Insiders at smaller regional banks are snapping up their banks' stock.
With stock prices of many smaller banks trading well below 52-week highs, executives and directors said they are buying shares in their companies at a discount.
"I believe in eating your own cooking," said John Holcomb, chairman and chief executive officer at Alabama Bancorp in Birmingham. He recently bought 1,100 shares in his $1.6 billion-asset company at roughly 37% below its high of $39.75.
At Downey Financial in Newport Beach, Calif., a group of directors bought nearly 21,000 of the $6 billion-asset company's shares in the fourth quarter. By comparison, in the first nine months of 1998, Downey Financial insiders bought just 60 shares.
According to First Call/Thomson Financial, an American Banker affiliate, more insiders are buying stock these days in banking than in any other industry. Insider buying is especially brisk at smaller regional banks, where stock prices are still generally flat.
"Insiders at large cap banks more often sell shares for profit," said Elizabeth Poisson, research analyst at First Call/Thomson in Rockville, Md. "Since major bank stocks have recovered from the (last fall's) turmoil, we would expect to see insiders take advantage of their higher stock prices."
First Call/Thomson compiles an index each week that ranks insider activity in 69 industries, including banking, utilities, chemicals, and apparel. For the week ended March 19, four separate groups of banks-those in the Midwest, South, and East, and all savings and loans-placed among the top six in insider buying.
Analysts said the trend signals a confidence among insiders that bank stocks will recover. That confidence is fueled by optimistic earnings projections, overall faith in the U.S. economy, and a belief that bank mergers will continue.
"With the stock cheap, why not take advantage?" said Cassandra Toroian, a bank analyst at Ryan, Beck & Co. in Livingston, N.J.
Insiders at southern banks, such as Trustmark Corp. in Jackson, Miss., Alabama Bancorp, and First Charter Corp. in Concord, N.C., have been particularly active in accumulating shares. So far this year, banks in the South have ranked among the top five industries on First Call/Thomson's list for 10 consecutive weeks.
Through Feb. 12, Trustmark insiders had bought 56,982 shares over five months. Shares of the $6.5 billion-asset company were bought at prices as much as 30% off its 52-week high of $24.75 a share.
Richard G. Hickson, president and chief executive officer, said that with earnings up 17% and loan growth up 24% last year, Trustmark's officers and directors consider the stock a solid long-term buy.
In less than six weeks last fall, First Charter insiders bought 32,600 shares at prices ranging from $16.58 to $18.46 per share-far off the $1.9 billion-asset bank's 52-week high of $27 last May.
That period, from Nov. 9 to Dec. 18, accounted for 78% of insider buying last year at First Charter. In the past decade, First Charter executives and directors have bought an average of just 6,100 shares per year.
Given the bank's growth prospects around the Charlotte area, First Charter president and CEO Lawrence M. Kimbrough said, insiders consider the stock an "awfully good buy and a sound long-term investment."