicating that it is currently the more affordable of the two stocks.

Analyst Recommendations

This is a summary of recent ratings and price targets for Banc of California and Prosperity Bancshares, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Banc of California	0	1	7	1	3.00
Prosperity Bancshares	1	7	5	0	2.31

Banc of California presently has a consensus price target of $22.31, indicating a potential upside of 13.52%. Prosperity Bancshares has a consensus price target of $76.82, indicating a potential upside of 8.00%. Given Banc of California’s stronger consensus rating and higher possible upside, research analysts clearly believe Banc of California is more favorable than Prosperity Bancshares.

Risk & Volatility

Banc of California has a beta of 0.74, indicating that its share price is 26% less volatile than the S&P 500. Comparatively, Prosperity Bancshares has a beta of 0.64, indicating that its share price is 36% less volatile than the S&P 500.

Profitability

This table compares Banc of California and Prosperity Bancshares’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Banc of California	13.58%	9.25%	0.81%
Prosperity Bancshares	29.50%	7.20%	1.41%

Summary

Banc of California beats Prosperity Bancshares on 10 of the 18 factors compared between the two stocks.

About Banc of California

Banc of California, Inc. operates as the bank holding company for Banc of California that provides various banking products and services in California. The company offers deposit products, such as checking, savings, money market, demand, and time deposits; certificates of deposit; retirement accounts; and safe deposit boxes. It also provides real estate loans to professional developers and real estate investors for the acquisition, construction, refinancing, renovation, and on-going operation of commercial real estate properties; commercial real estate mortgage, residential real estate mortgage, and real estate construction and land loans; commercial loans and leases, such as equipment finance, other asset-based, venture capital, secured business, warehouse, and other lending services; small business administration loans; and consumer loans comprising personal, auto, and other loans, as well as home equity and revolving lines of credit. In addition, the company offers international banking, multi-state deposit, and asset and investment management services, as well as cash and treasury management services; and online, mobile, remote deposit, and telephone banking services. It serves small and middle-market businesses, venture capital firms, non-profit organizations, business owners, entrepreneurs, professionals, and high-net worth individuals. Banc of California, Inc. was founded in 1941 and is headquartered in Los Angeles, California.

About Prosperity Bancshares

Prosperity Bancshares, Inc. operates as bank holding company for the Prosperity Bank that provides financial products and services to businesses and consumers. It accepts various deposit products, such as demand, savings, money market, and time accounts, as well as and certificates of deposit. The company also offers 1-4 family residential mortgage, commercial real estate and multifamily residential, commercial and industrial, agricultural, and non-real estate agricultural loans, as well as construction, land development, and other land loans; consumer loans, including automobile, recreational vehicle, boat, home improvement, personal, and deposit account collateralized loans; term loans and lines of credit; and consumer durables and home equity loans, as well as loans for working capital, business expansion, and purchase of equipment and machinery. In addition, it provides internet banking, mobile banking, trust and wealth management, retail brokerage, mortgage services, and treasury management, as well as debit and credit cards. The company was incorporated in 1983 and is headquartered in Houston, Texas.