Reviewing Independent Bank (NASDAQ:IBCP) and Mercantile Bank (NASDAQ:MBWM)

Independent Bank (NASDAQ:IBCP) and Mercantile Bank (NASDAQ:MBWM) are both small-cap finance companies, but which is the superior business? We will compare the two companies based on the strength of their risk, analyst recommendations, valuation, profitability, earnings, institutional ownership and dividends.

Risk & Volatility

Independent Bank has a beta of 0.71, suggesting that its stock price is 29% less volatile than the S&P 500. Comparatively, Mercantile Bank has a beta of 0.81, suggesting that its stock price is 19% less volatile than the S&P 500.

Dividends

Independent Bank pays an annual dividend of $1.12 per share and has a dividend yield of 3.2%. Mercantile Bank pays an annual dividend of $1.56 per share and has a dividend yield of 3.0%. Independent Bank pays out 33.4% of its earnings in the form of a dividend. Mercantile Bank pays out 28.0% 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. Independent Bank has increased its dividend for 11 consecutive years and Mercantile Bank has increased its dividend for 14 consecutive years.

Profitability

This table compares Independent Bank and Mercantile Bank’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Independent Bank	22.02%	14.15%	1.27%
Mercantile Bank	24.19%	13.73%	1.44%

Earnings and Valuation

This table compares Independent Bank and Mercantile Bank”s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Independent Bank	$315.38 million	2.26	$68.54 million	$3.35	10.32
Mercantile Bank	$371.80 million	2.45	$88.75 million	$5.57	9.47

Mercantile Bank has higher revenue and earnings than Independent Bank. Mercantile Bank is trading at a lower price-to-earnings ratio than Independent Bank, indicating that it is currently the more affordable of the two stocks.

Analyst Recommendations

This is a breakdown of recent ratings and recommmendations for Independent Bank and Mercantile Bank, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Independent Bank	0	2	1	0	2.33
Mercantile Bank	0	3	4	0	2.57

Independent Bank currently has a consensus price target of $37.00, suggesting a potential upside of 7.00%. Mercantile Bank has a consensus price target of $56.20, suggesting a potential upside of 6.56%. Given Independent Bank’s higher possible upside, analysts plainly believe Independent Bank is more favorable than Mercantile Bank.

Institutional & Insider Ownership

79.4% of Independent Bank shares are owned by institutional investors. Comparatively, 58.6% of Mercantile Bank shares are owned by institutional investors. 5.9% of Independent Bank shares are owned by insiders. Comparatively, 2.5% of Mercantile Bank 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.

Summary

Mercantile Bank beats Independent Bank on 11 of the 17 factors compared between the two stocks.

About Independent Bank

Independent Bank Corporation operates as the bank holding company for Independent Bank that provides commercial banking services to individuals and businesses in rural and suburban communities in Michigan. It offers checking and savings accounts, commercial lending, direct and indirect consumer financing, mortgage lending, and safe deposit box services. The company also provides title insurance services and investment services, as well as automatic teller machines, and internet and mobile banking services. In addition, it operates through branches, drive-thru facilities, and loan production offices. Independent Bank Corporation was founded in 1864 and is based in Grand Rapids, Michigan.

About Mercantile Bank

Mercantile Bank Corporation operates as the bank holding company for Mercantile Bank of Michigan that provides commercial and retail banking services to small- to medium-sized businesses and individuals in the United States. It accepts various deposit products, including checking, savings, and term certificate accounts; time deposits; and certificates of deposit. The company also provides commercial and industrial loans; vacant land, land development, and residential construction loans; owner and non-owner occupied real estate loans; multi-family and residential rental property loans; single-family residential real estate loans; home equity line of credit programs; and consumer loans, such as new and used automobile and boat loans, and credit cards, as well as overdraft protection services; and residential mortgage and instalment loans. In addition, it offers courier services and safe deposit facilities; and insurance products, such as private passenger automobile, homeowners, personal inland marine, boat owners, recreational vehicle, dwelling fire, umbrella policies, small business, and life insurance products. The company was incorporated in 1997 and is headquartered in Grand Rapids, Michigan.