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3 Bank Stock Value Plays

1. Mercantile Bank Corp.

MBWM Chart MBWM data by YCharts

Shares of Mercantile Bank Corp. (MBWM - Get Report) of Grand Rapids, Mich., closed at $16.50 Wednesday, returning 1% this year, following a 70% return during 2012. The shares trade just below tangible book value, and for 12.0 times the consensus 2014 EPS estimate of $1.37. The consensus 2013 EPS estimate is $1.54.

Based on a quarterly payout of 11 cents, the shares have a dividend yield of 2.67%.

The company had $1.4 billion in total assets as of March 31 and on April 16 reported first-quarter net income attributable to common shareholders of $4.4 million, or 50 cents a share, increasing from $3.0 million, or 35 cents a share, in the fourth quarter, and $2.6 million, or 28 cents a share, in the first quarter of 2012.

The company transferred $1.5 million from loan loss reserves during the first quarter, directly boosting pre-tax earnings. This compared to a provision for loan losses of $300,000 the previous quarter. During the first quarter of 2012, the company's provision for loan losses was zero.

The earnings improvement also reflected a decline in noninterest expense to $8.6 million in the first quarter from $9.2 million the previous quarter and $9.7 million a year earlier, as the company saw a decline in expenses related to the resolution of nonperforming loans and disposal of repossessed assets.

Mercantile Bank Corp's first-quarter ROA was a strong 1.28%, and its return on average equity was 12.07%.

Rodis in a note on April 16 said Mercantile Bank Corp. had a "solid quarter," and that the company's core results of 50 cents a share, including 11 cents for the negative provision for loan losses, beat his EPS estimate of 35 cents.

Rodis's price target for Mercantile Bank Corp.'s shares is $20, and he estimates the company will earn $1.47 a share this year, with earnings declining to $1.34 a share in 2014. "Fundamentally, the Company continues to show nice improvement as [nonperforming assets] continue to fall and the loan portfolio appears to be stabilizing," he wrote.

Rodis added that his price target assumes the shares will trade "closer to 110-115% of our TBV estimate one-year out (~ $17.75/share)."

Interested in more on Mercantile Bank Corp.? See TheStreet Ratings' report card for this stock.

-- Written by Philip van Doorn in Jupiter, Fla.

>Contact by Email.

Philip W. van Doorn is a member of TheStreet's banking and finance team, commenting on industry and regulatory trends. He previously served as the senior analyst for Ratings, responsible for assigning financial strength ratings to banks and savings and loan institutions. Mr. van Doorn previously served as a loan operations officer at Riverside National Bank in Fort Pierce, Fla., and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a bachelor of science in business administration from Long Island University.
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