3 A-Rated Bank Stocks

Community Bank System

Shares of Community Bank System (CBU) of DeWitt, N.Y., closed at $26.68 Tuesday, down 3% year-to-date, following a 4% return during 2011. The five-year total return was 57%, according to Thomson Reuters Bank Insight.

Based on a 26-cent quarterly payout, the shares have a dividend yield of 2.84%.

The company has a deal in place to purchase 19 branches as part of First Niagara Financial Group's (FNFG) plan to divest roughly 100 branches following its purchase of 200 branches from HSBC (HBC), in a deal that was completed last Friday. The branch purchase will include roughly $218 million in loans and $955 million in deposits.

Community Bank System raised $57.5 million in common equity in January, to support the branch acquisitions.

The company had $6.9 billion in total assets as of March 31. CBU's operating return on average assets (ROA) has ranged between 1.14% and 1.24% over the past five quarters, according to Thomson Reuters Bank Insight.

The shares trade for 2.2 times tangible book value, according to Thomson Reuters Bank insight, and for 12 times the consensus 2013 EPS estimate of $2.15. The consensus 2012 EPS estimate is $2.04.

Guggenheim Securities analyst David Darst has a neutral rating on Community Bank System, with a $29 price target, saying in late April after the company reported its first-quarter results that the share were trading "in line with the historical earnings multiple," and that "a premium valuation versus peers is warranted given the company's clean asset quality, favorable market demographics with growth opportunities, and our expectations for CBU to generate ~19% [return on tangible equity] in 2012."

Darst estimates that First Niagara will earn $2.04 a share this year, followed by earnings of $2.14 a share during 2013.

Interested in more on Community Bank System? See TheStreet Ratings' report card for this stock.

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