Contrasting Mercantile Bank (NASDAQ:MBWM) and Old National Bancorp (NASDAQ:ONB)

Mercantile Bank (NASDAQ:MBWM) and Old National Bancorp (NASDAQ:ONB) are both finance companies, but which is the better business? We will compare the two companies based on the strength of their analyst recommendations, risk, earnings, profitability, dividends, valuation and institutional ownership.

Analyst Ratings

This is a breakdown of recent ratings and price targets for Mercantile Bank and Old National Bancorp, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Mercantile Bank	0	3	4	0	2.57
Old National Bancorp	0	3	8	0	2.73

Mercantile Bank presently has a consensus price target of $56.20, suggesting a potential upside of 4.56%. Old National Bancorp has a consensus price target of $27.91, suggesting a potential upside of 12.54%. Given Old National Bancorp’s stronger consensus rating and higher possible upside, analysts clearly believe Old National Bancorp is more favorable than Mercantile Bank.

Volatility and Risk

Mercantile Bank has a beta of 0.81, indicating that its share price is 19% less volatile than the S&P 500. Comparatively, Old National Bancorp has a beta of 0.84, indicating that its share price is 16% less volatile than the S&P 500.

Earnings and Valuation

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

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Mercantile Bank	$371.80 million	2.50	$88.75 million	$5.57	9.65
Old National Bancorp	$3.74 billion	2.56	$669.26 million	$1.94	12.78

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

Dividends

Mercantile Bank pays an annual dividend of $1.56 per share and has a dividend yield of 2.9%. Old National Bancorp pays an annual dividend of $0.58 per share and has a dividend yield of 2.3%. Mercantile Bank pays out 28.0% of its earnings in the form of a dividend. Old National Bancorp 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. Mercantile Bank is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Mercantile Bank	24.19%	13.73%	1.44%
Old National Bancorp	18.90%	11.23%	1.27%

Institutional and Insider Ownership

58.6% of Mercantile Bank shares are owned by institutional investors. Comparatively, 83.7% of Old National Bancorp shares are owned by institutional investors. 2.5% of Mercantile Bank shares are owned by company insiders. Comparatively, 0.7% of Old National Bancorp shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock will outperform the market over the long term.

Summary

Old National Bancorp beats Mercantile Bank on 9 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 Old National Bancorp

Old National Bancorp operates as the bank holding company for Old National Bank that provides various financial services to individual and commercial customers in the United States. It accepts deposit accounts, including noninterest-bearing demand, interest-bearing checking, negotiable order of withdrawal, savings and money market, and time deposits; and offers loans, such as home equity lines of credit, residential real estate loans, consumer loans, commercial loans, commercial real estate loans, agricultural loans, letters of credit, and lease financing. The company also provides debit and automated teller machine cards, telephone access, online banking, and other electronic and mobile banking services; cash management, private banking, brokerage, trust, investment advisory, and other traditional banking services; wealth management, investment, and foreign currency services; and treasury management, merchant, and capital markets services, as well as community development lending and equity investment solutions. The company was founded in 1834 and is headquartered in Evansville, Indiana.