Analyzing Mercantile Bank (NASDAQ:MBWM) & First Financial (NASDAQ:THFF)

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

Earnings and Valuation

This table compares Mercantile Bank and First Financial’s revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Mercantile Bank $160.99 million 3.56 $42.02 million $2.53 13.87
First Financial $164.43 million 3.65 $46.58 million $3.80 11.53

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

Risk and Volatility

Mercantile Bank has a beta of 0.84, suggesting that its stock price is 16% less volatile than the S&P 500. Comparatively, First Financial has a beta of 0.91, suggesting that its stock price is 9% less volatile than the S&P 500.

Analyst Ratings

This is a breakdown of recent recommendations for Mercantile Bank and First Financial, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Mercantile Bank 0 1 0 0 2.00
First Financial 0 0 0 0 N/A

Mercantile Bank presently has a consensus price target of $36.50, suggesting a potential upside of 4.05%. Given Mercantile Bank’s higher possible upside, equities analysts plainly believe Mercantile Bank is more favorable than First Financial.

Profitability

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

Net Margins Return on Equity Return on Assets
Mercantile Bank 26.36% 11.39% 1.26%
First Financial 26.28% 9.40% 1.39%

Insider and Institutional Ownership

55.0% of Mercantile Bank shares are held by institutional investors. Comparatively, 55.2% of First Financial shares are held by institutional investors. 3.2% of Mercantile Bank shares are held by company insiders. Comparatively, 3.7% of First Financial shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company is poised for long-term growth.

Dividends

Mercantile Bank pays an annual dividend of $1.08 per share and has a dividend yield of 3.1%. First Financial pays an annual dividend of $1.04 per share and has a dividend yield of 2.4%. Mercantile Bank pays out 42.7% of its earnings in the form of a dividend. First Financial pays out 27.4% 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.

Summary

First Financial beats Mercantile Bank on 9 of the 14 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 for 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 offers commercial and industrial loans; vacant land, land development, and residential construction loans; owner occupied real estate, non-owner occupied real estate, and multi-family and residential rental property loans; single-family residential real estate loans; home equity line of credit programs; and consumer loans, such as loans for new and used automobiles, boats, and credit cards, as well as overdraft protection services. In addition, it provides courier services and safe deposit facilities; repurchase agreements; 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, as well as operates and 40 automated teller machines. The company operates 46 banking offices. Mercantile Bank Corporation was founded in 1997 and is headquartered in Grand Rapids, Michigan.

About First Financial

First Financial Corporation, through its subsidiaries, provides various financial services. It offers non-interest-bearing demand, interest-bearing demand, savings, time, and other time deposits. The company also provides commercial loans primarily to expand a business or finance asset purchases; residential real estate and residential real estate construction loans; and home equity loans and lines, secured loans, and cash/CD secured and unsecured loans. In addition, it offers lease financing, trust account, depositor, and insurance services. The company operates 66 branches in west-central Indiana and east-central Illinois. It also rents an office building. First Financial Corporation was founded in 1984 and is headquartered in Terre Haute, Indiana.

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