Even though the "motley" part of The Motley Fool might suggest that there aren't a lot of unifying strategies or philosophies around here, most of us would agree that small-cap stocks are more likely than their larger brethren to produce market-beating returns for you. And if that's true of software and consumer goods, why not banking?

So today, I'll start by taking a gander at more small banks, and I'll begin with Michigan's MercantileBank (NASDAQ:MBWM).

While many banks would be pleased with the results that Mercantile posted, I'm not sure the managers at Mercantile are. Revenue was up nearly 18%, net income climbed by 13%, and earnings per share rose by more than 12%, but this is a bank where the expectation is often on the order of 15% growth.

Nevertheless, net interest income did grow by more than 19% this quarter -- a level that the likes of Wachovia (NYSE:WB), Wells Fargo (NYSE:WFC), and even Commerce Bancorp (NYSE:CBH) can't beat organically. While the composition of Mercantile's balance sheet has led to better net interest margin stability (more on this later), the growth here was fueled by a nearly 18% increase in average earnings assets. And that all helps to offset the relatively anemic contribution of non-interest income.

Mercantile's key difference is its focus on making variable-rate loans to small and mid-sized businesses, funding most of those loans with time deposits and brokered deposits. Relatively speaking, there are far fewer 30-year fixed-rate mortgages or checking accounts to talk about with this bank. That said, average loan balances did grow more than 17%, and deposits rose by 20%.

While the return on assets and equity are both a little lower here than I'd like, the bank is still in the process of expanding its business. But of course, there's risk, too -- bad loan decisions can hurt results (the company recently identified $2.6 million in possibly fraudulent loans), and the company is highly sensitive to economic conditions in Michigan.

On some level, we all understand the "no guts, no glory" concept and how it applies to smaller and riskier stock ideas. Given that this is just the tip of what I envision as a larger iceberg, I can't really say where Mercantile fits into the pantheon of publicly traded small-bank stocks. So for now, I'll withhold a buy/sell comment and simply suggest that it might be worth a further look if you're interested in a smaller bank that's focused more on business customers.

For more Foolish thoughts on banks great and small:

Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).