Chemung: New York Takeover Target?

09/16/2016 8:00 am EST


Doug Hughes


Doug Hughes has a long-standing track record in analyzing smaller financial institutions. Here, the editor of Bank Newsletter highlights a current favorite.

We're always looking for takeover potential and like to find banks with growing earnings, growing dividends, and great asset quality.

When selecting bank stocks, we always love asset quality, making sure the bank has very few bad loans. We also focus on management.  If management is very smart, usually there are very few bad loans.

In addition, we like an affluent area where there are people with some money; usually the money areas get the bigger premiums and takeover candidates and that's generally what we're looking for.  

Chemung Financial (CHMG) is headquartered in upstate New York. It has over $1.6 billion in assets and Trust Assets as well over the same amount.

They are the oldest bank in New York trading just over their $24.50 a share book value, makes this a steal now around $28 a share.  

The bank's peers like Tompkins Financial (TMP) and NBT Bancorp. (NBTB) both trade near 2 times book or over and they would make a great fit for either one of these banks and on the cheap to boot, with their stocks at highs and CHMG at lows for the year.

Chemung Financial has very smart management. They’ve all been there 30+ years. Insiders own a ton well over 24% and at these levels downside risk is almost none.

The stock trades plenty, so investors can take a nice position easily. I think current price levels provide a great entry point.

I consider the stock to be very safe with very limited downside. There is very good asset quality here as well and insiders are always buying the stock.  and pay a 4% cash dividend. This is as solid a bank as they come. 

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By Doug Hughes, Editor of Bank Newsletter

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