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10 Community Bank M&A Targets

9. Cardinal Financial

Shares of Cardinal Financial (CFNL) of McLean, Va. closed at $10.94 Friday, up 6% over the previous year.

The company had $2.1 billion in total assets as of March 31, operating 26 branches in the Washington, D.C. area and was also mentioned in January by Brett Scheiner as a possible acquisition candidate.

Cardinal Financial also appears on KBW's Potential Sellers List, with analyst Brian Klock rating the shares at "market perform," or neutral, with a $12.25 price target.

First-quarter net income was $5.2 million, or 18 cents a share, improving from $3.8 million, or 13 cents a share, a year earlier. The provision for loan losses declined to $1.1 million in the first quarter, from $2.4 million a year earlier. The company's first-quarter return on average assets (ROA) was 1.02%, making it, by far, the best earnings performer among the 10 banks listed here.

Asset quality was strong, with nonperforming assets making up 0.45% of total assets as of March 31. The first-quarter net charge-off ratio was 0.32%, and reserves covered 1.71% of total loans as of March 31.

The shares trade for 12 times the consensus 2012 earnings estimate of 89 cents a share, among analysts polled by FactSet. According to SNL Financial, the shares trade for 1.4 times tangible book value.

The eight analysts covering Cardinal Financial are evenly split between buy and hold ratings.

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