As a bit of an experiment, I decided to examine insider activity at a large group of commercial banks. I appraised over 230 different commercial banks for this survey and gathered my list of banks off of Motley Fool's tagged “commercial banks”. I did not examine some of the banks with extremely small market caps and I only examined a handful of banks that were not on this list, so it is by no means exhaustive, but it is a fairly large sample that should provide some ideas and insight.
The goal of this survey is to classify insider activity at various commercial banks, take a closer examination at some of the banks that get emphasized, and track the results over time. This article is essentially “Part I” of this experiment and deals exclusively with categorization of the banks.
The Process and the Definitions
Before listing the results, I think it’s important to define a few terms and explain the process I used. I attempted to apply fairly consistent standards throughout, but since I conducted this research over a three day period and I examined over 230 institutions, there will certainly be some inconsistencies.
My major categorizations are as follows:
Major Insider Buying/Selling – This means that I saw a sizable number of insider buys/sells with values that I deemed significant. This can vary from institution to institution because what is “major buying” at a bank with a $1 billion market cap is probably different from one with a $75 million market cap.
Moderate Insider Buys/Sells – This means I saw a number of insider buys/sells, but not quite enough to be classified as “major.” The difference between moderate and major insider buying can often be blurred so don’t be surprised if some of the ones here feel as if they might be “major”.
Minuscule Insider Buys – Occasionally, I would see a pattern of buying, but the amounts were too minuscule for much insight to be deemed from them. I ignored minuscule insider sells because I would see that as typical at many institutions.
Prevalent Buying/Selling, With Contradicting Sells/Buys – This means I saw somewhat of a pattern towards buying or selling, but it was contradicted by at least one significant transaction in the opposite direction.
Dated Buying – Banks with significant insider buying from Spring or Summer ’08, but lacking in more recent transactions.
Other Banks of Interest – This is a bit of an odd-ball classification of banks where I found something interesting in the buying/selling habits, but did not notice a definitive trend so that I would feel comfortable lumping it into another category. Take this category for what you will – it may be nothing more than personal interest on my part.
A few caveats here: I have personal notes written about many of these banks, but for simplicity’s sake and to prevent this article from becoming overly bulky and cumbersome, I had to classify each institution under one label or another. It might not fit perfectly and as I suggested, I might not be 100% consistent, but this is merely meant to give the reader a basic guide that can be used for further research.
Also, a number of the institutions I have classified in the seller category have seen their stock plummet since the time of the sells. Hence, it might not necessarily be a very good gage as to whether or not the bank is overvalued. However, it does seem to suggest if you see a lot of insider selling at a bank, that the stock price has a good shot at dropping significantly.
Time Frame and the Norms
I put more emphasis on recent transactions, but occasionally found significance in insider buys over four months old. I should note that, by far, the most common thing I found at most banks was conflicting insider buys and sells. This might suggest that the insiders themselves are often torn about the future of the banks they know so well. Or in some cases, it could simply be honest profit-taking giving the appearance of diverging opinions.
Another thing worth noting is that while I am testing a hypothesis of whether insider buying at commercial banks provides insight to their real value, I did find a lot of evidence of foolish insider buying while conducting this survey. There were a handful of banks with fairly sizable insider buys in Spring or Summer of ’08 that have seen their stock price absolutely plummet since that time.
The major lesson: don’t assume just because insiders are buying in heavily that an institution is automatically undervalued; all the same, it might provide some insight and combined with an examination of the financial statements, it could be fruitful in providing investment ideas.
Now onto the results:
Major Insider Buying
- Bancorp Rhode Island (BARI)
- Bridge Bancorp (BDGE)
- Bank of Florida (BOFL)
- Cadence Financial Corp (CADE)
- Capitol Bancorp (CBC)
- Cardinal Financial (CFNL)
- Center Bancorp (CNBC)
- First Bancorp (FBP)
- Oriental Financial Group (OFG)
- Merchants Bancshares (MBVT)
- Suffolk Bancorp (SUBK)
- Centrue Financial Corp (TRUE)
Moderate Insider Buying
- Ameris Bancorp (ABCB)
- Colonial Bancorp (CNB)
- Central Pacific Financial Corp (CPF)
- Macatawa Bancorp (MCBC)
- Regions Financial (RF)
- Capital Bank Corp (CBKN)
- Cascade Financial Corp (CASB)
- Horizon Financial Corp (HRZB)
- National Bankshares (NKSH)
Miniscule Insider Buying
- BancTrust Financial Group (BTFG)
- First Financial Bancorp (FFBC)
- Independent Bancorp (IBCP)
- Republic Bancorp (RBCAA)
- 1st Source Corp (SRCE)
- Columbia Banking System, Inc (COLB)
- German American Bancorp (GABC)
Dated Insider Buying
- Amcore Financial (AMFI)
- Ames National (ATLO)
- Boston Private Financial (BPFH)
- Chase Corp (CCF)
- Capital Corp of the West (CCOW)
- First Horizon National Corp (FHN)
- First Midwest Bancorp (FMBI)
- First State Bancorp (FSNM)
- Sandy Spring Bancorp (SASR)
Prevalent Insider Buying, With Some Contradicting Sells
Other Banks of Interest
- Bank of the Ozarks (OZRK)
- Mercantile Bancorp (MBR)
- Marshall & Ilsley (MI)
- Sun Bancorp (SNBC)
- TCF Financial Corp (TCB)
- US Bancorp (USB)
- Wells Fargo (WFC)
Moving onto the sell side -
Major Insider Selling
- BancFirst Corp (BANF)
- Centerstate Banks of Florida (CSFL)
- Community Trust Bancorp (CTBI)
- CVB Financial Corp (CVBF)
- MB Financial (MBFI)
- NBT Bancorp (NBTB)
- Pacific Continental Corp (PCBK)
- Prosperity Bancshares (PRSP)
- International Bancshares Corp (IBOC)
- Pinnacle Financial Partners (PNFP)
- Synovus Financial Corp (SNV)
- Texas Capital BancShares (TCBI)
- Tompkins Financial Corp (TMP)
- Capital City Bank Group (CCBG)
- East West Bancorp (EWBC)
- Peapack-Gladstone Financial Corp (PGC)
- SVB Financial Group (SIVB)
- Westamerica Bancorp (WABC)
- Comerica Incorporated (CMA)
- Pennsylvania Commerce Bancorp (COBH)
- Lakeland Financial Corp (LKFN)
- Yadkin Valley Financial Corp (YAVY)
Prevalent Selling, With Some Contradicting Buys
- First Financial Bankshares (FFIN)
- First South Bancorp (FSBK)
- Heartland Financial USA (HTLF)
- Premier West Bancorp (PRWT)
- Southside Bancshares (SBSI)
- Home Bancshares (HOMB)
- S&T Bancorp (STBA)
- Umpqua Holdings Corp (UMPQ)
- Valley National Bancorp (VLY)
Now that I’ve completed the survey of the insider transactions at commercial banks, the next step will be to examine some of the companies highlighted by the results more closely. Look out for a “Part Two” to this article at some point.
Disclosure: No position on any stocks surveyed for this article.