Analyzing Mercantile Bank (NASDAQ:MBWM) and MainStreet Bancshares (NASDAQ:MNSB)

Mercantile Bank (NASDAQ:MBWM) and MainStreet Bancshares (NASDAQ:MNSB) 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, valuation, institutional ownership, earnings, analyst recommendations, dividends and profitability.

Profitability

This table compares Mercantile Bank and MainStreet Bancshares’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Mercantile Bank	23.99%	15.52%	1.50%
MainStreet Bancshares	12.99%	9.00%	0.85%

Earnings and Valuation

This table compares Mercantile Bank and MainStreet Bancshares”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Mercantile Bank	$230.14 million	2.92	$82.22 million	$5.16	8.09
MainStreet Bancshares	$69.83 million	1.98	$26.58 million	$2.59	7.01

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

Institutional & Insider Ownership

58.6% of Mercantile Bank shares are held by institutional investors. Comparatively, 52.3% of MainStreet Bancshares shares are held by institutional investors. 3.1% of Mercantile Bank shares are held by company insiders. Comparatively, 9.2% of MainStreet Bancshares shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock will outperform the market over the long term.

Volatility and Risk

Mercantile Bank has a beta of 0.95, suggesting that its share price is 5% less volatile than the S&P 500. Comparatively, MainStreet Bancshares has a beta of 0.56, suggesting that its share price is 44% less volatile than the S&P 500.

Analyst Recommendations

This is a summary of current ratings and target prices for Mercantile Bank and MainStreet Bancshares, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Mercantile Bank	0	3	1	0	2.25
MainStreet Bancshares	0	0	0	0	N/A

Mercantile Bank currently has a consensus price target of $52.00, suggesting a potential upside of 24.61%. Given Mercantile Bank’s higher possible upside, analysts plainly believe Mercantile Bank is more favorable than MainStreet Bancshares.

Dividends

Mercantile Bank pays an annual dividend of $1.44 per share and has a dividend yield of 3.5%. MainStreet Bancshares pays an annual dividend of $0.40 per share and has a dividend yield of 2.2%. Mercantile Bank pays out 27.9% of its earnings in the form of a dividend. MainStreet Bancshares pays out 15.4% 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. Mercantile Bank has increased its dividend for 13 consecutive years. Mercantile Bank is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Summary

Mercantile Bank beats MainStreet Bancshares on 14 of the 16 factors compared between the two stocks.

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.

About MainStreet Bancshares

MainStreet Bancshares, Inc. operates as the bank holding company for MainStreet Bank that provides various banking products and services for individuals, small to medium-sized businesses, and professional service organizations. The company offers demand, NOW, money market, savings, and sweep accounts, as well as certificates of deposit; business and consumer checking, interest-bearing checking, business account analysis, and other depository services; and cash management, wire transfer, check imaging, bill pay, remote deposit capture, and courier services. It also provides commercial loans, include government contract receivables, plant and equipment, general working capital, contract administration, and acquisition loans; commercial real estate, real estate construction, and residential real estate loans; and consumer loans comprising term loans and overdraft protection, as well as debit and credit cards. In addition, the company offers deposit insurance solutions; remote deposit of checks; and internet bill payment, online cash management, and online and mobile banking services. It operates in Herndon, Fairfax, McLean, Leesburg, Clarendon, and Washington D.C., as well as automated teller machines. The company was incorporated in 2003 and is headquartered in Fairfax, Virginia.