Reviewing Mercantile Bank (NASDAQ:MBWM) and California BanCorp (NASDAQ:BCAL)

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

Valuation and Earnings

This table compares California BanCorp and Mercantile Bank”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
California BanCorp	$237.07 million	2.96	$63.06 million	$1.84	11.86
Mercantile Bank	$371.80 million	2.85	$88.75 million	$5.68	10.79

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

Analyst Recommendations

This is a summary of current ratings and price targets for California BanCorp and Mercantile Bank, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
California BanCorp	0	1	5	0	2.83
Mercantile Bank	0	4	3	0	2.43

California BanCorp presently has a consensus price target of $24.50, suggesting a potential upside of 12.28%. Mercantile Bank has a consensus price target of $62.00, suggesting a potential upside of 1.14%. Given California BanCorp’s stronger consensus rating and higher probable upside, equities analysts plainly believe California BanCorp is more favorable than Mercantile Bank.

Dividends

California BanCorp pays an annual dividend of $0.40 per share and has a dividend yield of 1.8%. Mercantile Bank pays an annual dividend of $1.60 per share and has a dividend yield of 2.6%. California BanCorp pays out 21.7% of its earnings in the form of a dividend. Mercantile Bank pays out 28.2% 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. Mercantile Bank is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
California BanCorp	26.01%	10.44%	1.49%
Mercantile Bank	24.75%	13.66%	1.46%

Volatility & Risk

California BanCorp has a beta of 0.92, meaning that its stock price is 8% less volatile than the S&P 500. Comparatively, Mercantile Bank has a beta of 0.8, meaning that its stock price is 20% less volatile than the S&P 500.

Institutional and Insider Ownership

55.4% of California BanCorp shares are held by institutional investors. Comparatively, 58.6% of Mercantile Bank shares are held by institutional investors. 8.1% of California BanCorp shares are held by insiders. Comparatively, 2.5% of Mercantile Bank shares are held by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock will outperform the market over the long term.

Summary

California BanCorp beats Mercantile Bank on 10 of the 17 factors compared between the two stocks.

About California BanCorp

Southern California Bancorp operates as the holding company for Bank of Southern California, N.A. that provides various financial products to individuals, professionals, and small-to medium-sized businesses. The company offers checking, personal and business savings, and money market accounts, as well as certificates of deposit. It also provides home equity lines of credit, business loans and lines of credit, commercial real estate and construction loans, small business administration loans, letters of credit, and personal and business credit cards. In addition, the company provides cash vault, sweep accounts, and remote deposit capture services; online and mobile banking services; courier service; lockbox services; and merchant services. It operates branches in San Diego, Orange, Ventura, Los Angeles, and Riverside counties, as well as the Inland Empire. The company was founded in 2001 and is headquartered in San Diego, 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.