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Bank Insiders Step Up Their Purchases – Insider Weekends

  • May 7, 2023

I was at the Berkshire Hathaway shareholder meeting, or rather celebration, yesterday and the focus was very much on what is happening with banking. It was amusing that for the second half of the day, Buffett sat behind a placard that said “Available For Sale”, while Munger sat next to one that said “Held to Maturity”.

Neither Buffett nor anyone else has the answers at this time about how this crisis will unfold and if there are additional dominoes to fall. The challenge is that beyond a few bad apples that got caught in an assets/liabilities duration mismatch, the issue is a crisis of confidence. Insiders of regional and community banks have been running into the metaphorical burning building and buying stock hand over fist. I was not surprised to see that three of the five top insider purchases this week were by insiders of regional banks.

Two difference directors of the super regional bank U.S. Bancorp (USB) with $682.34 billion in assets purchased stock last week and so did a third director in April.  In Q1 2023, U.S. Bancorp saw its total deposits drop 3.74% with a significant portion of that being driven by a decline in non-interest bearing deposits (down 9.55%). Net interest margin increased 9 basis points to 3.08%.

In contrast the much smaller Zions Bancorporation (ZION) with $88.57 billion in assets saw four different insiders purchase stock last week. In Q1 2023, Zions saw its total deposits drop 3.41% with a significant portion of that being driven by a decline in non-interest bearing deposits (down 13.42%). Net interest margin declined 20 basis points to 3.33%.

Insiders are often early and I believe that is very much the case here. There will be some amazing opportunities in this space but besides a bank like First Citizens BancShares (FCNCA) that I featured as a spotlight idea in the May 2023 Special Situations newsletter, it might be best to approach the sector with an abundance of caution. It would also be worth watching what bank focused funds like Stilwell Value are doing as discussed in my article An Activist Fund With A Focus On Banks last week.

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