Contrasting Mercantile Bank Corporation (NASDAQ:MBWM) and Midland States Bancorp (MSBI)

Mercantile Bank Corporation (NASDAQ: MBWM) and Midland States Bancorp (NASDAQ:MSBI) are both small-cap finance companies, but which is the superior business? We will contrast the two companies based on the strength of their earnings, profitabiliy, valuation, institutional ownership, analyst recommendations, risk and dividends.

Dividends

Mercantile Bank Corporation pays an annual dividend of $0.72 per share and has a dividend yield of 2.3%. Midland States Bancorp pays an annual dividend of $0.80 per share and has a dividend yield of 2.4%. Mercantile Bank Corporation pays out 38.3% of its earnings in the form of a dividend. Midland States Bancorp pays out 35.6% 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. Midland States Bancorp is clearly the better dividend stock, given its higher yield and lower payout ratio.

Insider and Institutional Ownership

52.8% of Mercantile Bank Corporation shares are held by institutional investors. Comparatively, 37.2% of Midland States Bancorp shares are held by institutional investors. 3.4% of Mercantile Bank Corporation shares are held by company insiders. Comparatively, 14.9% of Midland States Bancorp shares are held by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock will outperform the market over the long term.

Risk and Volatility

Mercantile Bank Corporation has a beta of 0.67, indicating that its share price is 33% less volatile than the S&P 500. Comparatively, Midland States Bancorp has a beta of 2.49, indicating that its share price is 149% more volatile than the S&P 500.

Earnings & Valuation

This table compares Mercantile Bank Corporation and Midland States Bancorp’s revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Mercantile Bank Corporation $121.00 million 4.30 $30.95 million $1.88 16.81
Midland States Bancorp $178.36 million 3.00 $35.53 million $2.25 15.06

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

Profitability

This table compares Mercantile Bank Corporation and Midland States Bancorp’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Mercantile Bank Corporation 22.25% 8.92% 1.01%
Midland States Bancorp 17.38% 11.08% 1.11%

Analyst Recommendations

This is a summary of current recommendations and price targets for Mercantile Bank Corporation and Midland States Bancorp, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Mercantile Bank Corporation 0 4 0 0 2.00
Midland States Bancorp 0 0 1 0 3.00

Mercantile Bank Corporation currently has a consensus price target of $31.25, indicating a potential downside of 1.14%. Midland States Bancorp has a consensus price target of $37.00, indicating a potential upside of 9.18%. Given Midland States Bancorp’s stronger consensus rating and higher probable upside, analysts clearly believe Midland States Bancorp is more favorable than Mercantile Bank Corporation.

Summary

Midland States Bancorp beats Mercantile Bank Corporation on 12 of the 16 factors compared between the two stocks.

About Mercantile Bank Corporation

Mercantile Bank Corporation is a bank holding company. The Company owns the Mercantile Bank of Michigan (the Bank). The Bank is a state banking company. The Bank provides commercial banking services primarily to small- to medium-sized businesses and retail banking services. The Bank makes secured and unsecured commercial, construction, mortgage and consumer loans, and accepts checking, savings and time deposits. The Bank also enables customers to conduct certain loan and deposit transactions by personal computer and through mobile applications. Courier service is provided to certain commercial customers, and safe deposit facilities are available at its office locations. The Bank’s commercial lending group originates commercial loans and leases primarily in its market areas. The Bank’s primary deposit products are checking, savings and term certificate accounts.

About Midland States Bancorp

Midland States Bancorp, Inc. is a diversified financial holding company. The Company’s banking subsidiary is Midland States Bank (the Bank). The Company’s principal business activity has been lending to and accepting deposits from individuals, businesses, municipalities and other entities. The Company’s segments include Banking, which provides a range of financial products and services to consumers and businesses, including loan products; commercial equipment leasing; mortgage loan sales and servicing; letters of credit; various types of deposit products, including checking, savings and time deposit accounts; merchant services, and corporate treasury management services; Commercial Federal Housing Administration (FHA) Origination and Servicing, which provides for the origination and servicing of government sponsored mortgages for multifamily and healthcare facilities, and Other, which includes the operating results of the Company and its wealth management business unit.

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