Contrasting Farmers National Banc (NASDAQ:FMNB) and Mercantile Bank (NASDAQ:MBWM)

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

Dividends

Farmers National Banc pays an annual dividend of $0.68 per share and has a dividend yield of 4.9%. Mercantile Bank pays an annual dividend of $1.48 per share and has a dividend yield of 3.2%. Farmers National Banc pays out 55.7% of its earnings in the form of a dividend. Mercantile Bank pays out 29.9% 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 14 consecutive years.

Risk & Volatility

Farmers National Banc has a beta of 0.86, indicating that its share price is 14% less volatile than the S&P 500. Comparatively, Mercantile Bank has a beta of 0.98, indicating that its share price is 2% less volatile than the S&P 500.

Earnings and Valuation

This table compares Farmers National Banc and Mercantile Bank”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Farmers National Banc	$170.08 million	3.05	$45.95 million	$1.22	11.30
Mercantile Bank	$231.48 million	3.18	$79.59 million	$4.95	9.21

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

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Farmers National Banc	17.05%	11.71%	0.93%
Mercantile Bank	21.99%	14.29%	1.41%

Institutional and Insider Ownership

38.7% of Farmers National Banc shares are held by institutional investors. Comparatively, 58.6% of Mercantile Bank shares are held by institutional investors. 4.0% of Farmers National Banc shares are held by insiders. Comparatively, 3.1% of Mercantile Bank shares are held by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company is poised for long-term growth.

Analyst Ratings

This is a breakdown of current ratings and target prices for Farmers National Banc and Mercantile Bank, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Farmers National Banc	0	2	1	0	2.33
Mercantile Bank	0	2	2	0	2.50

Farmers National Banc currently has a consensus target price of $16.33, indicating a potential upside of 18.44%. Mercantile Bank has a consensus target price of $54.67, indicating a potential upside of 19.96%. Given Mercantile Bank’s stronger consensus rating and higher probable upside, analysts clearly believe Mercantile Bank is more favorable than Farmers National Banc.

Summary

Mercantile Bank beats Farmers National Banc on 14 of the 17 factors compared between the two stocks.

About Farmers National Banc

Farmers National Banc Corp. operates as a bank holding company for The Farmers National Bank of Canfield engages in the banking, trust, retirement consulting, insurance, and financial management businesses. It offers commercial and retail banking services, including checking, savings, and time deposit accounts; commercial, mortgage and installment, and home equity loans; home equity lines of credit, night depository, safe deposit box, money order, bank check, automated teller machine, Internet banking, travel card, E bond transaction, brokerage, and other services. The company also provides personal and corporate trust services in the areas of estate settlement, trust administration, employee benefit plans, and retirement services; property and casualty insurance products and services; and various insurance products through licensed representatives, as well as invests in municipal securities. The company was founded in 1887 and is headquartered in Canfield, Ohio.

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.