When looking to invest in regional banks, it only makes sense to begin your search by looking for banks that have exposure to economies that are experiencing robust and stable growth. You want to be invested in a location where the money is constantly flowing. My search has brought me all over the country, from Charleston, to San Antonio, to Seattle. All of these cities sport an above average growth rate that is expected to last well into the future. But one banking company I recently stumbled upon that has called my name (and wallet), is Tompkins Financial Corporation (TMP). Headquartered in Ithaca, NY, this small cap bank is a well-diversified financial services company that has been in constant growth mode for decades and is poised to benefit from the more than stable economy of Ithaca, the diversification of its branch locations, and the possibility of future mergers and acquisitions.
Tompkins Financial Corporation was founded in 1836. The company operates four subsidiary banks and has 66 branches throughout the central, western, and Hudson valley region of New York State. 21 of these 66 branches are located throughout the suburbs of Pennsylvania cities Philadelphia, Reading, and Allentown, thanks to the $109 million acquisition of VIST Financial that closed in 2012. Tompkins Financial controls $4.9 billion in assets, and has more than $3.9 billion in deposits. Total equity stood at $440 million as of 2012. Tompkins Financial is ranked in the top 5 banks for largest deposit share in nine different counties. The company has merged with 10 insurance agencies since 2000, to create Tompkins Insurance Agencies, and acquired AM&M Financial Services in 2006 to create Tompkins Financial Advisors. Tompkins Financial is a locally focused bank that's products include retail banking, corporate banking, insurance, and asset management. Currently Tompkins Financial has a market cap of $670 million and is 8% off from its 52-week high of $49.85.
Tompkins Financial Corporation belongs in every long-term investors portfolio. The company has been profitable for 59 consecutive years, has increased its revenue for 56 consecutive years, has paid cash dividends for 132 consecutive years, and has increased its dividends for 24 consecutive years. Not too many companies can say that, and I challenge any reader to find a company that can outshine those metrics.
Here are a few more impressive financial statistics when compared to the company's peers. The peer group consists of 89 public banks nationwide that have assets between $3 billion and $10 billion.
TMP's EPS has a 10-year compound annual growth rate of 4.9%, compared to 3.3% for its peers.
TMP's core return on average equity has a three-year average of 12.1%, compared to 5.4% for its peers.
Tangible book value growth has a five-year CAGR of 7.1%, compared to 2.0% for its peers.
TMP's dividend has a ten-year CAGR of 6.2%, compared to 1.6% for its peers.
TMP had non-interest income of 29% in 2012, compared to 23% for its peers.
Source: Company SEC Filings
Tompkins Financial's constant growth that has helped the company outperform its peers comes from two sources, the sustainable and growing economy of the county it's headquartered in (Tompkins), and the successful acquisitions of small banks in contiguous geographies that have compatible cultures and are focused on long term, sustainable growth.
A recent article in the New York Times helped solidify my decision to invest in Tompkins Financial. Ithaca, which I'm proud to have called home for the past five years, is a small city nestled in the heart of the Finger Lakes region. Ten square miles surrounded by reality. Sitting at the bottom of Cayuga Lake, Ithaca's economy has managed to outshine other cities in the region thanks to two private universities that sit atop opposite hills, Cornell University and Ithaca College. The college town's population doubles from 30,000 to 60,000+ during the academic year, and the city is expanding. Walk around the downtown area and you will see what I mean. The downtown commons is being redeveloped in a multi million dollar project, two hotels are being built, two separate apartment complexes are being built, and a large three story office building is being built. And one thing almost all of these construction projects have in common: Variants of these signs are at the construction sites.(click to enlarge)
Tompkins Financial will continue to grow and develop as they're buoyed by this education-based economy. Tompkins County continues to post the lowest county unemployment rate in New York State, which sat at 5.7% in June of 2013.
Ithaca has attracted more than $200 million in funds for city development since 2012 and most upstate New York venture capitalists and investors concentrate their money in Ithaca. Both colleges have poured hundreds of millions of dollars into the local economy and many business startups have popped up from Ithaca graduates. All of this bodes well for Tompkins Financial, who is fully exposed to this growth and opportunity.
Tompkins Financial first expanded outside of Tompkins County in 2000 when they began to acquire several small banks that were locally oriented and shared the same culture as Tompkins. These strategic acquisitions have helped strengthen the balance sheet of Tompkins Financial, and diversify its business in a geographical sense. The recent buyout of VIST Financial added $1.5 billion to its total assets, and $1.2 billion in deposits. Tompkins also operates Mahopac National Bank, which is located in several suburbs of New York City, and The Bank Of Castille, which operates throughout western New York. Tompkins is strategically acquiring banks that operate in tight knit areas that have a strong sense of community. These acquisitions give the company immediate scale in attractive markets. Further acquisitions of solid operating banks with a similar culture will continue to expand Tompkins Financial's balance sheet and bolster its growth.
Tompkins Financial Corporation is a regional bank that has a proven track record of delivering leading results against its industry peers. The company's disciplined credit culture has spared it from losses during the 2008 financial crisis and the company managed to grow profits to all time highs. This should ease investors who are worried about investing in a bank that engages in risky lending. The company is clearly committed to creating long-term shareholder wealth, and after 132 years of consecutive dividend payments, I don't see this trend stopping anytime soon. The company is coming off of 52-week highs and probably has more room to fall, though RSI is approaching 20, which may signal the stock has been oversold. Although the stock has been moving sideways since the early 2000's, I believe the company is poised to experience impressive growth figures and is a solid buy for long term investors. The share price will appreciate overtime and catch up with the company, until then sit back and collect the ever growing, 3.3% dividend.