Critical Survey: Mercantile Bank (NASDAQ:MBWM) and United Community Banks (NASDAQ:UCB)

United Community Banks (NASDAQ:UCB) and Mercantile Bank (NASDAQ:MBWM) are both finance companies, but which is the superior stock? We will compare the two companies based on the strength of their earnings, institutional ownership, risk, valuation, dividends, profitability and analyst recommendations.

Dividends

United Community Banks pays an annual dividend of $0.96 per share and has a dividend yield of 3.1%. Mercantile Bank pays an annual dividend of $1.44 per share and has a dividend yield of 3.2%. United Community Banks pays out 62.3% of its earnings in the form of a dividend. Mercantile Bank pays out 28.9% 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 raised 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.

Institutional and Insider Ownership

82.3% of United Community Banks shares are owned by institutional investors. Comparatively, 58.6% of Mercantile Bank shares are owned by institutional investors. 0.5% of United Community Banks shares are owned by company insiders. Comparatively, 3.1% of Mercantile Bank shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company will outperform the market over the long term.

Analyst Ratings

This is a breakdown of recent recommendations and price targets for United Community Banks and Mercantile Bank, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
United Community Banks	0	2	0	0	2.00
Mercantile Bank	0	3	1	0	2.25

United Community Banks presently has a consensus target price of $29.00, indicating a potential downside of 6.72%. Mercantile Bank has a consensus target price of $54.50, indicating a potential upside of 20.74%. Given Mercantile Bank’s stronger consensus rating and higher possible upside, analysts plainly believe Mercantile Bank is more favorable than United Community Banks.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
United Community Banks	13.04%	8.36%	0.99%
Mercantile Bank	22.77%	14.59%	1.43%

Risk and Volatility

United Community Banks has a beta of 0.92, indicating that its stock price is 8% less volatile than the S&P 500. Comparatively, Mercantile Bank has a beta of 0.99, indicating that its stock price is 1% less volatile than the S&P 500.

Valuation & Earnings

This table compares United Community Banks and Mercantile Bank”s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
United Community Banks	$860.29 million	4.31	$187.54 million	$1.54	20.19
Mercantile Bank	$229.89 million	3.17	$82.22 million	$4.98	9.06

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

Summary

Mercantile Bank beats United Community Banks on 12 of the 17 factors compared between the two stocks.

About United Community Banks

United Community Banks, Inc. operates as the financial holding company for United Community Bank that provides financial products and services to commercial, retail, government, education, energy, health care, and real estate sectors. It accepts various deposit products, including checking, savings, money market, and other deposit accounts. The company also offers lending services, including real estate, consumer, and commercial loans, to individuals, small businesses, mid-sized commercial businesses, and non-profit organizations, as well as secured and unsecured, and mortgage loans. In addition, it originates loans partially guaranteed by the SBA and USDA loan programs. Further, the company provides wealth management services comprising financial planning, customized portfolio management, and investment advice; trust services to manage fiduciary assets; non-deposit investment products; and insurance products, including life insurance, long-term care insurance, and tax-deferred annuities, as well as invests in residential and commercial mortgage-backed securities, asset-backed securities, the U.S. treasury, the U.S. agency, and municipal obligations. Additionally, it offers reinsurance on a property insurance contract; insurance agency services; treasury management; credit cards; payment and commerce solution, equipment finance, investment advisory, and other related financial services; brokerage services; and payment processing, merchant, wire transfer, private banking, and other related financial services. The company was founded in 1950 and is headquartered in Blairsville, Georgia.

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.