Anyone who resides in West Michigan can attest to the struggling economy and housing slump that has overtaken the area. One of the industries taking the biggest hit are the local banks. Two examples of publicly traded West Michigan banks are Macatawa Bank (MCBC) and Mercantile Bank (MBWM).

Recently, both banks released earnings that were lower than expectations and each instantly shed 15-20% of their value. Earnings were down because of the banks number of non-performing assets, slower than expected loan underwriting and increasing their loan loss provisions to prepare for a potential increase in local foreclosures amid the crumbling economy.

These banks are now trading at their book values and MCBC is sporting a 4.4% dividend yield. The turnaround in West Michigan will take some time, perhaps several more years but the investment opportunity present in these banks is too good to pass by. Currently MCBC is trading at $12 and MBWM at $20. These are great entry points for what is most definitely two very undervalued local banks. MCBC is also buying back stock, with another $20-30 Million worth of buybacks already approved and ongoing.

I see these two banks as a good medium length investment and should see a powerful recovery in share price over the next 12 months along with high dividends and being ripe targets for a potential buyout in the near-term.

[tags]west michigan, shaun carter, banks, macatawa bank, mercantile bank, mcbc, mbwm, buyback, economy, foreclosure, dividend[/tags]