KBW Just Upgraded Two Small-Cap Banks

Keefe, Bruyette & Woods recently released two reports highlighting Cardinal Financial Corporation

and First Financial Bancorp

. Analysts Catherine Mealor and Andrew Taylor upgraded Cardinal Financial to Outperform with a $23 price target. Christopher McGratty and Michael Perito upgraded First Financial from Market Perform to OutPerform with a $19.50 price target. Cardinal Financial: "Cardinal Bank is a high performing bank that continues to deliver attractive balance sheet growth with exceptional credit quality trends in the metro DC market under its "Aggressive on Sales, Conservative on Risk" operating philosophy...The current valuation supports our expectations for 6-7 percent EPS growth over the next two years; however, we believe upside in the stock could come in the form of an M&A catalyst with CFNL as either a buyer or a seller." Another positive catalyst that KBW noted is Cardinal Financial's mortgage subsidiary George Mason Mortgage. Analysts believe that the business unit has brought volatility to earnings, however, its "purchase money focus" in a strong market could provide a cushion in industry downturns. First Financial: "The company returned to the M&A arena in 2014 with 3 bank deals, which collectively boosted assets by about 10%...This evolving dynamic, along with a healthy 4 percent yield are key investment considerations in the near term...We expect 11 percent EPS growth in 2016." KBW analysts highlighted that First Financial showed strong organic grown, with loans increasing 13 percent in 2015. This may drive the company's stock going forward in the competitive financial services industry. Currently, Cardinal Financial is trading at $17.81, down 2.62 percent. Currently, First Financial is trading at $14.96, down 3.55 percent.