5 Bank Stocks That Can't Stop Posting Profits

4. Community Bank System

Shares of Community Bank System (CBU) of DeWitt, N.Y., closed at $27.36 Monday, returning 2% during 2012, with a three-year total return of 33.5% and a five-year return of 70%.

The shares traded for 2.1 times tangible book value, and for 12.9 times the consensus 2013 EPS estimate of $2.13. The consensus 2014 EPS estimate is $2.15.

Based on Monday's close and a quarterly payout of 27 cents, the shares had a dividend yield of 3.95%.

For the first quarter of 2010 through the third quarter of 2012, Community Bank System's return on average tangible common equity was 19.36%.

Community Bank System in the third quarter acquired 19 branches in Central, Western and Northern New York from First Niagara Financial Group (FNFG) and HSBC (HBC) for roughly $27 million, taking on $798 million in deposits and $160 million in loans. The company had $7.6 billion in total assets as of Sept. 30.

Third-quarter earnings were $18.4 million, or 46 cents a share, declining from $21.1 million, or 53 cents a share, the previous quarter, and from $18.8 million, or 48 cents a share, a year earlier. The earnings decline mainly reflected expenses associated with the branch acquisitions.

Third-quarter net interest income increased to $58.8 million from $57.88 million in the second quarter and $54.6 million in the third quarter of 2013 because of the branch acquisitions, along with growth in mortgage and auto loans, but the net interest margin narrowed to 3.79% from 3.96% the previous quarter and 4.04% a year earlier.

CBU's third-quarter return on average tangible common equity was 14.09%.

KBW analyst Damon DelMonte rates Community Bank System "Market Perform" with a $28 price target, saying in October after the third-quarter results were announced that "positive momentum continues for CBU as the bank once again posted record [operating] results. CBU has been able to maintain top-line revenue dollars, despite experiencing margin compression."

DelMonte expects "the level of top-line revenue growth to slow, as new assets come on at lower yields; however, sound expense control and further expansion of fee-based products should help offset the top-line impact."

The analyst estimates that Community Bank System will earn $2.18 a share in 2013, as the net interest margin narrows further to 3.66%.

CBU data by YCharts

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

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