Reviewing Farmers National Banc (NASDAQ:FMNB) & Mercantile Bank (NASDAQ:MBWM)

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

Analyst Ratings

This is a summary of recent ratings and price targets for Mercantile Bank and Farmers National Banc, as provided by MarketBeat.com.

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

Mercantile Bank presently has a consensus target price of $54.67, suggesting a potential upside of 23.76%. Farmers National Banc has a consensus target price of $16.33, suggesting a potential upside of 23.46%. Given Mercantile Bank’s stronger consensus rating and higher probable upside, research analysts clearly believe Mercantile Bank is more favorable than Farmers National Banc.

Profitability

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

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

Valuation & Earnings

This table compares Mercantile Bank and Farmers National Banc”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Mercantile Bank	$231.48 million	3.10	$79.59 million	$4.95	8.92
Farmers National Banc	$170.08 million	2.92	$45.95 million	$1.22	10.84

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.

Dividends

Mercantile Bank pays an annual dividend of $1.48 per share and has a dividend yield of 3.4%. Farmers National Banc pays an annual dividend of $0.68 per share and has a dividend yield of 5.1%. Mercantile Bank pays out 29.9% of its earnings in the form of a dividend. Farmers National Banc pays out 55.7% 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.

Insider and Institutional Ownership

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

Risk and Volatility

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

Summary

Mercantile Bank beats Farmers National Banc on 14 of the 17 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 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.