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10 Community Bank M&A Targets, Revisited

8. Cardinal Financial

Shares of Cardinal Financial (CFNL) of McLean, Va. closed at $10.04 Wednesday, down 13% year-to-date.

The company had $2.3 billion in total assets as of June 30, operating 27 branches in the Washington, D.C. area and was also mentioned in January by Brett Scheiner as a possible acquisition candidate.

Cardinal Financial also appeared on KBW's Potential Sellers List.

Second-quarter net income was $5.9 million, or 20 cents a share, improving from $4.7 million, or 16 cents a share, a year earlier. The provision for loan losses declined to $750 thousand in the second quarter, from $2.7 million a year earlier. The company's second-quarter return on average assets (ROA) was 1.14%, for the best earnings performance among the community banks listed here.

Asset quality was very strong, with nonperforming assets making up 0.46% of total assets as of June 30. The first-quarter net charge-off ratio was 0.49%, and reserves covered 1.56% of total loans as of June 30.

The shares trade for 11 times the consensus 2012 earnings estimate of 87 cents a share, among analysts polled by FactSet. According to SNL Financial, the shares trade for 1.3 times tangible book value.

Scheiner says that "Cardinal continues to perform well, but it is the wrong environment to receive the type of multiple that they would hope for," if the company decided to sell.

Five of the nine analysts covering Cardinal Financial rate the shares a buy, while the remaining four analysts all have neutral ratings.

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