Critical Analysis: Mercantile Bank (NASDAQ:MBWM) vs. TriCo Bancshares (NASDAQ:TCBK)

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

Institutional and Insider Ownership

59.1% of TriCo Bancshares shares are held by institutional investors. Comparatively, 58.6% of Mercantile Bank shares are held by institutional investors. 4.6% of TriCo Bancshares shares are held by insiders. Comparatively, 3.2% of Mercantile Bank shares are held by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company will outperform the market over the long term.

Analyst Recommendations

This is a breakdown of recent ratings and price targets for TriCo Bancshares and Mercantile Bank, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
TriCo Bancshares	0	3	2	0	2.40
Mercantile Bank	0	2	2	0	2.50

TriCo Bancshares currently has a consensus price target of $50.75, suggesting a potential upside of 37.42%. Mercantile Bank has a consensus price target of $54.67, suggesting a potential upside of 35.78%. Given TriCo Bancshares’ higher probable upside, equities analysts plainly believe TriCo Bancshares is more favorable than Mercantile Bank.

Valuation & Earnings

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

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
TriCo Bancshares	$388.76 million	3.13	$114.87 million	$3.46	10.67
Mercantile Bank	$231.48 million	2.82	$79.59 million	$4.95	8.13

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

Volatility and Risk

TriCo Bancshares has a beta of 0.53, meaning that its share price is 47% less volatile than the S&P 500. Comparatively, Mercantile Bank has a beta of 0.86, meaning that its share price is 14% less volatile than the S&P 500.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
TriCo Bancshares	21.63%	9.63%	1.17%
Mercantile Bank	21.99%	14.29%	1.41%

Dividends

TriCo Bancshares pays an annual dividend of $1.32 per share and has a dividend yield of 3.6%. Mercantile Bank pays an annual dividend of $1.48 per share and has a dividend yield of 3.7%. TriCo Bancshares pays out 38.2% 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. TriCo Bancshares has raised its dividend for 12 consecutive years and Mercantile Bank has raised its dividend for 14 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 TriCo Bancshares on 9 of the 16 factors compared between the two stocks.

About TriCo Bancshares

TriCo Bancshares operates as a bank holding company for Tri Counties Bank that provides commercial banking services to individual and corporate customers. The company accepts demand, savings, and time deposits. It also provides small business loans; real estate mortgage loans, such as residential and commercial loans; consumer loans; mortgage, auto, other vehicle, and personal loans; commercial loans, including agricultural loans; and real estate construction loans. In addition, the company offers treasury management services; credit and debit cards; and other customary banking services, including safe deposit boxes; and independent financial and broker-dealer services. Further, it provides checking, saving, and money market accounts, as well as individual retirement accounts; equipment financing; certificate of deposit account registry service; certificated of deposit; and IntraFi cash service. TriCo Bancshares was founded in 1975 and is headquartered in Chico, California.

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.