2 Small-Caps KBW Just Moved

Keefe, Bruyette & Woods analysts changed the ratings of two small cap stocks. The analysts downgraded the rating on AG Mortgage Investment Trust Inc MITT from Outperform to Market Perform, while setting the price target at $19.

The company reported its quarterly EPS at 63c core, significantly short of the 72c estimate. Dollar roll income was about 2c short of the estimate. While portfolio performance has been consistent over the past five quarters, the analysts had projected a larger portfolio with a slightly higher average yield.

In the report Keefe, Bruyette & Woods noted, "Valuations of hybrid mREITs have diverged somewhat over the past several quarters, with several getting to valuations above 0.95x book and others lingering near 0.80x book. Those with higher valuations (such as MITT) have arguably "earned them" in some sense, generally through more stable returns. We see that as a good thing, but realistically we believe there's a limit to the spread of those valuation disparities and we're probably about there."

Although the analysts continue to expect "relatively stable earnings" and a stable dividend through the rest of this year, they believe that the company's stock valuation is "relatively full" and that the dividend provides "more or less all of the total return."

The analysts upgraded the rating on Suffolk Bancorp SUBK from Market Perform to Outperform, while raising the price target from $25 to $27, after meetings with President and CEO Howard Bluver and EVP and CFO Brian Finneran.

"We left our meetings with increased confidence in the outlook for non-interest deposit growth (driven by incremental commercial deposit generation), which should continue to set SUBK apart and enhance franchise value," the analysts said.

The company expressed optimism regarding the outlook for commercial loan growth and its core deposit base. Suffolk Bancorp's earnings growth may be mostly driven by continued loan generation going ahead. Since cost cutting was a part of the company's turnaround, further expense improvement "will likely be choppy" and the savings would be reinvested in "revenue-generating functions," the analysts wrote.

In the report Keefe, Bruyette & Woods noted the reasons for the upgrade as:

• An industry-leading funding base
• Substantial and sustainable team-driven loan growth outlook
• Positive earnings momentum in the wake of a turnaround under a strong management team
• Positive exposure to rising rates