1st Source (NASDAQ:SRCE) & Mercantile Bank (NASDAQ:MBWM) Head to Head Contrast

Mercantile Bank (NASDAQ:MBWM) and 1st Source (NASDAQ:SRCE) are both small-cap finance companies, but which is the superior business? We will compare the two businesses based on the strength of their risk, institutional ownership, earnings, dividends, valuation, profitability and analyst recommendations.

Profitability

This table compares Mercantile Bank and 1st Source’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Mercantile Bank	23.87%	14.03%	1.43%
1st Source	24.97%	12.25%	1.68%

Valuation and Earnings

This table compares Mercantile Bank and 1st Source”s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Mercantile Bank	$371.80 million	2.48	$88.75 million	$5.46	9.85
1st Source	$574.21 million	2.92	$132.62 million	$6.01	11.42

1st Source has higher revenue and earnings than Mercantile Bank. Mercantile Bank is trading at a lower price-to-earnings ratio than 1st Source, indicating that it is currently the more affordable of the two stocks.

Dividends

Mercantile Bank pays an annual dividend of $1.52 per share and has a dividend yield of 2.8%. 1st Source pays an annual dividend of $1.60 per share and has a dividend yield of 2.3%. Mercantile Bank pays out 27.8% of its earnings in the form of a dividend. 1st Source pays out 26.6% 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 14 consecutive years and 1st Source has raised its dividend for 38 consecutive years.

Risk & Volatility

Mercantile Bank has a beta of 0.89, indicating that its stock price is 11% less volatile than the S&P 500. Comparatively, 1st Source has a beta of 0.64, indicating that its stock price is 36% less volatile than the S&P 500.

Insider & Institutional Ownership

58.6% of Mercantile Bank shares are held by institutional investors. Comparatively, 74.5% of 1st Source shares are held by institutional investors. 3.2% of Mercantile Bank shares are held by insiders. Comparatively, 19.6% of 1st Source shares are held by 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 for Mercantile Bank and 1st Source, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Mercantile Bank	0	2	4	0	2.67
1st Source	0	3	2	0	2.40

Mercantile Bank currently has a consensus target price of $56.75, suggesting a potential upside of 5.54%. 1st Source has a consensus target price of $75.33, suggesting a potential upside of 9.74%. Given 1st Source’s higher possible upside, analysts plainly believe 1st Source is more favorable than Mercantile Bank.

Summary

1st Source beats Mercantile Bank on 12 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 1st Source

1st Source Corporation operates as the bank holding company for 1st Source Bank that provides commercial and consumer banking services, trust and wealth advisory services, and insurance products to individual and business clients. Its consumer banking services include checking and savings accounts; certificates of deposit; individual retirement accounts; online and mobile banking products; consumer loans, real estate mortgage loans, and home equity lines of credit; and financial planning, financial literacy, and other consultative services, as well as debit and credit cards. The company also offers commercial, small business, agricultural, and real estate loans for general corporate purposes, including financing for industrial and commercial properties, equipment, inventories, accounts receivables, and renewable energy and acquisition financing; and commercial leasing, treasury management, and retirement planning services. In addition, it provides trust, investment, agency, and custodial services comprising administration of estates and personal trusts, as well as management of investment accounts for individuals, employee benefit plans, and charitable foundations. Further, the company offers equipment loan and lease products for construction equipment, new and pre-owned aircraft, auto and light trucks, and medium and heavy duty trucks; and finances construction equipment, aircrafts, medium and heavy duty trucks, step vans, vocational work trucks, motor coaches, shuttle buses, funeral cars, automobiles, and other equipment. Additionally, it provides corporate and personal property, casualty, and individual and group health and life insurance products and services. 1st Source Corporation was founded in 1863 and is headquartered in South Bend, Indiana.